| 5/06 | 5/07 | 5/08 | 5/09 | 5/10 | 5/11 | |||||||||||||||||||||||||
| Skyline Corporation | 100.00 | 96.03 | 79.27 | 60.95 | 60.12 | 60.23 | ||||||||||||||||||||||||
| S&P 500 | 100.00 | 122.79 | 114.57 | 77.26 | 93.47 | 117.73 | ||||||||||||||||||||||||
| Peer Issuer | 100.00 | 81.47 | 80.83 | 48.49 | 76.48 | 91.00 | ||||||||||||||||||||||||
11
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FormFORM 10-K
(Mark One)
| þ | ||
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended May 31, 2012
or
| ¨ | ||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the transition period from to
Commission filenumber: 1-4714
SKYLINE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana (State or other jurisdiction of incorporation or organization) | 35-1038277 (I.R.S. Employer Identification No.) | ||
P. O. Box 743, 2520 By-Pass Road Elkhart, Indiana (Address of principal executive offices) | 46515 (Zip Code) | ||
Registrant’s telephone number, including area code:
(574) 294-6521
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, $.0277 Par Value | New York Stock Exchange |
Securities registered pursuant to section 12 (g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o¨ No þ
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 þ No o¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). oYes oþ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or an amendment to thisForm 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Act). Yes o¨ No þ
The aggregate market value of the common stock held by non-affiliates of the registrant (6,852,762 shares) based on the closing price on the New York Stock Exchange on November 30, 20102011 was $130,065,423.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Title of Class | ||
Shares Outstanding | ||
July | ||
| 23, 2012 | ||
| Common Stock | 8,391,244 |
DOCUMENTS INCORPORATED BY REFERENCE
Title | Form 10-K | |
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held September | Part III, Items 10 |
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required to be included in Part III of thisForm 10-K is also included in the registrant’s Proxy Statement used in connection with its 20112012 Annual Meeting of Shareholders to be held on September 26, 201124, 2012 (“20112012 Proxy Statement”).
TABLE OF CONTENTS
1
1
Skyline Corporation was originally incorporated in Indiana in 1959, as successor to a business founded in 1951. Skyline Corporation and its consolidated subsidiaries (the “Corporation”) designs, produces and markets manufactured housing, modular housing and towable recreational vehicles (travel trailers, fifth wheels and park models) to independent dealers and manufactured housing communities located throughout the United States and Canada. Manufactured housing represents homes built according to a national building code; modular housing represents homes built to a local building code.
The Corporation, which is one of the largerlargest producers of manufactured and modular housing in the United States, sold 1,9251,948 manufactured homes and 267380 modular homes in fiscal 2011.
The Corporation’s housing products are marketed under a number of trademarks. They are available in lengths ranging from 30’ to 76’ and in singlewide widths from 12’ to 16’, doublewide widths from 18’ to 32’, and triplewide widths from 36’ to 46’. The area of a singlewide ranges from approximately 400 to 1,200 square feet, a doublewide from approximately 700 to 2,400 square feet, and a triplewide from approximately 1,600 to 2,900 square feet.
The Corporation also sold 4,7065,004 recreational vehicles in fiscal 2011,2012, which are sold under a number of trademarks for travel trailers, fifth wheels and park models.
Financial Information about Segments
Net sales, operating results and total assets for the housing and recreational vehicle segments are included in Note 13, Industry Segment Information, in the Notes to Consolidated Financial Statements included in this document under Item 8.
Narrative Description of Business
Principal Products and Markets
The Corporation’s homes are marketed under a number of trademarks, and are available in a variety of dimensions. Manufactured housing models are built according to standards established by the U.S. Department of Housing and Urban Development. Modular homes are built according to state, provincial or local building codes. Each home typically includes two to four bedrooms, kitchen, dining area, living room, one or two bathrooms, kitchen appliances, central heating and cooling. Custom options may include but are not limited to: exterior dormers and windows; interior or exterior accent columns; fireplaces and whirlpool tubs. Materials used to construct a manufactured or a modular home are similar to those used in site-built housing. The Corporation also sells homes that are “Energy-Star” compliant.
The Corporation’s recreational vehicles include travel trailers, fifth wheels and park models. Travel trailers and fifth wheels are marketed under the following trademarks: “Aljo”; “Bobcat”; “Koala”; “Layton”; “Mountain View”; “Nomad”; “Texan”; “Wagoneer”; “Walkabout” and “Weekender”. Park models are marketed under the following trademarks: “Cabin Series”; “Cedar Cove”; “Cutlass”; “Cutlass Elite”; “Deerfield”; “Forest Brook”“Kensington”; “Shore Park Homes”; and “Vacation Villa”. The Corporation’s recreational vehicles are intended to provide temporary living accommodations for individuals seeking leisure travel and outdoor recreation. A recreational vehicle typically includes sleeping, kitchen, dining and bath areas.
The principal markets for manufactured and modular housing are the suburban and rural areas of the continental United States and Canada. The principal buyers continue to be individuals over the age of fifty, but the market tends to broaden when conventional housing becomes more difficult to purchase and finance.
The recreational vehicle market is made up of primarily vacationing families, traveling retired couples and sports enthusiasts pursuing four-season hobbies.
2
| Item 1. | Business — (Continued) |
The Corporation provides the retail purchaser of its homes with a full fifteen-month warranty against defects in design, materials and workmanship. Recreational vehicles are covered by a one-year warranty. The warranties are backed by service departments located at the Corporation’s manufacturing facilities and an extensive field service system.
The amount and percentage of net sales contributed by the housing and recreational vehicle segments is noted in Items 7 and 8.
Method of Distribution
The Corporation’s homes are distributed by approximately 220210 independent dealers at 340320 locations throughout the United States and Canada, and recreational vehicles are distributed by approximately 170210 independent dealers at 200240 locations throughout the United States and Canada. These are generally not exclusive dealerships and it is believed that most dealers also sell products of other manufacturers.
The Corporation’s products are sold to dealers either through floor plan financing with various financial institutions or on a cash basis. Payments to the Corporation are made either directly by the dealer or by financial institutions, which have agreed to finance dealer purchases of the Corporation’s products. In accordance with industry practice, certain financial institutions which finance dealer purchases require the Corporation to execute repurchase agreements in which the Corporation agrees, that in the event a dealer defaults on its repayment of the financing, the Corporation will repurchase its products from the financial institution in accordance with a declining repurchase price schedule establishedagreed to by the financial institution and the Corporation. Any loss under these agreements is the difference between the repurchase cost and the resale value of the units repurchased. Further, the risk of loss is spread over numerous dealers.
The Corporation had no losses related to repurchases totaled $1,000, $23,000 and $235,000 in fiscal years 2011, 2010year 2012, and 2009, respectively.$1,000 of losses in fiscal year 2011. Additional information regarding these repurchase agreements is included in Note 9, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in this document under Item 8.
Raw Materials and Supplies
The Corporation is basically an assembler and installer of components purchased from outside sources. The major components used by the Corporation are electrical components, lumber, plywood, shingles, vinyl and wood siding, steel, aluminum, insulation, home appliances, furnaces, plumbing fixtures, hardware, floor coverings and furniture. The suppliers are many and range in size from large national companies to very small local companies. At the present time the Corporation is obtaining sufficient materials to fulfill its needs.
Patents, Trademarks, Licenses, Franchises and Concessions
The Corporation does not rely upon any terminable or nonrenewable rights such as patents, licenses or franchises under the trademarks or patents of others, in the conduct of anyeither segment of its business.
Seasonal Fluctuations
While the Corporation maintains production of homes and recreational vehicles throughout the year, seasonal fluctuations in sales do occur. Sales and production of homes are affected by winter weather conditions at the Corporation’s northern plants. Recreational vehicle sales are generally higher in the spring and summer months than in the fall and winter months.
Inventory
The Corporation does not maintain significant inventories of either raw materials or finished goods. In addition, there are no inventories sold on consignment.
3
The Corporation does not rely upon any single dealer for a significant percentage of its business in any industry segment.
3
| Item 1. | Business — (Continued). |
Backlog
The Corporation does not consider the existence and extent of backlog to be significant in its business. The Corporation’s production is based on a relatively short manufacturing cycle and dealers’ orders, which continuously fluctuate. As such, the existence of backlog is insignificant at any given date and does not typically provide a reliable indication of the status of the Corporation’s business.
Government Contracts
The Corporation has had no government contracts during the past threetwo years.
Competitive Conditions
The industries in which the Corporation operates are highly competitive, with particular emphasis on price and features offered. The Corporation’s competitors are numerous, ranging from multi-billion dollar corporations to relatively small and specialized manufacturers. In addition, the housing segment also competes with companies that provide other forms of housing, such as new and existing site-built homes, apartments, condominiums and townhouses.
The following tables show the Corporation’s competitive position on a calendar and fiscal year basis in the product lines it sells.
| Units Shipped | Units Shipped | |||||||||||||||||||||||
| Calendar Year 2010 | Calendar Year 2009 | |||||||||||||||||||||||
| Market | Market | |||||||||||||||||||||||
| Industry | Skyline | Share | Industry | Skyline | Share | |||||||||||||||||||
| Manufactured housing | 50,000 | 1,894 | 3.8 | % | 50,000 | 1,690 | 3.4 | % | ||||||||||||||||
| Domestic modular housing | 13,000 | 216 | 1.7 | % | 13,000 | 186 | 1.4 | % | ||||||||||||||||
| Travel trailer | 145,000 | 3,381 | 2.3 | % | 102,000 | 2,302 | 2.3 | % | ||||||||||||||||
| Fifth wheels | 55,000 | 288 | 0.5 | % | 37,000 | 153 | 0.4 | % | ||||||||||||||||
| Park models | 3,000 | 129 | 4.3 | % | 4,000 | 71 | 1.8 | % | ||||||||||||||||
| Units Shipped Calendar Year 2011 | Units Shipped Calendar Year 2010 | |||||||||||||||||||||||
| Industry | Skyline | Market Share | Industry | Skyline | Market Share | |||||||||||||||||||
Manufactured housing | 52,000 | 1,880 | 3.6 | % | 50,000 | 1,894 | 3.8 | % | ||||||||||||||||
Domestic modular housing | 12,000 | 246 | 2.1 | % | 13,000 | 216 | 1.7 | % | ||||||||||||||||
Travel trailer | 153,000 | 4,714 | 3.1 | % | 145,000 | 3,381 | 2.3 | % | ||||||||||||||||
Fifth wheels | 60,000 | 209 | 0.4 | % | 55,000 | 288 | 0.5 | % | ||||||||||||||||
Park models | 3,000 | 170 | 5.7 | % | 3,000 | 129 | 4.3 | % | ||||||||||||||||
The competitive position for Canadian modular housing is not listed because industry data is not available.
| Units Shipped | Units Shipped | |||||||||||||||||||||||
| Fiscal Year 2011 | Fiscal Year 2010 | |||||||||||||||||||||||
| Market | Market | |||||||||||||||||||||||
Industry | Skyline | Share | Industry | Skyline | Share | |||||||||||||||||||
| Manufactured housing | 47,000 | 1,925 | 4.1 | % | 51,000 | 1,746 | 3.4 | % | ||||||||||||||||
| Travel trailer | 150,000 | 4,335 | 2.9 | % | 132,000 | 2,747 | 2.1 | % | ||||||||||||||||
| Fifth wheels | 58,000 | 207 | 0.4 | % | 49,000 | 262 | 0.5 | % | ||||||||||||||||
| Units Shipped Fiscal Year 2012 | Units Shipped Fiscal Year 2011 | |||||||||||||||||||||||
| Industry | Skyline | Market Share | Industry | Skyline | Market Share | |||||||||||||||||||
Manufactured housing | 56,000 | 1,948 | 3.5 | % | 47,000 | 1,925 | 4.1 | % | ||||||||||||||||
Travel trailer | 161,000 | 4,610 | 2.9 | % | 150,000 | 4,335 | 2.9 | % | ||||||||||||||||
Fifth wheels | 62,000 | 232 | 0.4 | % | 58,000 | 207 | 0.4 | % | ||||||||||||||||
The competitive position for modular housing and park models in fiscal 20112012 is not listed because industry data is not available.
Both the housing and recreational vehicle segments of the Corporation’s business are dependent upon the availability of wholesale and retail financing. Consequently, increases in interest rates and the availability of credit through governmental action or otherwise, have adversely affected the Corporation’s business in the past and may do so in the future.
4
4
| Item 1. | Business — (Continued). |
Environmental Quality
The Corporation believes that compliance with federal, state and local requirements with respect to environmental quality will not require any material capital expenditures for plant or equipment modifications which would adversely affect earnings.
Other Regulations
The U.S. Department of Housing and Urban Development (HUD) has set national manufactured home construction and safety standards and implemented recall and other regulations since 1976. The National Manufactured Housing Construction and Safety Standards Act of 1974, as amended, under which such standards and regulations are promulgated, prohibits states from establishing or continuing in effect any manufactured home standard that is not identical to the federal standards as to any covered aspect of performance. Implementation of these standards and regulations involves inspection agency approval of manufactured home designs, plant and home inspection by states or other HUD-approved third parties, manufacturer certification that the standards are met, and possible recalls if they are not or if homes contain safety hazards.
HUD has promulgated rules requiring producers of manufactured homes to utilize wood products certified by their suppliers to meet HUD’s established limits on formaldehyde emissions, and to place in each home written notice to prospective purchasers of possible adverse reaction from airborne formaldehyde in the homes. These rules are designated as preemptive of state regulation. Some components of manufactured and modular housing may also be subject to Consumer Product Safety Commission standards and recall requirements.
Regarding recreational vehicles, the Corporation has voluntarily subjected itself to third party inspection of all of its recreational vehicle products nationwide in order to further assure the Corporation, its dealers, and customers of compliance with established standards.
Manufactured housing, modular housing and recreational vehicles may be subject to the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act, which regulates warranties on consumer products.
The Corporation’s travel trailers continue to be subject to safety standards and recall and other regulations promulgated by the U.S. Department of Transportation under the National Traffic and Motor Vehicle Safety Act of 1966 and the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, as well as state laws and regulations.
The Corporation’s operations are subject to the Federal Occupational Safety and Health Act, and are routinely inspected thereunder.
The transportation and placement (in the case of manufactured and modular housing) of the Corporation’s products are subject to state highway use regulations and local ordinances which control the size of units that may be transported, the roads to be used, speed limits, hours of travel, and allowable locations for manufactured homes and communities.
The Corporation is also subject to many state manufacturer licensing and bonding requirements, and to dealer day in court requirements in some states.
The Corporation believes that it is currently in compliance with the above regulations.
Number of Employees
The Corporation employs approximately 1,3001,100 people at the present time.
5
Information regarding the Corporation’s executive officers is located in this document under Part III, Item 10.
5
| Item 1. | Business — (Continued). |
Available Information
The Corporation makes available, free of charge, through the Investors section of its internet website its annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports on Form8-K, Proxy Statements and all amendments to those reports as soon as practicable after such material is electronically filed or furnished to the United States Securities and Exchange Commission (SEC). The Corporation’s internet site ishttp://www.skylinecorp.com. A copy of the Corporation’s annual report onForm 10-K will be provided without charge upon written request to Skyline Corporation, Investor Relations Department, Post Office Box 743, Elkhart, Indiana 46515.
The public may read and copy any materials the Corporation has filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. The SEC maintains an internet website(http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
| Item 1A. | Risk Factors. |
Investors or potential investors should carefully consider the risks described below. Additional risks of which the Corporation is presently unaware or that the Corporation considers immaterial may also impair business operations and hinder financial performance.
Retail Financing Availability
Customers who purchase the Corporation’s products generally obtain retail financing from third party lenders. The availability, terms and cost of retail financing depend on the lending practices of financial institutions, governmental policies and economic and other conditions, all of which are beyond the Corporation’s control. A customer seeking to purchase a manufactured home without land will generally pay a higher interest rate and have a shorter loan maturity versus a customer financing the purchase of land and a home. This difference is due to most states classifying home-only manufactured housing loans as personal property rather than real property for purposes of taxation and lien perfection.
In recent years, many lenders of home-only financing have tightened credit underwriting standards, with some deciding to exit the industry. These actions resulted in decreased availability of retail financing, causing a negative effect on sales and operating results. If retail financing were to be further curtailed, net sales, operating results and cash flows could be adversely affected.
Wholesale Financing Availability
Independent dealers of the Corporation’s products generally finance their inventory purchases with wholesale floor plan financing provided by lending institutions. A dealer’s ability to obtain financing is significantly affected by the number of lending institutions offering floor planning, and by an institution’s lending limits. In recent years, the industries in which the Corporation operates experienced a reduction in both the number of lenders offering floor planning and the amount of money available for financing. These events could have a negative impact on a dealer’s ability to purchase manufactured housing, modular housing and recreational vehicle products, resulting in lower net sales, operating results and cash flows.
Dependence on Independent Dealers
The Corporation sells its manufactured homes, modular homes and recreational vehicles to independent dealers. These dealers are not obligated to exclusively sell the Corporation’s products, and may choose to sell competitor’s products. In addition, a dealer may become financially insolvent and be forced to close its business. Both scenarios could have an adverse effect on net sales, operating results and cash flows.
6
| Item 1A. | Risk Factors — (Continued) |
Dealer Inventories
As wholesale shipments of manufactured homes, modular homes and recreational vehicles exceed retail sales, dealer inventories increase to a level where dealers decrease orders from manufacturers. As manufacturers respond to reduced demand, many either offer discounts to maintain production volumes or curtail production levels. Both outcomes could have a negative impact on net sales, operating results and cash flows.
Contingent Repurchase Agreements
As referenced in Note 9 to the Notes to the Consolidated Financial Statements in Item 8, the Corporation is contingently liable under repurchase agreements with certain financial institutions providing inventory financing for retailers of its products. The Corporation could be required to fulfill some or all of the repurchase agreements, resulting in increased expense and reduced cash flows.
Cost and Availability of Raw Materials
Prices and availability of raw materials used to manufacture the Corporation’s products can change significantly due to fluctuations in supply and demand. In addition, the cost of raw materials is also influenced by transportation costs. The Corporation has historically been able to have an adequate supply of raw materials by maintaining good relations with its vendors. Increased prices have historically been passed on to dealers by raising the price of manufactured housing, modular housing and recreational vehicles. There is no certainty that the Corporation will be able to pass on future price increases and maintain an adequate supply of raw materials. The inability to raise the price of its products and to maintain a proper supply of materials could have a negative impact on net sales, operating results and cash flows.
Competition
As noted in Item 1, the manufactured housing, modular housing and recreational vehicle industries are highly competitive with particular emphasis on price and features offered. Some of the Corporation’s competitors are vertically integrated by owning retail, consumer finance and insurance operations. This integration may provide competitors with an advantage. In addition, the Corporation’s housing products compete with other forms of housing, such as new and existing site-built homes, apartments, condominiums and townhouses. The inability to effectively compete in this environment could result in lower net sales, operating results and cash flows.
Cyclical and Seasonal Nature of Business
The industries in which the Corporation operates are highly cyclical, and are impacted by but not limited to the following conditions:
Availability of wholesale and retail financing | |||
Consumer confidence | |||
Interest rates | |||
Demographic and employment trends | |||
Availability of used or repossessed homes or recreational vehicles | |||
Impact of | |||
Sales of manufactured housing, modular housing and recreational vehicle industries are also seasonal in nature with sales being lowest in the winter months. Seasonal changes, in addition to continued weakness in demand in one or both of the Corporation’s market segments, could materially impact the Corporation’s net sales, operating results and cash flows.
7
| Item 1A. | Risk Factors — (Continued) |
Changing Consumer Preferences
Changes in consumer preferences for manufactured housing, modular housing and recreational vehicles occur over time, and consequently the Corporation responds to changing demand by evaluating the market acceptability of its products. Delays in responding to changing consumer preferences could have an adverse effect on net sales, operating results and cash flows.
Increased Fuel Prices
The Corporation’s recreational vehicle products depend on the use of vehicles that operate on gasoline or diesel fuel. In the Corporation’s history there have been periods where the price of gasoline and diesel fuel dramatically increased. These increases resulted in greater cost associated with recreational vehicle travel. This trend could result in decreased net sales, operating results and cash flows.
Governmental Regulations
As noted in Item 1, the Corporation is subject to various governmental regulations. Implementation of new regulations or amendments to existing regulations could significantly increase the cost of the Corporation’s products. In addition, failure to comply with present or future regulations could result in fines or potential civil or criminal liability. Both scenarios could negatively impact net sales, operating results and cash flows.
Dependence on Executive Officers and Other Key Personnel
The Corporation depends on the efforts of its executive officers and certain key employees. The loss of the service of one or more of these individuals could have an adverse effect on net sales, operating results and cash flows of the Corporation.
Incurrence of Net Losses
Due to negative economic conditions that impacted the manufactured housing, modular housing and recreational vehicle industries, the Corporation incurred net losses from fiscal year 2008 to 2012. While the Corporation’s management is pursuing strategies as referenced in Item 7 to increase sales and decrease costs, no one can predict with certainty what the future may hold. Continued losses could negatively affect the Corporation’s liquidity.
| Item 1B. | Unresolved Staff Comments. |
None
8
| Item 2. | Properties. |
The Corporation’s 1411 operating manufacturing facilities, 67 idle facilities and 3 corporate facilities, all of which are owned, are as follows:
Location | Products | Approximate | |||||
California, San Jacinto | Manufactured Housing | 84,000 | |||||
California, Hemet | 64,000 | ||||||
California, Hemet | Idle | 55,000 | |||||
California, Woodland | Manufactured Housing | 81,000 | |||||
Florida, Ocala | Manufactured Housing | 139,000 | |||||
Florida, Ocala | |||||||
| Idle | 127,000 | ||||||
Indiana, Bristol | 115,000 | ||||||
Indiana, Elkhart | |||||||
| Recreational Vehicles | 75,000 | ||||||
Indiana, Elkhart | Idle | 55,000 | |||||
Indiana, Elkhart | Corporate | 37,000 | |||||
Indiana, Elkhart | Corporate | 18,000 | |||||
Indiana, Elkhart | Corporate | 4,000 | |||||
Kansas, Arkansas City | Manufactured Housing | 83,000 | |||||
Kansas, Halstead | Idle | 84,000 | |||||
North Carolina, Mocksville | Idle | 115,000 | |||||
Ohio, Sugarcreek | Manufactured Housing | 149,000 | |||||
Oregon, McMinnville | Manufactured Housing | 246,000 | |||||
Pennsylvania, Leola | Manufactured Housing | 210,000 | |||||
Texas, Mansfield | Recreational Vehicles | 79,000 | |||||
Vermont, Fair Haven | 91,000 | ||||||
Wisconsin, Lancaster | Manufactured Housing | 130,000 | |||||
In addition, the Corporation owns undeveloped land in Elkhart, Indiana and McMinnville, Oregon. In the thirdsecond quarter of fiscal 2009 and 2010,2012, the Corporation sold an idle recreational vehicle facilityhousing facilities in McMinnville, OregonOcala, Florida and an idle manufactured housing facility in Bossier City, Louisiana, respectively.Ephrata, Pennsylvania. The salesales resulted in pre-tax gains of $3,396,000$1,114,000 and $1,544,000,$1,386,000, respectively.
It is extremely difficult to determine the unit productive capacity of the Corporation because of the ever-changing product mix. The Corporation believes that its plant facilities, machinery and equipment are well maintained and are in good operating condition.
| Item 3. | Legal Proceedings. |
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.
9
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Skyline Corporation (SKY) is traded on the New York Stock Exchange. At May 31, 2011,2012, there were 812775 shareholders of record of Skyline Corporation common stock. A quarterly summary of the market price and dividends declared per share are listed for the fiscal years ended May 31, 20112012 and 2010. On June 1, 2011,2011. In the Corporation’sthird quarter of fiscal 2012, the Board of Directors declaredapproved a quarterlyresolution to suspend dividend payments on the outstanding shares of $.09 per share payable July 1, 2011 to shareholdersthe Corporation’s common stock until further notice. The suspension was for cash preservation purposes. The Board will evaluate financial performance and liquidity needs in determining the timing and amount of record at the close of business on June 14, 2011. On July 25, 2011, the Board also declared a quarterlyfuture dividend of $.09 per share payable October 3, 2011 to shareholders of record at the close of business on September 16, 2011. The quarterly dividends were reduced from $.18 per share paid in prior years for purposes of cash conservation.
| Common Stock | Dividends | |||||||||||||||||||||||
| Price Range | Declared Per | |||||||||||||||||||||||
| 2011 | 2010 | Share | ||||||||||||||||||||||
| High | Low | High | Low | 2011 | 2010 | |||||||||||||||||||
| First quarter | $ | 22.19 | $ | 16.53 | $ | 26.48 | $ | 17.24 | $ | .18 | $ | .18 | ||||||||||||
| Second quarter | $ | 21.59 | $ | 17.35 | $ | 25.16 | $ | 15.74 | $ | .18 | $ | .18 | ||||||||||||
| Third quarter | $ | 29.39 | $ | 18.50 | $ | 21.99 | $ | 16.10 | $ | .18 | $ | .18 | ||||||||||||
| Fourth quarter | $ | 21.48 | $ | 16.74 | $ | 25.69 | $ | 16.93 | $ | .18 | $ | .18 | ||||||||||||
| Common Stock Price Range | Dividends Declared Per Share | |||||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||||
| High | Low | High | Low | 2012 | 2011 | |||||||||||||||||||
First quarter | $ | 18.25 | $ | 8.79 | $ | 22.19 | $ | 16.53 | $ | .09 | $ | .18 | ||||||||||||
Second quarter | $ | 11.00 | $ | 4.96 | $ | 21.59 | $ | 17.35 | $ | .09 | $ | .18 | ||||||||||||
Third quarter | $ | 8.34 | $ | 4.02 | $ | 29.39 | $ | 18.50 | $ | — | $ | .18 | ||||||||||||
Fourth quarter | $ | 8.16 | $ | 4.50 | $ | 21.48 | $ | 16.74 | $ | — | $ | .18 | ||||||||||||
The name, address and phone number of ourthe Corporation’s stock transfer agent and registrar is:
Computershare Investor Services
P. O. Box 43078
Providence, RI 02940
(312) 588-4237
10
| 5/06 | 5/07 | 5/08 | 5/09 | 5/10 | 5/11 | |||||||||||||||||||||||||
| Skyline Corporation | 100.00 | 96.03 | 79.27 | 60.95 | 60.12 | 60.23 | ||||||||||||||||||||||||
| S&P 500 | 100.00 | 122.79 | 114.57 | 77.26 | 93.47 | 117.73 | ||||||||||||||||||||||||
| Peer Issuer | 100.00 | 81.47 | 80.83 | 48.49 | 76.48 | 91.00 | ||||||||||||||||||||||||
11
| Item 6. | Selected Financial Data. |
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
FOR THE YEAR | ||||||||||||||||||||
| Net sales | $ | 162,327 | $ | 136,230 | $ | 166,676 | $ | 301,765 | $ | 365,473 | ||||||||||
| (Loss) earnings before income taxes | $ | (26,627 | ) | $ | (19,351 | ) | $ | (24,994 | ) | $ | (9,138 | ) | $ | 3,399 | ||||||
| Net (loss) earnings | $ | (26,627 | ) | $ | (28,993 | )* | $ | (15,434 | ) | $ | (5,556 | ) | $ | 2,593 | ||||||
| Cash dividends declared | $ | 6,041 | $ | 6,042 | $ | 6,042 | $ | 6,041 | $ | 22,824 | ||||||||||
| Capital expenditures | $ | 816 | $ | 891 | $ | 1,574 | $ | 2,092 | $ | 4,968 | ||||||||||
| Depreciation | $ | 2,683 | $ | 2,189 | $ | 2,704 | $ | 3,181 | $ | 3,148 | ||||||||||
| Weighted average common shares outstanding | 8,391,244 | 8,391,244 | 8,391,244 | 8,391,244 | 8,391,244 | |||||||||||||||
AT YEAR END | ||||||||||||||||||||
| Working capital | $ | 53,665 | $ | 84,643 | $ | 104,374 | $ | 132,594 | $ | 141,828 | ||||||||||
| Current ratio | 4.6:1 | 7.2:1 | 7.8:1 | 7.1:1 | 6.2:1 | |||||||||||||||
| Property, plant and equipment, net | $ | 24,802 | $ | 26,722 | $ | 30,598 | $ | 32,535 | $ | 35,806 | ||||||||||
| Total assets | $ | 99,099 | $ | 130,713 | $ | 168,119 | $ | 196,999 | $ | 214,940 | ||||||||||
| Total liabilities | $ | 22,060 | $ | 21,006 | $ | 23,377 | $ | 30,781 | $ | 37,125 | ||||||||||
| Shareholders’ equity | $ | 77,039 | $ | 109,707 | $ | 144,742 | $ | 166,218 | $ | 177,815 | ||||||||||
PER SHARE | ||||||||||||||||||||
| Basic (loss) earnings | $ | (3.17 | ) | $ | (3.46 | )* | $ | (1.84 | ) | $ | (.66 | ) | $ | .31 | ||||||
| Cash dividends declared | $ | .72 | $ | .72 | $ | .72 | $ | .72 | $ | 2.72 | ||||||||||
| Shareholders’ equity | $ | 9.18 | $ | 13.07 | $ | 17.25 | $ | 19.81 | $ | 21.19 | ||||||||||
Not applicable.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Corporation designs, produces and markets manufactured housing, modular housing and towable recreational vehicles (travel trailers, fifth wheels and park models) to independent dealers and manufactured housing communities located throughout the United States and Canada. Manufactured housing represents homes built according to a national building code; modular housing represents homes built to a local building code. To better serve the needs of its dealers and communities, the Corporation has fourteeneleven manufacturing facilities in ten states; including a recreational vehicle facility that commenced operations in the third quarter of fiscal 2011. This facility, located in Elkhart, Indiana, produces and sells the “Koala”; a product that combines aerodynamic design and lightweight material composition.nine states. Manufactured housing, modular housing and recreational vehicles are sold to dealers and communities either through floor plan financing with various financial institutions or on a cash basis. While the Corporation maintains production of manufactured housing, modular homes and recreational vehicles throughout the year, seasonal fluctuations in sales do occur. Sales and production of manufactured housing and modular housing are affected by winter weather conditions at the Corporation’s northern plants. Recreational vehicle sales are generally higher in the spring and summer months than in the fall and winter months.
As referenced in Item 1, manufactured and modular housing are marketed under a number of trademarks, and are available in a variety of dimensions. Manufactured housing products are built according to standards established by the U.S. Department of Housing and Urban Development. Modular homes are built according to state, provincial or local building codes. Recreational vehicles include travel trailers, fifth wheels and park models. Travel trailers
12
10
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Manufactured Housing, Modular Housing and Recreational Vehicle Industry Conditions
Sales of manufactured housing, modular housing and recreational vehicles are affected by the strength of the U.S. economy, interest rate and employment levels, consumer confidence and the availability of wholesale and retail financing. The manufactured housing industry has until recently been affected by a continuing decline in sales. This decline, caused primarily by adverse economic conditions, tightening retail and wholesale credit markets and a depressed site-built housing market, is resulting in historically low industry shipments. FromTotal shipments for calendar 2011 were approximately 52,000 units, a 4 percent increase from the previous year’s total of approximately 50,000 units. In addition, total shipments from January to May 2011, total shipments2012 were approximately 18,00023,000 units, an approximately 1425 percent decreaseincrease from the same period a year ago.
Tight credit markets for retail and wholesale financing have become a significant challenge for the manufactured housing industry. According to the Manufactured Housing Institute, a lack of retail financing options and restrictive credit standards has negatively affected manufactured home buyers. In addition, a significant decline has occurred in wholesale financing, especially as national floor plan lenders have decreased lending to industry dealers.
The domestic modular housing industry has challenges similar to the manufactured housing industry, such as restrictive retail and wholesale financing, and a depressed site-built housing market. From calendar 20042005 to 2010,2011, total shipments decreased from approximately 43,000 to 13,00012,000 units, a decline of 7072 percent. Information related to the Canadian modular housing industry is not available.
Sales of recreational vehicles are influenced by changes in consumer confidence, employment levels, the availability of retail and wholesale financing and gasoline prices. Industry unit sales of travel trailers and fifth wheels have varied in recent years. From calendar 2007 to the first half of 2009 unit sales decreased as a result of recessionary conditions, decreased household wealth, tightening credit markets for retail and wholesale financing, and excess inventory of new recreational vehicles. Unit sales, however, started increasing in the last half of calendar 2009 and continue to date. The Recreational Vehicle Industry Association (RVIA), notes that slowindustry sales will benefit from stronger economic growth, in jobsincreased job opportunities and incomes, continued weakness in the housing market, and slowly improving credit to consumers could slow the pace of the recovery.
Fiscal 20112012 Results
The Corporation experienced the following results during fiscal 2011:
Total net sales were | |||
Housing net sales were | |||
Recreational vehicle net sales were $73,689,000 in fiscal 2012, a 14 percent increase from $64,405,000 in fiscal | |||
Net loss for the fiscal | |||
The Corporation |
13
| Ÿ | The Corporation closed its recreational vehicle facility in Hemet, California due to weak demand in its market area; primarily states in the Pacific and Rocky Mountain regions. Operations concluded in April 2012. Dealers that purchased recreational vehicles from this facility now have their product needs met by the Corporation’s facilities in Bristol and Elkhart, Indiana. |
11
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued) |
Fiscal 20112012 Results — (Continued)
| Ÿ | The Corporation |
As referenced in Note 9 of the Notes to the Consolidated Financial Statements, the Corporation reached a settlement in the case ofFEMA Formaldehyde Product Liability Litigation,Multidistrict Litigation No. 1873. The settlement resulted in the Corporation incurring a charge of approximately $400,000 in the third quarter. The total settlement of $737,000 was remitted to the United States District Court, Eastern District of Louisiana during the fourth quarter. |
The Board of Directors |
The Corporation’s housing segment experienced increased net sales in fiscal 2011,2012 as compared to prior year, and management cannot determine with certainty if the increase is sustainable. This uncertainty is based on continuing negative economic conditions previously referenced. In addition, the Corporation’s fourth quarter net sales for fiscal 2011 totaled $24,238,000; an approximately 1 percent decrease from fiscal 2010’s fourth quarter total of $24,496,000.
The recreational vehicle segment experienced increased net sales in fiscal 2011.2012. Regarding the business environment for fiscal 2012,2013, the RVIA forecasts calendar 2011 travel trailer and fifth wheel shipments of approximately 217,000 units; a 9 percent increase from calendar 2010’s total of approximately 199,000 units. The RVIA also forecasts calendar 2012 travel trailer and fifth wheel shipments of approximately 227,000229,000 units; an 8 percent increase from calendar 2011’s total of approximately 213,000 units. The RVIA also forecasts calendar 2013 travel trailer and fifth wheel shipments of approximately 239,000 units; a 54 percent increase from calendar year 2011’s2012’s total. Despite this favorable trend, business conditions in fiscal 20122013 could be negatively impacted by adverse factors previously referenced by the RVIA.
The Corporation actively pursued and continues to pursue strategies to increase sales and decrease costs. These strategies include but are not limited to:
| Ÿ | Increasing efforts to increase sales of modular homes and park models in both the United States and Canada |
| Ÿ | Improving the process of developing homes and recreational vehicles to better meet ever changing preferences of consumers |
| Ÿ | Increasing the number of display models at housing facilities in order to provide dealers, communities and consumers with examples of newly designed product |
| Ÿ | Redesigning the Corporation’s website and utilizing social media to improve product exposure to customers and to better connect dealers to potential customers |
| Ÿ | Selling non-strategic assets such as the Florida and Pennsylvania facilities |
| Ÿ | Working with current and potential vendors to decrease costs |
| Ÿ | Analyzing staffing needs and making reductions when appropriate. |
By implementing these strategies, and having a significant position of its working capital in cash and U.S. Treasury Bills, no bank debt, and experienced employees, the Corporation is preparedcontinues to meet theremain diligent for any challenges ahead.
14
12
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued) |
Results of Operations — Fiscal 20112012 Compared to Fiscal 20102011
Net Sales and Unit Shipments
| Increase | ||||||||||||||||||||
| 2011 | Percent | 2010 | Percent | (Decrease) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Net sales | ||||||||||||||||||||
| Housing | ||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||
| Domestic | $ | 81,880 | 50 | % | $ | 75,536 | 55 | % | $ | 6,344 | ||||||||||
| Canadian | 830 | 1 | 362 | — | 468 | |||||||||||||||
| 82,710 | 51 | 75,898 | 55 | 6,812 | ||||||||||||||||
| Modular Housing | ||||||||||||||||||||
| Domestic | 13,039 | 8 | 11,569 | 8 | 1,470 | |||||||||||||||
| Canadian | 2,173 | 1 | 3,084 | 3 | (911 | ) | ||||||||||||||
| 15,212 | 9 | 14,653 | 11 | 559 | ||||||||||||||||
| Total Housing | 97,922 | 60 | 90,551 | 66 | 7,371 | |||||||||||||||
| Recreational Vehicles | ||||||||||||||||||||
| Domestic | 47,868 | 30 | 33,738 | 25 | 14,130 | |||||||||||||||
| Canadian | 16,537 | 10 | 11,941 | 9 | 4,596 | |||||||||||||||
| Total Recreational Vehicles | 64,405 | 40 | 45,679 | 34 | 18,726 | |||||||||||||||
| Total Net sales | $ | 162,327 | 100 | % | $ | 136,230 | 100 | % | $ | 26,097 | ||||||||||
Unit shipments | ||||||||||||||||||||
| Housing | ||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||
| Domestic | 1,893 | 27 | % | 1,733 | 34 | % | 160 | |||||||||||||
| Canadian | 32 | 1 | 13 | — | 19 | |||||||||||||||
| 1,925 | 28 | 1,746 | 34 | 179 | ||||||||||||||||
| Modular Housing | ||||||||||||||||||||
| Domestic | 224 | 3 | 204 | 4 | 20 | |||||||||||||||
| Canadian | 43 | 1 | 58 | 1 | (15 | ) | ||||||||||||||
| 267 | 4 | 262 | 5 | 5 | ||||||||||||||||
| Total Housing | 2,192 | 32 | 2,008 | 39 | 184 | |||||||||||||||
| Recreational Vehicles | ||||||||||||||||||||
| Domestic | 3,535 | 51 | 2,374 | 47 | 1,161 | |||||||||||||||
| Canadian | 1,171 | 17 | 726 | 14 | 445 | |||||||||||||||
| Total Recreational Vehicles | 4,706 | 68 | 3,100 | 61 | 1,606 | |||||||||||||||
| Total Unit Shipments | 6,898 | 100 | % | 5,108 | 100 | % | 1,790 | |||||||||||||
| 2012 | Percent | 2011 | Percent | Increase (Decrease) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Net sales | ||||||||||||||||||||
Manufactured Housing | ||||||||||||||||||||
Domestic | $ | 87,487 | 48 | % | $ | 81,880 | 50 | % | $ | 5,607 | ||||||||||
Canadian | — | — | 830 | 1 | (830 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 87,487 | 48 | 82,710 | 51 | 4,777 | ||||||||||||||||
Modular Housing | ||||||||||||||||||||
Domestic | 15,852 | 9 | 13,039 | 8 | 2,813 | |||||||||||||||
Canadian | 5,818 | 3 | 2,173 | 1 | 3,645 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 21,670 | 12 | 15,212 | 9 | 6,458 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Housing | 109,157 | 60 | 97,922 | 60 | 11,235 | |||||||||||||||
Recreational Vehicles | ||||||||||||||||||||
Domestic | 55,003 | 30 | 47,868 | 30 | 7,135 | |||||||||||||||
Canadian | 18,686 | 10 | 16,537 | 10 | 2,149 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Recreational Vehicles | 73,689 | 40 | 64,405 | 40 | 9,284 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Net sales | $ | 182,846 | 100 | % | $ | 162,327 | 100 | % | $ | 20,519 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Unit shipments | ||||||||||||||||||||
Manufactured Housing | ||||||||||||||||||||
Domestic | 1,948 | 27 | % | 1,893 | 27 | % | 55 | |||||||||||||
Canadian | — | — | 32 | 1 | (32 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1,948 | 27 | 1,925 | 28 | 23 | ||||||||||||||||
Modular Housing | ||||||||||||||||||||
Domestic | 274 | 4 | 224 | 3 | 50 | |||||||||||||||
Canadian | 106 | 1 | 43 | 1 | 63 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 380 | 5 | 267 | 4 | 113 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Housing | 2,328 | 32 | 2,192 | 32 | 136 | |||||||||||||||
Recreational Vehicles | ||||||||||||||||||||
Domestic | 3,825 | 52 | 3,535 | 51 | 290 | |||||||||||||||
Canadian | 1,179 | 16 | 1,171 | 17 | 8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Recreational Vehicles | 5,004 | 68 | 4,706 | 68 | 298 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Unit Shipments | 7,332 | 100 | % | 6,898 | 100 | % | 434 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Housing net sales revenue increased approximately 811 percent. The increase was the resultoutcome of:
Domestic manufactured housing net sales increasing approximately | |||
Canadian manufactured housing net sales decreasing 100 percent |
| Ÿ | Domestic modular housing net sales increasing approximately |
15
| Ÿ | Canadian modular housing net sales increasing approximately twofold. |
13
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued) |
Results of Operations — Fiscal 20112012 Compared to Fiscal 20102011 — (Continued)
Net Sales and Unit Shipments — (Continued)
Housing unit shipments increased approximately 96 percent. The increase was the resultoutcome of:
Domestic manufactured housing shipments increasing approximately | |||
Canadian manufactured housing shipments | |||
Domestic modular shipments increasing approximately | |||
Canadian modular shipments |
Total domestic manufactured housing unit shipments increased approximately 103 percent. Industry unit shipments for these products decreasedincreased approximately 819 percent during fiscal 20112012 as compared to the same period a year ago. Current industry unit shipment data for modular housing is not available.
| Ÿ | Competitors providing wholesale financing to dealers, thereby creating greater sales opportunities |
| Ÿ | Unit shipment growth occurring in states where the Corporation has no or minimal sales activity due primarily to a lack of either manufacturing facilities or an established independent dealer network |
| Ÿ | The Federal Emergency Management Agency purchasing a large quantity of emergency housing units. The Corporation does not sell directly to governmental entities, nor did it have an independent dealer compete in the bidding process. |
Compared to prior year, the average net sales price for domestic manufactured housing increased approximately 4 percent; primarily due to sales price adjustments resulting from higher material costs. The average net sales price per unit for domestic and Canadian manufactured housing products as compared to prior year decreased approximately 1 and 7 percent, respectively. In addition, the average net sales price per unit for Canadian modular housing products as compared to prior year decreasedincreased approximately 59 percent. The decreases are primarily due to a shift in consumer preference towardsincrease is the result of homes being sold with lower price points; either through lesslarger square footage or fewerand greater amenities.
Recreational vehicles net sales revenue increased approximately 4114 percent. The increase was the resultoutcome of:
Domestic recreational vehicle net sales increasing approximately | |||
Canadian recreational vehicle net sales increasing approximately |
Recreational vehicle unit shipments increased approximately 526 percent. The increase the resultoutcome of:
Domestic recreational vehicle shipments increasing approximately | |||
Canadian recreational vehicle shipments increasing |
The average net sales price per unit for recreational vehicle products in fiscal 2011year 2012 as compared to priorfiscal year decreased2011 increased approximately 78 percent. The decreaseincrease is primarily due to sales price adjustments with respect to increased material costs. In addition, the average net sales price increased as result of a shift in consumer preference toward recreational vehicles with lowerhigher price points; either through lessmore square footage or fewergreater amenities.
16
14
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued) |
Results of Operations — Fiscal 20112012 Compared to Fiscal 20102011 — (Continued)
Cost of Sales
| Percent of | Percent of | |||||||||||||||||||
| 2011 | Net Sales* | 2010 | Net Sales* | Increase | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Housing | $ | 97,544 | 100 | $ | 87,805 | 97 | $ | 9,739 | ||||||||||||
| Recreational vehicles | 62,981 | 98 | 43,595 | 95 | 19,386 | |||||||||||||||
| Consolidated | $ | 160,525 | 99 | $ | 131,400 | 96 | $ | 29,125 | ||||||||||||
| 2012 | Percent of Net Sales* | 2011 | Percent of Net Sales* | Increase | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
Housing | $ | 107,272 | 98 | $ | 97,544 | 100 | $ | 9,728 | ||||||||||||
Recreational vehicles | 70,690 | 96 | 62,981 | 98 | 7,709 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
Consolidated | $ | 177,962 | 97 | $ | 160,525 | 99 | $ | 17,437 | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| * | The percentages for housing and recreational vehicles are based on segment net sales. The percentage for consolidated cost of sales is based on total net sales. |
Housing cost of sales as well as recreational vehicle cost of sales, increasedrose primarily due to increased material costs and higheran increase in unit shipments. In addition, prior year’s cost of sales included a $2,200,000 reduction in manufacturing costs related to reduced warranty costs in line with lower sales levels.
Recreational vehicle cost of sales rose primarily due to an increase in unit shipments. As a percentage of net sales, cost of sales decreased due to material cost as a percentage of net sales also increaseddeclining as a result of a shift in consumer preference toward products with higher material costsprice points.
Selling and Administrative Expenses
| 2012 | Percent of Net Sales | 2011 | Percent of Net Sales | Decrease | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Selling and administrative expenses | $ | 27,450 | 15 | $ | 28,490 | 18 | $ | 1,040 | ||||||||||||
Selling and administrative expenses, in the current year,dollars and as a percent of net sales, decreased as a result of reduced warranty costs in prior year that occurred duethe Corporation’s efforts to lower sales levels. Cost of sales, as a percentage of sales, for both segments were positively impacted by certain manufacturing costs being fixed amid rising sales.
Selling and Administrative Expenses
| Percent of | Percent of | |||||||||||||||||||
| 2011 | Net Sales | 2010 | Net Sales | Increase | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Selling and administrative expenses | $ | 28,490 | 18 | $ | 26,200 | 19 | $ | 2,290 | ||||||||||||
| Percent of | Percent of | |||||||||||||||||||
| 2011 | Net Sales* | 2010 | Net Sales* | |||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Housing | $ | (17,026 | ) | (17 | ) | $ | (13,470 | ) | (15 | ) | ||||||||||
| Recreational vehicles | (7,490 | ) | (12 | ) | (5,308 | ) | (12 | ) | ||||||||||||
| General corporate expenses | (2,172 | ) | (1 | ) | (2,592 | ) | (2 | ) | ||||||||||||
| Income from life insurance proceeds | — | — | 412 | — | ||||||||||||||||
| Gain on sale of idle property, plant and equipment | — | — | 1,544 | 1 | ||||||||||||||||
| Total Operating Loss | $ | (26,688 | ) | (16 | ) | $ | (19,414 | ) | (14 | ) | ||||||||||
| 2012 | Percent of Net Sales* | 2011 | Percent of Net Sales* | |||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
Housing | $ | (13,440 | ) | (12 | ) | $ | (17,026 | ) | (17 | ) | ||||||
Recreational vehicles | (6,808 | ) | (9 | ) | (7,490 | ) | (12 | ) | ||||||||
General corporate expenses | (2,318 | ) | (1 | ) | (2,172 | ) | (1 | ) | ||||||||
Gain on sale of idle property, plant and equipment | 3,184 | 2 | — | — | ||||||||||||
|
|
|
| |||||||||||||
Total Operating loss | $ | (19,382 | ) | (11 | ) | $ | (26,688 | ) | (16 | ) | ||||||
|
|
|
| |||||||||||||
| * | The percentages for housing and recreational vehicles are based on segment net sales. The percentage for general corporate expenses |
17
General corporate expenses decreasedincreased due to a $600,000$300,000 charge in the prior year for the Corporation’scorporation’s liability for retirement and death benefits offered to certain current employees or former employees. The charge occurred as a result of a change in the interest rate used in valuing the liability.
In the firstsecond quarter of fiscal 2010 non-taxable income from life insurance proceeds2012, the Corporation sold idle housing facilities in Ocala, Florida and Ephrata, Pennsylvania. The sales resulted in gains of $1,114,000 and $1,386,000, respectively. In addition, the Corporation sold its aircraft in the amount of $412,000, which is separately stated in the Consolidated Statement of Operations and Retained Earnings.
| 2011 | 2010 | Decrease | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Interest income | $ | 61 | $ | 63 | $ | 2 | ||||||
| 2011 | 2010 | Decrease | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Federal | $ | — | $ | 7,080 | $ | 7,080 | ||||||
| State | — | 2,562 | 2,562 | |||||||||
| Total | $ | — | $ | 9,642 | $ | 9,642 | ||||||
18
15
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued) |
| Increase | ||||||||||||||||||||
| 2010 | Percent | 2009 | Percent | (Decrease) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Net sales | ||||||||||||||||||||
| Housing | ||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||
| Domestic | $ | 75,536 | 55 | % | $ | 108,779 | 65 | % | $ | (33,243 | ) | |||||||||
| Canadian | 362 | — | — | — | 362 | |||||||||||||||
| 75,898 | 55 | 108,779 | 65 | (32,881 | ) | |||||||||||||||
| Modular Housing | ||||||||||||||||||||
| Domestic | 11,569 | 8 | 14,372 | 9 | (2,803 | ) | ||||||||||||||
| Canadian | 3,084 | 3 | 779 | — | 2,305 | |||||||||||||||
| 14,653 | 11 | 15,151 | 9 | (498 | ) | |||||||||||||||
| Total Housing | 90,551 | 66 | 123,930 | 74 | (33,379 | ) | ||||||||||||||
| Recreational Vehicles | ||||||||||||||||||||
| Domestic | 33,738 | 25 | 33,293 | 20 | 445 | |||||||||||||||
| Canadian | 11,941 | 9 | 9,453 | 6 | 2,488 | |||||||||||||||
| Total Recreational Vehicles | 45,679 | 34 | 42,746 | 26 | 2,933 | |||||||||||||||
| Total Net sales | $ | 136,230 | 100 | % | $ | 166,676 | 100 | % | $ | (30,446 | ) | |||||||||
Unit shipments | ||||||||||||||||||||
| Housing | ||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||
| Domestic | 1,733 | 34 | % | 2,453 | 44 | % | (720 | ) | ||||||||||||
| Canadian | 13 | — | — | — | 13 | |||||||||||||||
| 1,746 | 34 | 2,453 | 44 | (707 | ) | |||||||||||||||
| Modular Housing | ||||||||||||||||||||
| Domestic | 204 | 4 | 243 | 5 | (39 | ) | ||||||||||||||
| Canadian | 58 | 1 | 16 | — | 42 | |||||||||||||||
| 262 | 5 | 259 | 5 | 3 | ||||||||||||||||
| Total Housing | 2,008 | 39 | 2,712 | 49 | (704 | ) | ||||||||||||||
| Recreational Vehicles | ||||||||||||||||||||
| Domestic | 2,374 | 47 | 2,258 | 41 | 116 | |||||||||||||||
| Canadian | 726 | 14 | 574 | 10 | 152 | |||||||||||||||
| Total Recreational Vehicles | 3,100 | 61 | 2,832 | 51 | 268 | |||||||||||||||
| Total Unit Shipments | 5,108 | 100 | % | 5,544 | 100 | % | (436 | ) | ||||||||||||
19
20
| Percent | Percent | |||||||||||||||||||
| of | of | |||||||||||||||||||
| 2010 | Net Sales* | 2009 | Net Sales* | Decrease | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Housing | $ | 87,805 | 97 | $ | 121,813 | 98 | $ | 34,008 | ||||||||||||
| Recreational vehicles | 43,595 | 95 | 43,809 | 102 | 214 | |||||||||||||||
| Consolidated | $ | 131,400 | 96 | $ | 165,622 | 99 | $ | 34,222 | ||||||||||||
| Percent | Percent | |||||||||||||||||||
| of | of | |||||||||||||||||||
| 2010 | Net Sales | 2009 | Net Sales | Decrease | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Selling and administrative expenses | $ | 26,200 | 19 | $ | 30,735 | 18 | $ | 4,535 | ||||||||||||
| Percent of | Percent of | |||||||||||||||||||
| 2010 | Net Sales* | 2009 | Net Sales* | |||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Housing | $ | (13,470 | ) | (15 | ) | $ | (18,304 | ) | (15 | ) | ||||||||||
| Recreational vehicles | (5,308 | ) | (12 | ) | (9,435 | ) | (22 | ) | ||||||||||||
| General corporate expenses | (2,592 | ) | (2 | ) | (1,942 | ) | (1 | ) | ||||||||||||
| Income from life insurance proceeds | 412 | — | 380 | — | ||||||||||||||||
| Gain on sale of idle property, plant and equipment | 1,544 | 1 | 3,396 | 2 | ||||||||||||||||
| Total Operating Loss | $ | (19,414 | ) | (14 | ) | $ | (25,905 | ) | (16 | ) | ||||||||||
21
| 2010 | 2009 | Decrease | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Interest income | $ | 63 | $ | 911 | $ | 848 | ||||||
| 2010 | 2009 | Increase | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Federal | $ | 7,080 | $ | (8,749 | ) | $ | 15,829 | |||||
| State | 2,562 | (811 | ) | 3,373 | ||||||||
| Total | $ | 9,642 | $ | (9,560 | ) | $ | 19,202 | |||||
22
| May 31, | Increase | |||||||||||
| 2011 | 2010 | (Decrease) | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Cash and U.S. Treasury Bills | $ | 44,721 | $ | 77,257 | $ | (32,536 | ) | |||||
| Current assets, exclusive of cash and U.S. Treasury Bills | $ | 23,660 | $ | 21,074 | $ | 2,586 | ||||||
| Current liabilities | $ | 14,716 | $ | 13,688 | $ | 1,028 | ||||||
| Working capital | $ | 53,665 | $ | 84,643 | $ | (30,978 | ) | |||||
| May 31, | ||||||||||||
| 2012 | 2011 | Decrease | ||||||||||
| (Dollars in thousands) | ||||||||||||
Cash and U.S. Treasury Bills | $ | 29,009 | $ | 44,721 | $ | 15,712 | ||||||
Current assets, exclusive of cash and U.S. Treasury Bills | $ | 22,461 | $ | 23,660 | $ | 1,199 | ||||||
Current liabilities | $ | 14,681 | $ | 14,716 | $ | 35 | ||||||
Working capital | $ | 36,789 | $ | 53,665 | $ | 16,876 | ||||||
The Corporation’s policy is to invest its excess cash, which exceeds its operating needs, in U.S. Government Securities. Cash and U.S. Treasury Bills decreased due primarily to a net loss of $26,627,000$19,365,000 and dividends paid of $6,041,000. $1,510,000; offset by $5,054,000 received from the sale of idle property, plant and equipment.
Current assets, exclusive of cash and U.S. Treasury Bills, increaseddecreased primarily due to a $1,699,000 increase$278,000 decrease in accountsAccounts receivable, a $1,964,000 increase in inventories and a $1,077,000$560,000 decrease in otherOther current assets. Accounts receivable increased due to increased sales in May 2011 as compared to May 2010, anddeclined due to the timing of payments from financial institutions. Inventories increaseddealers and communities at May 31, 2012 as a result of increased production, the new recreational vehicle facility, increased material costs and the needcompared to more quickly respond to orders from dealer and communities.May 31, 2011. Other current assets decreaseddeclined as a result of a $1,200,000 partial refund of a workers’ compensation liability deposit.
Capital expenditures totaled $614,000 for fiscal 2011, and the timing of payments to employees at May 31, 20112012 as compared to May 31, 2010.
In the third quarter of fiscal 2012, the Board of Directors approved a resolution to suspend dividend payments on the outstanding shares of the Corporation’s common stock until further notice. The suspension was for cash preservation purposes. The Board will evaluate financial performance and liquidity needs in determining the timing and amount of future dividend payments.
The Corporation’s current cash and other short-term investments are expected to be adequate to fund operating cash needs in addition to any capital expenditures and potential treasury stock purchases duringfor the upcoming fiscal 2012.year. Although the Corporation has experienced decreased liquidity, its financing needs have been met with a combination of cash on hand and funds generated through the sale of assets.
23
| Payments Due by Period | ||||||||||||||||||||
| Less Than | More Than | |||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Operating Leases | $ | 913 | $ | 308 | $ | 388 | $ | 197 | $ | 20 | ||||||||||
| Contingent Payments Due by Period | ||||||||||||||||||||
| Less Than | More Than | |||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Repurchase Agreements | $ | 52,000 | $ | 48,000 | $ | 4,000 | $ | — | $ | — | ||||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires the Corporation to make certain estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Estimates are periodically evaluated using historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
The following accounting policies are considered to require a significant estimate:
Deferred Tax Assets
Net deferred tax assets and liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted tax rates.
16
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Critical Accounting Policies — (Continued)
Deferred Tax Assets — (Continued)
The Corporation recordedhas a full valuation allowance against its deferred tax assets, and maintained a full valuation allowance in fiscal 2011.assets. In addition, net deferred tax assets consist of federal net operating loss and tax credit carryfowards, state net operating loss carryfowards and temporary differences between financial and tax reporting. Additional information regarding the increase in the valuation allowance is referenced in Note 8 of the Notes to Consolidated Financial Statements.
Revenue Recognition
The Corporation’s accounting for revenue recognition is referenced in Note 1 of the Notes to Consolidated Financial Statements.
Product Warranties
As referenced in Note 61 of the Notes to Consolidated Financial Statements, homes are sold with a fifteen-month warranty and recreational vehicles are sold with a one-year warranty. Estimated warranty costs are accrued at the time of sale based upon sales, historical claims experience and management’s judgment regarding anticipated rates of warranty claims. Significant changes in these factors could have a material impact on future results of operations.
24
The effect of newly issued accounting standards on the Corporation is addressed in Note 1 of the Notes to Consolidated Financial Statements.
Impact of Inflation
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. On a long-term basis, the Corporation has demonstrated an ability to adjustadjusted selling prices in reaction to changing costs due to inflation. During the first quarter of fiscal 2009, however, the Corporation was unable to increase its selling prices on its housing products to cover an increase in material costs during that period. Likewise, during the third quarter of fiscal 2011 the Corporation was unable to increase its selling prices on both housing and recreational vehicle products to cover a material cost increase during that period. In both quarters, increased selling prices were realized by the end of the subsequent quarter.
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:
Consumer confidence and economic uncertainty |
| Ÿ | Availability of wholesale and retail financing | ||
The health of the U.S. housing market as a whole | |||
Cyclical nature of the manufactured housing and recreational vehicle industries | |||
General or seasonal weather conditions affecting sales | |||
Potential impact of natural disasters on sales and raw material costs | |||
Potential periodic inventory adjustments by independent retailers | |||
Interest rate levels | |||
Impact of inflation | |||
Impact of rising fuel costs | |||
Cost of labor and raw materials |
17
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Forward Looking Information — (Continued)
Competitive pressures on pricing and promotional costs | |||
Catastrophic events impacting insurance costs | |||
The availability of insurance coverage for various risks to the Corporation | |||
Market demographics |
Management’s ability to attract and retain executive officers and key personnel | ||
25
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
| Item 8. | Financial Statements and Supplementary Data. |
Index to Consolidated Financial Statements
All other supplementary data is omitted because it is not applicable or the required information is shown in the financial statements or notes thereto.
26
18
To the Shareholders and Board of Directors of Skyline Corporation:
We have audited the accompanying consolidated balance sheets of Skyline Corporation and subsidiary companies (the “Corporation”) as of May 31, 20112012 and 2010,2011, and the related consolidated statements of operations and retained earnings, and cash flows for eachthe years then ended. These financial statements are the responsibility of the years in the three-year period ended May 31, 2011. We also have audited the Corporation’s internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Corporation’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in thisForm 10-K Item 9A as Management’s Report on Internal Control over Financial Reporting.management. Our responsibility is to express an opinion on these financial statements and an opinion on the Corporation’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effectivemisstatement. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting was maintainedas a basis for designing audit procedures that are appropriate in all material respects. Our auditsthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial statements includedreporting. Accordingly, we express no such opinion. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements,statements. An audit also includes assessing the accounting principles used and significant estimates made by management, andas well as evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of May 31, 20112012 and 2010,2011, and the results of its operations and its cash flows for each of the years in the three-year periodthen ended, May 31, 2011 in conformity with accounting principlesU.S. generally accepted in the United States of America. Also in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Crowe Horwath LLP
Fort Wayne, Indiana
July 25, 2011
27
19
May 31, 20112012 and 20102011
| 2011 | 2010 | |||||||
| (Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
| Cash | $ | 9,727 | $ | 9,268 | ||||
| U.S. Treasury Bills, at cost plus accrued interest | 34,994 | 67,989 | ||||||
| Accounts receivable | 11,477 | 9,778 | ||||||
| Inventories | 8,720 | 6,756 | ||||||
| Other current assets | 3,463 | 4,540 | ||||||
| Total Current Assets | 68,381 | 98,331 | ||||||
Property, Plant and Equipment, at Cost: | ||||||||
| Land | 4,063 | 4,063 | ||||||
| Buildings and improvements | 45,760 | 45,296 | ||||||
| Machinery and equipment | 23,300 | 22,972 | ||||||
| 73,123 | 72,331 | |||||||
| Less accumulated depreciation | 52,998 | 50,912 | ||||||
| 20,125 | 21,419 | |||||||
| Idle property, net of accumulated depreciation | 4,677 | 5,303 | ||||||
| Net Property, Plant and Equipment | 24,802 | 26,722 | ||||||
Other Assets | 5,916 | 5,660 | ||||||
| Total Assets | $ | 99,099 | $ | 130,713 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
| Accounts payable, trade | $ | 3,392 | $ | 3,136 | ||||
| Accrued salaries and wages | 3,089 | 2,505 | ||||||
| Accrued marketing programs | 1,573 | 1,524 | ||||||
| Accrued warranty and related expenses | 3,366 | 3,339 | ||||||
| Accrued workers’ compensation | 822 | 1,083 | ||||||
| Other accrued liabilities | 2,474 | 2,101 | ||||||
| Total Current Liabilities | 14,716 | 13,688 | ||||||
Other Deferred Liabilities | 7,344 | 7,318 | ||||||
Commitments and Contingencies — See Note 9 | ||||||||
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 | 137,543 | 170,211 | ||||||
| Treasury stock, at cost, 2,825,900 shares | (65,744 | ) | (65,744 | ) | ||||
| Total Shareholders’ Equity | 77,039 | 109,707 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 99,099 | $ | 130,713 | ||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
| ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 12,011 | $ | 9,727 | ||||
U.S. Treasury Bills, at cost plus accrued interest | 16,998 | 34,994 | ||||||
Accounts receivable | 11,199 | 11,477 | ||||||
Inventories | 8,359 | 8,720 | ||||||
Other current assets | 2,903 | 3,463 | ||||||
|
|
|
| |||||
Total Current Assets | 51,470 | 68,381 | ||||||
|
|
|
| |||||
Property, Plant and Equipment, at Cost: | ||||||||
Land | 3,918 | 4,063 | ||||||
Buildings and improvements | 40,891 | 45,760 | ||||||
Machinery and equipment | 18,122 | 23,300 | ||||||
|
|
|
| |||||
| 62,931 | 73,123 | |||||||
Less accumulated depreciation | 45,856 | 52,998 | ||||||
|
|
|
| |||||
| 17,075 | 20,125 | |||||||
Idle property, net of accumulated depreciation | 4,121 | 4,677 | ||||||
|
|
|
| |||||
Net Property, Plant and Equipment | 21,196 | 24,802 | ||||||
|
|
|
| |||||
Other Assets | 6,190 | 5,916 | ||||||
|
|
|
| |||||
Total Assets | $ | 78,856 | $ | 99,099 | ||||
|
|
|
| |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable, trade | $ | 3,296 | $ | 3,392 | ||||
Accrued salaries and wages | 2,990 | 3,089 | ||||||
Accrued marketing programs | 2,215 | 1,573 | ||||||
Accrued warranty and related expenses | 3,870 | 3,366 | ||||||
Accrued workers’ compensation | 435 | 822 | ||||||
Other accrued liabilities | 1,875 | 2,474 | ||||||
|
|
|
| |||||
Total Current Liabilities | 14,681 | 14,716 | ||||||
|
|
|
| |||||
Other Deferred Liabilities | 8,011 | 7,344 | ||||||
|
|
|
| |||||
Commitments and Contingencies — See Note 9 | ||||||||
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 | 116,668 | 137,543 | ||||||
Treasury stock, at cost, 2,825,900 shares | (65,744 | ) | (65,744 | ) | ||||
|
|
|
| |||||
Total Shareholders’ Equity | 56,164 | 77,039 | ||||||
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity | $ | 78,856 | $ | 99,099 | ||||
|
|
|
| |||||
The accompanying notes are an integral part of the consolidated financial statements.
28
20
For the Years Ended May 31, OPERATIONS Net sales Cost of sales Gross profit Selling and administrative expenses Gain on sale of idle property, plant and equipment Operating loss Interest income Loss before income taxes Benefit from income taxes Net loss Basic loss per share Cash dividends per share Weighted average number of common shares outstanding RETAINED EARNINGS Balance at beginning of year Net loss Cash dividends paid Balance at end of year The accompanying notes are an integral part of the consolidated financial statements.Consolidated Statements of Operations and Retained Earnings2011, 20102012 and 20092011 2011 2010 2009 (Dollars in thousands, except share and per share amounts) OPERATIONS Net sales $ 162,327 $ 136,230 $ 166,676 Cost of sales 160,525 131,400 165,622 Gross profit 1,802 4,830 1,054 Selling and administrative expenses 28,490 26,200 30,735 Income from life insurance proceeds — 412 380 Gain on sale of idle property, plant and equipment — 1,544 3,396 Operating loss (26,688 ) (19,414 ) (25,905 ) Interest income 61 63 911 Loss before income taxes (26,627 ) (19,351 ) (24,994 ) Provision for (benefit from) income taxes: Federal — 7,080 (8,749 ) State — 2,562 (811 ) — 9,642 (9,560 ) Net loss $ (26,627 ) $ (28,993 ) $ (15,434 ) Basic loss per share $ (3.17 ) $ (3.46 ) $ (1.84 ) Cash dividends per share $ .72 $ .72 $ .72 Weighted average number of common shares outstanding 8,391,244 8,391,244 8,391,244 RETAINED EARNINGS Balance at beginning of year $ 170,211 $ 205,246 $ 226,722 Net loss (26,627 ) (28,993 ) (15,434 ) Cash dividends paid (6,041 ) (6,042 ) (6,042 ) Balance at end of year $ 137,543 $ 170,211 $ 205,246 2012 2011 (Dollars in thousands, except
share and per share amounts) $ 182,846 $ 162,327 177,962 160,525 4,884 1,802 27,450 28,490 3,184 — (19,382 ) (26,688 ) 17 61 (19,365 ) (26,627 ) — — $ (19,365 ) $ (26,627 ) $ (2.31 ) $ (3.17 ) $ .18 $ .72 8,391,244 8,391,244 $ 137,543 $ 170,211 (19,365 ) (26,627 ) (1,510 ) (6,041 ) $ 116,668 $ 137,543
29
21
For the Years Ended May 31, CASH FLOWS FROM OPERATING ACTIVITIES: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Gain on sale of idle property, plant and equipment Change in assets and liabilities: Accrued interest receivable Accounts receivable Inventories Other current assets Accounts payable, trade Accrued liabilities Other, net Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from principal payments of U.S. Treasury Bills Purchase of U.S. Treasury Bills Proceeds from sale of idle property, plant and equipment Purchase of property, plant and equipment Other, net Net cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid Net cash used in financing activities Net increase in cash Cash at beginning of year Cash at end of year The accompanying notes are an integral part of the consolidated financial statements.Consolidated Statements of Cash Flows2011, 20102012 and 20092011 2011 2010 2009 (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (26,627 ) $ (28,993 ) $ (15,434 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,683 2,189 2,704 Gain on sale of idle property, plant and equipment — (1,544 ) (3,396 ) Deferred income taxes — 9,523 (7,639 ) Change in assets and liabilities: Accrued interest receivable (1 ) 53 81 Accounts receivable (1,699 ) (3,335 ) 11,801 Inventories (1,964 ) (254 ) 3,648 Other current assets 1,077 7,488 2,206 Accounts payable, trade 256 1,283 (2,114 ) Accrued liabilities 772 (3,285 ) (4,114 ) Other, net (72 ) 1,624 (1,359 ) Net cash used in operating activities (25,575 ) (15,251 ) (13,616 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from principal payments of U.S. Treasury Bills 227,939 315,854 238,945 Purchase of U.S. Treasury Bills (194,943 ) (298,946 ) (222,954 ) Proceeds from sale of idle property, plant and equipment — 4,082 4,115 Purchase of property, plant and equipment (816 ) (891 ) (1,574 ) Other, net (105 ) 626 405 Net cash provided by investing activities 32,075 20,725 18,937 CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid (6,041 ) (6,042 ) (6,042 ) Net cash used in financing activities (6,041 ) (6,042 ) (6,042 ) Net increase (decrease) in cash 459 (568 ) (721 ) Cash at beginning of year 9,268 9,836 10,557 Cash at end of year $ 9,727 $ 9,268 $ 9,836 2012 2011 (Dollars in thousands) $ (19,365 ) $ (26,627 ) 2,359 2,683 (3,184 ) — 5 (1 ) 278 (1,699 ) 361 (1,964 ) 560 1,077 (96 ) 256 61 772 424 (72 ) (18,597 ) (25,575 ) 67,979 227,939 (49,988 ) (194,943 ) 5,054 — (614 ) (816 ) (40 ) (105 ) 22,391 32,075 (1,510 ) (6,041 ) (1,510 ) (6,041 ) 2,284 459 9,727 9,268 $ 12,011 $ 9,727
30
22
| NOTE 1 | Nature of Operations, Accounting Policies of Consolidated Financial Statements |
Nature of operations —Skyline Corporation designs, produces and markets manufactured housing, modular housing and towable recreational vehicles (travel trailers, fifth wheels and park models) to independent dealers and manufactured housing communities throughout the United States and Canada. Manufactured housing represents homes built according to a national code; modular housing represents homes built to a local code. These dealers and communities often utilize floor plan financing arrangements with lending institutions.
The following is a summary of the accounting policies that have a significant effect on the consolidated financial statements.
Basis of presentation —The consolidated financial statements include the accounts of Skyline Corporation and its wholly-owned subsidiaries (the “Corporation”). All intercompany transactions have been eliminated.
Accounting Estimates —The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Key estimates would include accruals for warranty, workers’ compensation and health insurance.
Revenue recognition —Substantially all of the Corporation’s products are made to order. Revenue is recognized upon completion of the following: an order for a unit is received from a dealer or community (customer); written or verbal approval for payment is received from a customer’s financial institution or payment is received; a common carrier signs documentation accepting responsibility for the unit as agent for the customer; and the unit is removed from the Corporation’s premises for delivery to a customer. Freight billed to customers is considered sales revenue, and the related freight costs are cost of sales. Volume based rebates paid to dealers are classified as a reduction of sales revenue. Sales of parts are classified as revenue.
Investments —The Corporation invests in United States Government securities, which are typically held until maturity and are therefore classified asheld-to-maturity and carried at amortized cost.
Accounts Receivable —Trade receivables are based on the amounts billed to dealers and communities. The Corporation does not accrue interest on any of its trade receivables, nor does it have an allowance for credit losses due to favorable collections experience. If a loss occurs, the Corporation’s policy is to recognize it in the period when collectability cannot be reasonably assured.
Inventories —Inventories are stated at the lower of cost or market. Cost is determined under thefirst-in, first-out method. Physical inventory counts are taken at the end of each reporting quarter.
Property, Plant and Equipments —Property, plant and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets using the straight-line method for financial statement reporting and accelerated methods for income tax reporting purposes. Estimated useful lives for significant classes of property, plant and equipment, including idle property, are as follows: Building and improvements 10 to 30 years; machinery and equipment 5 to 8 years. At May 31, 2012, Idle property, net of accumulated depreciation represents the net book valueconsisted of idle manufacturing facilities in the following locations: Hemet, California; Ocala, Florida; Elkhart, Indiana; Halstead, Kansas; Mocksville, North Carolina and Fair Haven, Vermont. At May 31, 2011, Idle property, net of accumulated depreciation consisted of manufacturing facilities in: Hemet, California; Ocala, Florida; Halstead Kansas; Mocksville, North Carolina and Ephrata, Pennsylvania.
Long-lived assets are reviewed for impairment whenever events indicate that the carrying amount of an asset may not be recoverable from projected future cash flows. If the carrying value of a long-lived asset is impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. The Company believes no impairment of long-lived assets exists at May 31, 2012.
23
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements — (Continued)
| NOTE 1 | Nature of Operations, Accounting Policies of Consolidated Financial Statements — (Continued) |
Warranty —The Corporation provides the retail purchaser of its homes with a full fifteen-month warranty against defects in design, materials and workmanship. Recreational vehicles are covered by a one-year warranty. The warranties are backed by service departments located at the Corporation’s manufacturing facilities and an extensive field service system. Estimated warranty costs are accrued at the time of sale based upon current sales, historical experience and management’s judgment regarding anticipated rates of warranty claims. The adequacy of the recorded warranty liability is periodically assessed and the amount is adjusted as necessary.
31
The Corporation reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in fiscal 2010a tax return. The Corporation recognizes interest and continuedpenalties, if any, related to maintain a full valuation allowanceunrecognized tax benefits in fiscal 2011.
Consolidated statements of cash flows —For purposes of the consolidated statements of cash flows, investments in U.S.U. S. Treasury Bills and Notes are included as investing activities. The Corporation’s cash flows from operating activities were increasednot affected by income taxes received of $73,000, $9,263,000 and $4,219,000 in fiscal 2011, 20102012 and 2009, respectively.
Recently issued accounting pronouncements —In July 2010, the Financial Accounting Standards Board There have been no recently issued Accounting Standards Update (ASU)2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU2010-20 requires entities to provide new financial statement disclosures regarding financing receivables, including credit risk exposures and allowance for credit losses. The Corporation adopted this accounting standard with nopronouncements that had a material effect on itsthe Corporation’s financial condition or results of operation.
ReclassificationsManagement’s Plan —Certain prior period amounts have been reclassified The Corporation’s management actively pursued and continues to conformpursue strategies to the current period presentation.
| Ÿ | Increasing efforts to increase sales of modular homes and park models in both the United States and Canada |
| Ÿ | Improving the process of developing homes and recreational vehicles to better meet ever changing preferences of consumers |
| Ÿ | Increasing the number of display models at housing facilities in order to provide dealers, communities and consumers with examples of newly designed product |
| Ÿ | Redesigning the Corporation’s website and utilizing social media to improve product exposure to customers and to better connect dealers to potential customers |
| Ÿ | Streamlining operations as evidenced by the closure of the Vermont and California facilities |
| Ÿ | Selling non-strategic assets such as the Florida and Pennsylvania facilities and the aircraft |
| Ÿ | Working with current and potential vendors to decrease costs |
| Ÿ | Analyzing staffing needs and making reductions when appropriate. |
By implementing these strategies, and having a significant position of its working capital in cash and U.S. Treasury Bills, the Corporation continues to remain diligent for any challenges that may occur.
24
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements — (Continued)
| NOTE 2 | Investments |
The following is a summary of investments (dollars in thousands):
| Gross | Gross | |||||||||||
| Amortized | Unrealized | Fair | ||||||||||
| Costs | Gains | Value | ||||||||||
May 31, 2011 | ||||||||||||
| U. S. Treasury Bills | $ | 34,994 | $ | 11 | $ | 35,005 | ||||||
May 31, 2010 | ||||||||||||
| U. S. Treasury Bills | $ | 67,989 | $ | 3 | $ | 67,992 | ||||||
| Gross Amortized Costs | Gross Unrealized Gain | Fair Value | ||||||||||
| (Dollars in thousands) | ||||||||||||
May 31, 2012 | ||||||||||||
U. S. Treasury Bills | $ | 16,998 | $ | 5 | $ | 17,003 | ||||||
|
|
|
|
|
| |||||||
May 31, 2011 | ||||||||||||
U. S. Treasury Bills | $ | 34,994 | $ | 11 | $ | 35,005 | ||||||
|
|
|
|
|
| |||||||
The fair value is determined by a secondary market for U.S. Government Securities. At May 31, 2011, the U.S. Treasury Bills maturematured within five months. At May 31, 2010,2012, the U.S. Treasury Bills maturedmatures within four months.
| NOTE 3 | Inventories |
Total inventories consist of the following:
| May 31, | ||||||||
| 2011 | 2010 | |||||||
| (Dollars in thousands) | ||||||||
| Raw Materials | $ | 5,016 | $ | 3,774 | ||||
| Work in process | 3,300 | 2,941 | ||||||
| Finished goods | 404 | 41 | ||||||
| $ | 8,720 | $ | 6,756 | |||||
32
| May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Raw materials | $ | 4,743 | $ | 5,016 | ||||
Work in process | 2,543 | 3,300 | ||||||
Finished goods | 1,073 | 404 | ||||||
|
|
|
| |||||
| $ | 8,359 | $ | 8,720 | |||||
|
|
|
| |||||
| NOTE 4 | Property, Plant and Equipment |
During fiscal 2012,the Corporation sold two idle housing facilities located in Ocala, Florida and Ephrata, Pennsylvania. The gain on the sale of the facilities was $1,114,000 and $1,386,000, respectively. In addition, the Corporation sold its aircraft for a gain of $684,000.
| NOTE 5 | Other Assets |
Other assets consist primarily of the cash surrender value of life insurance policies which aggregated $6,126,000 and $5,582,000 at May 31, 2012 and 2011, respectively.
25
Notes to Consolidated Financial Statements — (Continued)
| May 31, | ||||||||
| 2011 | 2010 | |||||||
| (Dollars in thousands) | ||||||||
| Cash surrender value of life insurance policies | $ | 5,852 | $ | 5,607 | ||||
| Other assets | 64 | 53 | ||||||
| $ | 5,916 | $ | 5,660 | |||||
| NOTE 6 | Warranty |
A reconciliation of accrued warranty and related expenses is as follows:
| Year Ended May 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Balance at the beginning of the period | $ | 4,839 | $ | 7,019 | $ | 9,037 | ||||||
| Accruals for warranties | 5,040 | 3,062 | 5,598 | |||||||||
| Settlements made during the period | (4,913 | ) | (5,242 | ) | (7,616 | ) | ||||||
| Balance at the end of the period | 4,966 | 4,839 | 7,019 | |||||||||
| Non-current balance included in other deferred liabilities | 1,600 | 1,500 | 2,400 | |||||||||
| Accrued warranty and related expenses | $ | 3,366 | $ | 3,339 | $ | 4,619 | ||||||
| Year Ended May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Balance at the beginning of the period | $ | 4,966 | $ | 4,839 | ||||
Accruals for warranties | 5,990 | 5,040 | ||||||
Settlements made during the period | (5,086 | ) | (4,913 | ) | ||||
|
|
|
| |||||
Balance at the end of the period | 5,870 | 4,966 | ||||||
Non-current balance included in other deferred liabilities | 2,000 | 1,600 | ||||||
|
|
|
| |||||
Accrued warranty and related expenses | $ | 3,870 | $ | 3,366 | ||||
|
|
|
| |||||
| NOTE 7 | Other Deferred Liabilities |
Other deferred liabilities consist of the following:
| May 31, | ||||||||
| 2011 | 2010 | |||||||
| (Dollars in thousands) | ||||||||
| Deferred compensation expense | $ | 5,744 | $ | 5,818 | ||||
| Accrued warranty and related expenses | 1,600 | 1,500 | ||||||
| $ | 7,344 | $ | 7,318 | |||||
33
| May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Deferred compensation expense | $ | 6,011 | $ | 5,744 | ||||
Accrued warranty and related expenses | 2,000 | 1,600 | ||||||
|
|
|
| |||||
| $ | 8,011 | $ | 7,344 | |||||
|
|
|
| |||||
Additional information regarding deferred compensation expense is in Note 12.
| NOTE 8 | Income Taxes |
The Corporation had no federal and state income tax provision (benefit) is summarized as follows:
| Year Ended May 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Current | ||||||||||||
| Federal | $ | — | $ | (10 | ) | $ | (1,996 | ) | ||||
| State | — | 129 | 75 | |||||||||
| — | 119 | (1,921 | ) | |||||||||
| Deferred | ||||||||||||
| Federal | — | 7,090 | (6,753 | ) | ||||||||
| State | — | 2,433 | (886 | ) | ||||||||
| — | 9,523 | (7,639 | ) | |||||||||
| $ | — | $ | 9,642 | $ | (9,560 | ) | ||||||
The difference between the Corporation’s statutory federal income tax rate (3434 percent in fiscal 20112012 and 2010, and 35 percent in fiscal 2009)2011, and the effective income tax rate is due primarily to state income taxes and changes in deferred tax assets valuation allowance and are as follows:
| Year Ended May 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Income taxes at statutory federal rate | $ | (9,062 | ) | $ | (6,579 | ) | $ | (8,748 | ) | |||
| State income taxes | (731 | ) | 648 | 640 | ||||||||
| State net operating loss carryforward | (1,699 | ) | (1,373 | ) | (1,564 | ) | ||||||
| New Energy Efficient Home Credit | (297 | ) | (120 | ) | (324 | ) | ||||||
| Alternative Fuel Credit | (19 | ) | (10 | ) | (32 | ) | ||||||
| Other fuel credits | (26 | ) | — | — | ||||||||
| Increase in deferred tax assets valuation allowance | 12,019 | 16,867 | 397 | |||||||||
| Other, net | (185 | ) | 209 | 71 | ||||||||
| Income tax provision (benefit) | $ | — | $ | 9,642 | $ | (9,560 | ) | |||||
| Effective tax rate | 0 | % | 49.8 | % | (38.3 | )% | ||||||
34
| Year Ended May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Income taxes at statutory federal rate | $ | (6,584 | ) | $ | (9,062 | ) | ||
State income taxes | (47 | ) | (731 | ) | ||||
State net operating loss | (1,047 | ) | (1,699 | ) | ||||
New Energy Efficient Home Credit | (117 | ) | (297 | ) | ||||
Alternative Fuel Credit | (12 | ) | (19 | ) | ||||
Other federal credits | (7 | ) | (26 | ) | ||||
Increase in deferred tax assets valuation allowance | 7,436 | 12,019 | ||||||
Other, net | 378 | (185 | ) | |||||
|
|
|
| |||||
Income tax benefit | $ | — | $ | — | ||||
|
|
|
| |||||
Effective tax rate | 0 | % | 0 | % | ||||
|
|
|
| |||||
26
Notes to Consolidated Financial Statements — (Continued)
| NOTE 8 | Income Taxes — (Continued) |
Components of the net deferred tax assets include:
| May 31, | ||||||||
| 2011 | 2010 | |||||||
| (Dollars in thousands) | ||||||||
| Current deferred tax assets | ||||||||
| Accrued marketing programs | $ | 196 | $ | 197 | ||||
| Accrued warranty expense | 1,352 | 1,338 | ||||||
| Accrued workers’ compensation | 1,031 | 1,230 | ||||||
| Accrued vacation | 383 | 370 | ||||||
| Other | 322 | 179 | ||||||
| Gross current deferred tax assets | 3,284 | 3,314 | ||||||
| Noncurrent deferred tax assets | ||||||||
| Liability for certain post-retirement benefits | 2,167 | 2,192 | ||||||
| Accrued warranty expense | 643 | 601 | ||||||
| Federal net operating loss carryforward | 16,481 | 7,820 | ||||||
| Federal tax credit carryforward | 894 | 571 | ||||||
| State net operating loss carryforward | 5,728 | 3,123 | ||||||
| Depreciation | 569 | 357 | ||||||
| Other | 251 | 20 | ||||||
| Gross noncurrent deferred tax assets | 26,733 | 14,684 | ||||||
| Total gross deferred tax assets | 30,017 | 17,998 | ||||||
| Valuation allowance | (30,017 | ) | (17,998 | ) | ||||
| Net deferred tax assets | $ | — | $ | — | ||||
| May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Current deferred tax assets | ||||||||
Accrued marketing programs | $ | 207 | $ | 196 | ||||
Accrued warranty expense | 1,842 | 1,352 | ||||||
Accrued workers’ compensation | 843 | 1,031 | ||||||
Accrued vacation | 345 | 383 | ||||||
Other | 180 | 322 | ||||||
|
|
|
| |||||
Gross current deferred tax assets | 3,417 | 3,284 | ||||||
|
|
|
| |||||
Noncurrent deferred tax assets | ||||||||
Liability for certain post-retirement benefits | 2,286 | 2,167 | ||||||
Accrued warranty expense | 525 | 643 | ||||||
Federal net operating loss carryforward | 22,747 | 16,481 | ||||||
Federal tax credit carryforward | 1,038 | 894 | ||||||
State net operating loss carryforward | 6,775 | 5,728 | ||||||
Depreciation | 755 | 569 | ||||||
Other | (90 | ) | 251 | |||||
|
|
|
| |||||
Gross noncurrent deferred tax assets | 34,036 | 26,733 | ||||||
|
|
|
| |||||
Total gross deferred tax assets | 37,453 | 30,017 | ||||||
Valuation allowance | (37,453 | ) | (30,017 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | $ | — | $ | — | ||||
|
|
|
| |||||
The Corporation’s gross deferred tax assets of approximately $30$37 million consist of approximately $17$24 million in federal net operating loss and tax credit carryforwards, $6$7 million in state net operating loss carryforwards and $7$6 million resulting from temporary differences between financial and tax reporting. The federal net operating loss and tax credit carryforwards have a life expectancy of twenty years. The state net operating loss carryforwards have a life expectancy, depending on the state where a loss was incurred, between five and twenty years. If the Corporation, after considering future negative and positive evidence regarding the realization of deferred tax assets, determines that a lesser valuation allowance is warranted, it would record a reduction to income tax expense and the valuation allowance in the period of determination.
For the majority of taxing jurisdictions the Corporation is no longer subject to examination by taxing authorities for years before 2007. State income tax expense reflects minimum amounts required by certain taxing jurisdictions in which the Corporation operates.
35
| NOTE 9 | Commitments and Contingencies |
The Corporation was contingently liable at May 31, 2011,2012, under repurchase agreements with certain financial institutions providing inventory financing for dealers of its products. Under these arrangements, which are customary in the manufactured housing, modular housing and recreational vehicle industries, the Corporation agrees to repurchase units in the event of default by the dealer at declining prices over the term of the agreement. The period to potentially repurchase units is between 12 to 24 months.
27
Skyline Corporation signed new manufactured housing and recreational vehicle repurchase agreements with two national providers of wholesale financing.
Notes to Consolidated Financial Statements — (Continued)
| NOTE 9 | Commitments and Contingencies — (Continued) |
The maximum repurchase liability is the total amount that would be paid upon the default of the Corporation’s independent dealers. The maximum potential repurchase liability, without reduction for the resale value of the repurchased units, was approximately $64 million at May 31, 2012 and $52 million at May 31, 2011 and $49 million at May 31, 2010.
The risk of loss under these agreements is spread over many dealers and financial institutions. The loss, if any, under these agreements is the difference between the repurchase cost and the resale value of the units. The Corporation estimates the fair value of this commitment considering both the contingent losses and the value of the guarantee. This amount has historically been insignificant. The Corporation believes that any potential loss under the agreements in effect at May 31, 20112012 will not be material to its financial position or results of operations.
The amounts of obligations from repurchased units and incurred net losses for the periods presented are as follows:
| Year Ended May 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Number of units repurchased | 1 | 13 | 88 | |||||||||
| Obligations from units repurchased | $ | 14 | $ | 282 | $ | 1,784 | ||||||
| Net losses on repurchased units | $ | 1 | $ | 23 | $ | 235 | ||||||
| Year Ended May 31, | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
Number of units repurchased | — | 1 | ||||||
Obligations from units repurchased | $ | — | $ | 14 | ||||
Net losses on repurchased units | $ | — | $ | 1 | ||||
The Corporation is a party to various pending legal proceedings in the normal course of business. One settled proceeding in particular is the case ofFEMA Trailer Formaldehyde Product Liability Litigation, Multidistrict Litigation (“MDL”) No. 1873, before the United States District Court, Eastern District of Louisiana. This MDL relates to alleged formaldehyde exposure in emergency housing units provided by the Federal Emergency Management Agency (“FEMA”) to individuals displaced by Hurricanes Katrina and Rita. Although the Corporation did not have a contract with FEMA, its independent recreational vehicle dealers sold recreational vehicles to the agency.
During the third quarter of fiscal 2012, the court presiding over the MDL issued an order to have plaintiffs and defendants participate in mediation. From this mediation the Corporation and the plaintiffs agreed to a settlement of $737,000. In accruing for the settlement, an expense of approximately $400,000 was recognized in the third quarter. The Corporation remitted the $737,000 to the United States District Court, Eastern District of Louisiana in the fourth quarter of fiscal 2012.
The Corporation believes that any losses resulting from suchany pending legal proceedings would not have a material adverse effect on the Corporation’s results of operations or financial position.
The Corporation leases office and manufacturing equipment under non-cancelable operating lease agreements. Leases have various renewal terms, and generally provide that the Corporation pays the cost of insurance, taxes and maintenance. Lease expense totaled approximately $381,000, $600,000$440,000 and $800,000$381,000 for fiscal years 2012 and 2011, 2010respectively.
28
Skyline Corporation and 2009, respectively.
Notes to Consolidated Financial Statements — (Continued)
| NOTE 9 | Commitments and Contingencies — (Continued) |
Future minimum lease commitments under operating leases are as follows:
Year Ending May 31, | Amount | |||
| (Dollars in | ||||
| thousands) | ||||
| 2012 | $ | 308 | ||
| 2013 | 222 | |||
| 2014 | 166 | |||
| 2015 | 130 | |||
| 2016 | 67 | |||
| Thereafter | 20 | |||
| $ | 913 | |||
36
Year Ending May 31, | Amount | |||
| (Dollars in thousands) | ||||
2013 | $ | 331 | ||
2014 | 258 | |||
2015 | 176 | |||
2016 | 101 | |||
2017 | 19 | |||
Thereafter | 15 | |||
|
| |||
| $ | 900 | |||
|
| |||
| NOTE 10 |
The Corporation’s Board of directors from time to time has authorized the repurchase of shares of the Corporation’s common stock, in the open market or through negotiated transactions, at such times and at such prices as management may decide. In fiscal 2011, 20102012 and 2009,2011, the Corporation did not acquire any shares of its common stock. At May 31, 2011,2012, the Corporation had authorization to repurchase an additional 391,300 of its common stock.
| NOTE 11 | Profit Sharing and 401(K) Plans |
The Corporation has two defined contribution profit sharing plans (“Plans”), which together cover substantially all of its employees. The Corporation has the right to modify, suspend or discontinue contributions. Assets of the Plans are invested primarily in mutual funds which have as underlying assets United States Government Securities. No contributions were made for the fiscal years ended May 31, 2011, 20102012 and 2009.
The Corporation has an employee savings plan (the “401(k) Plan”) that is intended to provide participating employees with an additional method of saving for retirement. The 401(k) Plan covers all employees who meet certain minimum participation requirements. The Corporation does not currently provide a matching contribution to the 401(k) Plan.
On June 1, 2012, the assets of the two Profit Sharing Plans merged into the 401(k) Plan. Additional information regarding the merger is located in the “Defined Contribution Profit Sharing and 401(k) Plan” section of the Corporation’s 2012 Proxy Statement.
29
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements — (Continued)
| NOTE 12 | Retirement and Death Benefit Plans |
The Corporation has entered into various arrangements with certain employees or former employees for benefits to be paid in the following manner:
to an employee’s estate in the event of death | |||
to an | |||
in the event of |
The Corporation also purchased life insurance contracts on the covered employees or former employees. The present value of the principal cost of such arrangements is being accrued over the period from the date of such arrangements to full eligibility using a discount rate of 4.5 percent in fiscal 2012 and 5.5 percent in fiscal 2011 and 2010, and 7.0 percent in fiscal 2009.2011. The current and non-current amounts accrued for such arrangements totaled $6,049,000, $6,123,000$6,316,000 and $5,592,000$6,049,000 at May 31, 2011, 20102012 and 2009,2011, respectively. The amount charged (credited) to operations under these arrangements was $101,000, $686,000$414,000 and ($304,000)$101,000 for fiscal 2012 and 2011, 2010 and 2009, respectively.
37
| NOTE 13 | Industry Segment Information |
The Corporation designs, produces and markets manufactured housing, modular housing and towable recreational vehicles (travel trailers, fifth wheels and park models). Manufactured housing represents homes built according to a national building code; modular housing represents homes built to a local building code. The percentage allocation of housing and recreational vehicle net sales is:
| Year Ended May 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| Housing | ||||||||||||
| Manufactured Housing | ||||||||||||
| Domestic | 50 | % | 55 | % | 65 | % | ||||||
| Canadian | 1 | — | — | |||||||||
| 51 | 55 | 65 | ||||||||||
| Modular Housing | ||||||||||||
| Domestic | 8 | 8 | 9 | |||||||||
| Canadian | 1 | 3 | — | |||||||||
| 9 | 11 | 9 | ||||||||||
| Total Housing | 60 | 66 | 74 | |||||||||
| Recreational Vehicles | ||||||||||||
| Domestic | 30 | 25 | 20 | |||||||||
| Canadian | 10 | 9 | 6 | |||||||||
| Total Recreational Vehicles | 40 | 34 | 26 | |||||||||
| 100 | % | 100 | % | 100 | % | |||||||
| Year Ended May 31, | ||||||||
| 2012 | 2011 | |||||||
Manufactured Housing | ||||||||
Domestic | 48 | % | 50 | % | ||||
Canadian | — | 1 | ||||||
|
|
|
| |||||
| 48 | 51 | |||||||
Modular Housing | ||||||||
Domestic | 9 | 8 | ||||||
Canadian | 3 | 1 | ||||||
|
|
|
| |||||
| 12 | 9 | |||||||
|
|
|
| |||||
Total Housing | 60 | 60 | ||||||
Recreational Vehicles | ||||||||
Domestic | 30 | 30 | ||||||
Canadian | 10 | 10 | ||||||
|
|
|
| |||||
Total Recreational Vehicles | 40 | 40 | ||||||
|
|
|
| |||||
| 100 | % | 100 | % | |||||
|
|
|
| |||||
Total operating loss represents operating losses before interest income and provision for (benefit from)benefit from income taxes with non-traceable operating expenses being allocated to industry segments based on percentages of net sales. General corporate expenses are not allocated to the industry segments.
Identifiable assets, depreciation and capital expenditures, by industry segment, are those items that are used in operations in each industry segment, with jointly used items being allocated based on a percentage of net sales.
38
30
Notes to Consolidated Financial Statements — (Continued)
| NOTE 13 | Industry Segment Information — (Continued) |
| Year Ended May 31 | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (Dollars in thousands) | ||||||||||||
NET SALES | ||||||||||||
| Housing | ||||||||||||
| Manufactured Housing | ||||||||||||
| Domestic | $ | 81,880 | $ | 75,536 | $ | 108,779 | ||||||
| Canadian | 830 | 362 | — | |||||||||
| 82,710 | 75,898 | 108,779 | ||||||||||
| Modular Housing | ||||||||||||
| Domestic | 13,039 | 11,569 | 14,372 | |||||||||
| Canadian | 2,173 | 3,084 | 779 | |||||||||
| 15,212 | 14,653 | 15,151 | ||||||||||
| Total Housing | 97,922 | 90,551 | 123,930 | |||||||||
| Recreational Vehicles | ||||||||||||
| Domestic | 47,868 | 33,738 | 33,293 | |||||||||
| Canadian | 16,537 | 11,941 | 9,453 | |||||||||
| Total Recreational Vehicles | 64,405 | 45,679 | 42,746 | |||||||||
| Total Net sales | $ | 162,327 | $ | 136,230 | $ | 166,676 | ||||||
LOSS BEFORE INCOME TAXES | ||||||||||||
| Operating Loss | ||||||||||||
| Housing | $ | (17,026 | ) | $ | (13,470 | ) | $ | (18,304 | ) | |||
| Recreational vehicles | (7,490 | ) | (5,308 | ) | (9,435 | ) | ||||||
| General corporate expense | (2,172 | ) | (2,592 | ) | (1,942 | ) | ||||||
| Income from life insurance proceeds | — | 412 | 380 | |||||||||
| Gain on sale of idle property, plant and equipment | — | 1,544 | 3,396 | |||||||||
| Total operating loss | (26,688 | ) | (19,414 | ) | (25,905 | ) | ||||||
| Interest income | 61 | 63 | 911 | |||||||||
| Loss before income taxes | $ | (26,627 | ) | $ | (19,351 | ) | $ | (24,994 | ) | |||
IDENTIFIABLE ASSETS | ||||||||||||
| Operating assets | ||||||||||||
| Housing | $ | 42,111 | $ | 45,089 | $ | 65,359 | ||||||
| Recreational vehicles | 21,994 | 17,635 | 17,810 | |||||||||
| Total operating assets | 64,105 | 62,724 | 83,169 | |||||||||
| U.S. Treasury bills | 34,994 | 67,989 | 84,950 | |||||||||
| Total assets | $ | 99,099 | $ | 130,713 | $ | 168,119 | ||||||
DEPRECIATION | ||||||||||||
| Housing | $ | 2,171 | $ | 1,830 | $ | 2,206 | ||||||
| Recreational vehicles | 512 | 359 | 498 | |||||||||
| Total depreciation | $ | 2,683 | $ | 2,189 | $ | 2,704 | ||||||
CAPITAL EXPENDITURES | ||||||||||||
| Housing | $ | 522 | $ | 639 | $ | 1,322 | ||||||
| Recreational vehicles | 294 | 252 | 252 | |||||||||
| Total capital expenditures | $ | 816 | $ | 891 | $ | 1,574 | ||||||
39
| Year Ended May 31 | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
NET SALES | ||||||||
Manufactured Housing | ||||||||
Domestic | $ | 87,487 | $ | 81,880 | ||||
Canadian | — | 830 | ||||||
|
|
|
| |||||
| 87,487 | 82,710 | |||||||
Modular Housing | ||||||||
Domestic | 15,852 | 13,039 | ||||||
Canadian | 5,818 | 2,173 | ||||||
|
|
|
| |||||
| 21,670 | 15,212 | |||||||
|
|
|
| |||||
Total Housing | 109,157 | 97,922 | ||||||
Recreational Vehicles | ||||||||
Domestic | 55,003 | 47,868 | ||||||
Canadian | 18,686 | 16,537 | ||||||
|
|
|
| |||||
Total Recreational Vehicles | 73,689 | 64,405 | ||||||
|
|
|
| |||||
Total Net sales | $ | 182,846 | $ | 162,327 | ||||
|
|
|
| |||||
LOSS BEFORE INCOME TAXES | ||||||||
Operating Loss | ||||||||
Housing | $ | (13,440 | ) | $ | (17,026 | ) | ||
Recreational vehicles | (6,808 | ) | (7,490 | ) | ||||
General corporate expense | (2,318 | ) | (2,172 | ) | ||||
Gain on sale of idle property, plant and equipment | 3,184 | — | ||||||
|
|
|
| |||||
Total operating loss | (19,382 | ) | (26,688 | ) | ||||
Interest income | 17 | 61 | ||||||
|
|
|
| |||||
Loss before income taxes | $ | (19,365 | ) | $ | (26,627 | ) | ||
|
|
|
| |||||
IDENTIFIABLE ASSETS | ||||||||
Operating assets | ||||||||
Housing | $ | 40,985 | $ | 42,111 | ||||
Recreational vehicles | 20,873 | 21,994 | ||||||
|
|
|
| |||||
Total operating assets | 61,858 | 64,105 | ||||||
U.S. Treasury bills | 16,998 | 34,994 | ||||||
|
|
|
| |||||
Total assets | $ | 78,856 | $ | 99,099 | ||||
|
|
|
| |||||
31
Notes to Consolidated Financial Statements — (Continued)
| NOTE 13 | Industry Segment Information — (Continued) |
| Year Ended May 31 | ||||||||
| 2012 | 2011 | |||||||
| (Dollars in thousands) | ||||||||
DEPRECIATION | ||||||||
Housing | $ | 1,762 | $ | 2,171 | ||||
Recreational vehicles | 597 | 512 | ||||||
|
|
|
| |||||
Total depreciation | $ | 2,359 | $ | 2,683 | ||||
|
|
|
| |||||
CAPITAL EXPENDITURES | ||||||||
Housing | $ | 450 | $ | 522 | ||||
Recreational vehicles | 164 | 294 | ||||||
|
|
|
| |||||
Total capital expenditures | $ | 614 | $ | 816 | ||||
|
|
|
| |||||
| NOTE 14 |
| Financial Summary by Quarter — Unaudited |
Financial Summary by Quarter
2011 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||
| Net sales | $ | 45,827 | $ | 36,621 | $ | 31,776 | $ | 48,103 | $ | 162,327 | ||||||||||
| Gross profit (loss) | 1,747 | (623 | ) | (1,718 | ) | 2,396 | 1,802 | |||||||||||||
| Net loss | (6,065 | ) | (7,756 | ) | (8,742 | ) | (4,064 | ) | (26,627 | ) | ||||||||||
| Basic loss per share | (.72 | ) | (.93 | ) | (1.04 | ) | (.48 | ) | (3.17 | ) | ||||||||||
2010 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||
| Net sales | $ | 35,874 | $ | 34,246 | $ | 25,415 | $ | 40,695 | $ | 136,230 | ||||||||||
| Gross profit (loss) | 277 | 1,066 | (821 | ) | 4,308 | 4,830 | ||||||||||||||
| Net loss | (3,907 | ) | (3,808 | ) | (3,697 | ) | (17,581 | )* | (28,993 | ) | ||||||||||
| Basic loss per share | (.47 | ) | (.45 | ) | (.44 | ) | (2.10 | )* | (3.46 | ) | ||||||||||
2012 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Net sales | $ | 50,284 | $ | 45,296 | $ | 36,805 | $ | 50,461 | $ | 182,846 | ||||||||||
Gross profit (loss) | 1,044 | 1,265 | (692 | ) | 3,267 | 4,884 | ||||||||||||||
Net loss | (6,845 | ) | (3,422 | ) | (7,387 | ) | (1,711 | ) | (19,365 | ) | ||||||||||
Basic loss per share | (.82 | ) | (.40 | ) | (.88 | ) | (.21 | ) | (2.31 | ) | ||||||||||
2011 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Net sales | $ | 45,827 | $ | 36,621 | $ | 31,776 | $ | 48,103 | $ | 162,327 | ||||||||||
Gross profit (loss) | 1,747 | (623 | ) | (1,718 | ) | 2,396 | 1,802 | |||||||||||||
Net loss | (6,065 | ) | (7,756 | ) | (8,742 | ) | (4,064 | ) | (26,627 | ) | ||||||||||
Basic loss per share | (.72 | ) | (.93 | ) | (1.04 | ) | (.48 | ) | (3.17 | ) | ||||||||||
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None
| Item 9A. | C |
Evaluation of Disclosure Controls and Procedures
As of May 31, 2011,2012, the Corporation conducted an evaluation, under the supervision and participation of management including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Corporation’s disclosure controls and procedures (as defined inRule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective for the period ended May 31, 2011.
Management’s Assessment on Internal Controls Over Financial Reporting
Management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) of the Securities Exchange Act of 1934. Internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
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Management of the Corporation has assessed the effectiveness of the Corporation’s internal control over financial reporting based on criteria established inInternal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.
Management’s assessment included an evaluation of the design of the Corporation’s internal control over financial reporting, and testing of the operational effectiveness of the Corporation’s internal control over financing reporting. Based on this assessment, management has concluded that the Corporation’s internal control over financial reporting was effective as of May 31, 2011.
Changes in Internal Control over Financial Reporting
No change in the Corporation’s internal control over financial reporting (as such term is defined in Exchange ActRule 13a-15(f)) occurred during the fiscal quarter ended May 31, 20112012 that materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Chief Executive Officer and Chief Financial Officer Certifications
The Corporation’s Chief Executive Officer and Chief Financial Officer have filed with the Securities and Exchange Commission the certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 to the Corporation’s Annual Report onForm 10-K for the fiscal year ended May 31, 2011.2012. In addition, on September 27, 201026, 2011 the Corporation’s Chief Executive Officer certified to the New York Stock Exchange (NYSE) that he was not aware of any violation by the Corporation of the NYSE corporate governance listing standards as in effect on September 27, 2010.26, 2011. The foregoing certification was unqualified.
| Item 9B. | Other Information. |
None
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| Item 10. | Directors, Executive Officers and Corporate Governance (Officers are elected annually.) |
Name | Age | Position | ||||
Thomas G. Deranek | ||||||
| Chairman and Chief Executive Officer | ||||||
Charles W. Chambliss | Vice President-Product Development and Engineering | |||||
Terrence M. Decio | Vice President-Marketing and Sales | |||||
Martin R. Fransted | Corporate Controller and Secretary | |||||
Bruce G. Page | Vice | |||||
Jon S. Pilarski | Vice President-Finance & Treasurer, Chief Financial Officer | |||||
Thomas G. Deranek, Chairman and Chief Executive Officer, joined the Corporation in 1964. He served as Chief of Staff from 1991 to 2001, and Vice Chairman from 2001 to 2007. He was elected Chief Executive Officer in 2001 and Chairman in 2007.
Charles W. Chambliss, Vice President-Product Development and Engineering, joined the Corporation in 1973 and was elected Vice President in 1996.
Terrence M. Decio, Vice President-Marketing and Sales, joined the Corporation in 1973. He was elected Vice President in 1985, Senior Vice President in 1991, Senior Executive Vice President in 1993 and Vice President-Marketing and Sales in 2004.
Martin R. Fransted,Corporate Controller and Secretary, joined the Corporation in 1981 and was elected Corporate Controller and Secretary in 2007. He previously served as the Director of Taxation and Assistant Treasurer.
Bruce G. Page, Vice President-Operations,President-Chief Operating Officer, joined the Corporation in 1969 and was elected Vice PresidentChief Operating Officer in 2006.2011. He previously served as Vice President-Operations from 2006 to 2011, and Director of Operations from 2005 to 2006. Prior to 2005 he was the General Manager of the Corporation’s manufactured housing facility in McMinnville, Oregon.
Jon S. Pilarski, Vice President-Finance & Treasurer, and Chief Financial Officer, joined the Corporation in 1994. He served as Corporate Controller from 1997 to 2007 and was elected Vice President in 2007.
Information regarding the Corporation’s directors, and other information required by this Item 10 is available in the following sections of the Corporation’s Proxy Statement: “Directors“Director Qualifications and Biographical Information”; “Committees”; “Code of Business Conduct and Ethics”; and “Section 16(a) Beneficial Ownership Reporting Compliance.” The Proxy Statement for the Annual Meeting of Shareholders to be held on September 26, 201124, 2012 is incorporated herein by reference.
| Item 11. | Executive Compensation. |
Information regarding executive compensation is available in the following sections“Executive Compensation” section of the Corporation’s Proxy Statement: “Compensation, Discussion and Analysis”; “Executive Compensation”; “Compensation Committee Interlocks and Insider Participation”; and “Report of the Compensation Committee on Executive Compensation.”
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Information regarding certain beneficial owners is available in the “Security Ownership of Management” and “Certain Other Beneficial Owners” section of the Corporation’s Proxy Statement.
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Information regarding related party transactions and director independence is available in the following sections of the Corporation’s Proxy Statement: “Transactions with Management” and “Director Independence and Executive Sessions.”
| Item 14. | Principal Accounting Fees and Services. |
Information regarding accounting fees and services is located in the “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” sections of the Corporation’s Proxy Statement.
| Item 15. | Exhibits, Financial Statement Schedules. |
Financial statements for the Corporation are listed in the index under Item 8 of this document.
All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
Exhibits (Numbered according to Item 601 ofRegulation S-K, Exhibit Table)
| (3)(i) | Articles of Incorporation | |
| (3)(ii) | By-Laws | |
| (14) | Code of Business Conduct and Ethics | |
| (21) | Subsidiaries of the Registrant | |
| (31.1) | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002-Rule 13a-14(a)/15d | |
| (31.2) | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002-Rule 13a-14(a)/15d | |
| (32.1) | Certification of Periodic Financial Reports Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| (32.2) | Certification of Periodic Financial Reports Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document. | |
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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SKYLINE CORPORATION Registrant | ||
| BY: | /s/ Thomas G. Deranek | |
Thomas G. Deranek, Chairman, Chief Executive Officer and Director | ||
DATE:July 25, 201123, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| BY: | ||||||
/s/ Jon S. Pilarski Jon S. Pilarski | Vice President-Finance & Treasurer, Chief Financial Officer | July | ||||
| BY: | ||||||
/s/ Martin R. Fransted Martin R. Fransted | Corporate Controller and Secretary | July | ||||
| BY: | ||||||
/s/ Arthur J. Decio Arthur J. Decio | Director | July | ||||
| BY: | ||||||
/s/ John C. Firth John C. Firth | Director | July | ||||
| BY: | ||||||
/s/ Jerry Hammes Jerry Hammes | Director | July | ||||
| BY: | ||||||
/s/ William H. Lawson William H. Lawson | Director | July | ||||
| BY: | ||||||
/s/ David T. Link David T. Link | Director | July | ||||
| BY: | ||||||
/s/ Andrew J. McKenna Andrew J. McKenna | Director | July | ||||
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