UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended August 31,November 30, 2015
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-4714
SKYLINE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana | 35-1038277 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
P. O. Box 743, 2520 By-Pass Road Elkhart, Indiana | 46515 | ||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(574) 294-6521
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. þ Yes ¨ No
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 of Regulation 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). þ Yes ¨ No
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 | þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes þ No
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
| |
Common Stock, $.0277 Par Value | 8,391,244 |
INDEX
PART I— FINANCIAL INFORMATION
Page No. | ||||||
Item 1. | ||||||
Consolidated Balance Sheets as of | 1 | |||||
3 | ||||||
4 | ||||||
5 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | ||||||
Item 4. | ||||||
PART II— OTHER INFORMATION | ||||||
Item 1. | ||||||
Item 1A. | ||||||
Item 6. | ||||||
Signatures |
PART I— FINANCIAL INFORMATION
Item 1. | Financial |
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
August 31, 2015 | May 31, 2015 | November 30, 2015 | May 31, 2015 | |||||||||||||
(Unaudited) | (Unaudited) | �� | ||||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash | $ | 6,672 | $ | 4,995 | $ | 6,804 | $ | 4,995 | ||||||||
Accounts receivable, less allowance for doubtful accounts of $536 | 12,064 | 15,259 | ||||||||||||||
Accounts receivable, less allowance for doubtful accounts of $0 and $536 at November 30, 2015 and May 31, 2015, respectively | 14,309 | 15,288 | ||||||||||||||
Inventories | 10,498 | 9,008 | 10,759 | 9,119 | ||||||||||||
Workers’ compensation security deposit | 1,015 | 1,732 | 792 | 1,732 | ||||||||||||
Other current assets | 1,540 | 447 | 1,370 | 447 | ||||||||||||
Assets of discontinued operations | 137 | 140 | ||||||||||||||
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Total Current Assets | 31,926 | 31,581 | 34,034 | 31,581 | ||||||||||||
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Property, Plant and Equipment: | ||||||||||||||||
Land | 2,996 | 2,996 | 2,996 | 2,996 | ||||||||||||
Buildings and improvements | 36,287 | 36,280 | 36,624 | 36,280 | ||||||||||||
Machinery and equipment | 16,340 | 16,332 | 16,161 | 16,332 | ||||||||||||
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55,623 | 55,608 | 55,781 | 55,608 | |||||||||||||
Less accumulated depreciation | 44,232 | 44,039 | 44,485 | 44,039 | ||||||||||||
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11,391 | 11,569 | 11,296 | 11,569 | |||||||||||||
Other Assets | 7,299 | 7,289 | 7,319 | 7,289 | ||||||||||||
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Total Assets | $ | 50,616 | $ | 50,439 | $ | 52,649 | $ | 50,439 | ||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets — (Continued)
(Dollars in thousands, except share and per share amounts)
August 31, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable, trade | $ | 3,617 | $ | 3,025 | ||||
Accrued salaries and wages | 2,486 | 2,565 | ||||||
Accrued marketing programs | 3,172 | 2,319 | ||||||
Accrued warranty | 4,482 | 4,511 | ||||||
Other accrued liabilities | 2,340 | 2,593 | ||||||
Liabilities of discontinued operations | 108 | 104 | ||||||
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Total Current Liabilities | 16,205 | 15,117 | ||||||
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Long-Term Liabilities: | ||||||||
Deferred compensation expense | 5,160 | 5,237 | ||||||
Accrued warranty | 2,400 | 2,400 | ||||||
Life insurance loans | 4,312 | 4,312 | ||||||
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Total Long-Term Liabilities | 11,872 | 11,949 | ||||||
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Commitments and Contingencies – See Note 8 | ||||||||
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 | 83,043 | 83,877 | ||||||
Treasury stock, at cost, 2,825,900 shares | (65,744 | ) | (65,744 | ) | ||||
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Total Shareholders’ Equity | 22,539 | 23,373 | ||||||
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Total Liabilities and Shareholders’ Equity | $ | 50,616 | $ | 50,439 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Operations and Retained Earnings
For the Three-Month Periods Ended August 31, 2015 and 2014
(Dollars in thousands, except share and per share amounts)
2015 | 2014 | |||||||
(Unaudited) | ||||||||
OPERATIONS | ||||||||
Net sales | $ | 48,742 | $ | 49,604 | ||||
Cost of sales | 44,099 | 45,563 | ||||||
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Gross profit | 4,643 | 4,041 | ||||||
Selling and administrative expenses | 5,459 | 5,180 | ||||||
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Operating loss | (816 | ) | (1,139 | ) | ||||
Interest expense | (79 | ) | (94 | ) | ||||
Interest income | — | 24 | ||||||
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Loss from continuing operations before income taxes | (895 | ) | (1,209 | ) | ||||
Benefit from income taxes | — | — | ||||||
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Loss from continuing operations | (895 | ) | (1,209 | ) | ||||
Income (loss) from discontinued operations, net of income taxes | 61 | (2,564 | ) | |||||
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Net loss | $ | (834 | ) | $ | (3,773 | ) | ||
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Basic loss per share | $ | (.10 | ) | $ | (.45 | ) | ||
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Loss per share from continuing operations | $ | (.11 | ) | $ | (.14 | ) | ||
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Income (loss) per share from discontinued operations | $ | .01 | $ | (.31 | ) | |||
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Weighted average number of common shares outstanding | 8,391,244 | 8,391,244 | ||||||
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RETAINED EARNINGS | ||||||||
Balance at beginning of period | $ | 83,877 | $ | 94,291 | ||||
Net loss | (834 | ) | (3,773 | ) | ||||
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Balance at end of period | $ | 83,043 | $ | 90,518 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Three-Month Periods Ended August 31, 2015 and 2014
(Dollars in thousands)
2015 | 2014 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (834 | ) | $ | (3,773 | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
Depreciation | 257 | 394 | ||||||
Amortization of debt financing costs | 19 | ��� | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable | 3,137 | 3,857 | ||||||
Inventories | (1,429 | ) | (1,622 | ) | ||||
Workers’ compensation security deposit | 717 | — | ||||||
Other current assets | (1,093 | ) | (355 | ) | ||||
Accounts payable, trade | 624 | (1,283 | ) | |||||
Accrued liabilities | 464 | (171 | ) | |||||
Other, net | (107 | ) | (66 | ) | ||||
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Net cash from operating activities | 1,755 | (3,019 | ) | |||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from note receivable | — | 13 | ||||||
Purchase of property, plant and equipment | (70 | ) | (26 | ) | ||||
Other, net | (8 | ) | (4 | ) | ||||
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Net cash from investing activities | (78 | ) | (17 | ) | ||||
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Net increase (decrease) in cash | 1,677 | (3,036 | ) | |||||
Cash at beginning of period | 4,995 | 6,031 | ||||||
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Cash at end of period | $ | 6,672 | $ | 2,995 | ||||
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November 30, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable, trade | $ | 3,144 | $ | 3,033 | ||||
Accrued salaries and wages | 2,752 | 2,565 | ||||||
Accrued marketing programs | 3,637 | 2,356 | ||||||
Accrued warranty | 4,618 | 4,511 | ||||||
Other accrued liabilities | 2,406 | 2,652 | ||||||
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Total Current Liabilities | 16,557 | 15,117 | ||||||
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Long-Term Liabilities: | ||||||||
Deferred compensation expense | 5,100 | 5,237 | ||||||
Accrued warranty | 2,400 | 2,400 | ||||||
Life insurance loans | 4,312 | 4,312 | ||||||
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Total Long-Term Liabilities | 11,812 | 11,949 | ||||||
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Commitments and Contingencies – See Note 8 | ||||||||
Shareholders’ Equity: | ||||||||
Common stock, $.0277 par value, 15,000,000 shares authorized; issued 11,217,144 shares | 312 | 312 | ||||||
Additional paid-in capital | 4,963 | 4,928 | ||||||
Retained earnings | 84,749 | 83,877 | ||||||
Treasury stock, at cost, 2,825,900 shares | (65,744 | ) | (65,744 | ) | ||||
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Total Shareholders’ Equity | 24,280 | 23,373 | ||||||
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Total Liabilities and Shareholders’ Equity | $ | 52,649 | $ | 50,439 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Operations
For the Three-Month and Six-Month Periods Ended November 30, 2015 and 2014
(Dollars in thousands, except share and per share amounts)
Three-Months Ended | Six-Months Ended | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
OPERATIONS | ||||||||||||||||
Net sales | $ | 58,684 | $ | 49,667 | $ | 107,426 | $ | 99,271 | ||||||||
Cost of sales | 51,457 | 44,509 | 95,556 | 90,072 | ||||||||||||
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Gross profit | 7,227 | 5,158 | 11,870 | 9,199 | ||||||||||||
Selling and administrative expenses | 5,400 | 5,008 | 10,859 | 10,188 | ||||||||||||
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Operating income (loss) | 1,827 | 150 | 1,011 | (989 | ) | |||||||||||
Interest expense | (79 | ) | (93 | ) | (158 | ) | (187 | ) | ||||||||
Interest income | — | 24 | — | 48 | ||||||||||||
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Income (loss) from continuing operations before income taxes | 1,748 | 81 | 853 | (1,128 | ) | |||||||||||
Income tax expense | — | — | — | — | ||||||||||||
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Income (loss) from continuing operations | 1,748 | 81 | 853 | (1,128 | ) | |||||||||||
(Loss) income from discontinued operations, net of income taxes | (42 | ) | (3,525 | ) | 19 | (6,089 | ) | |||||||||
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Net income (loss) | $ | 1,706 | $ | (3,444 | ) | $ | 872 | $ | (7,217 | ) | ||||||
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Basic income (loss) per share | $ | .20 | $ | (.41 | ) | $ | .10 | $ | (.86 | ) | ||||||
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Basic income (loss) per share from continuing operations | $ | .21 | $ | .01 | $ | .10 | $ | (.13 | ) | |||||||
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Basic loss per share from discontinued operations | $ | (.01 | ) | $ | (.42 | ) | $ | — | $ | (.73 | ) | |||||
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Weighted average number of common shares outstanding | 8,391,244 | 8,391,244 | 8,391,244 | 8,391,244 | ||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Six-Month Periods Ended November 30, 2015 and 2014
(Dollars in thousands)
2015 | 2014 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 872 | $ | (7,217 | ) | |||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||
Depreciation | 520 | 726 | ||||||
Reduction in inventory value of discontinued operations | — | 901 | ||||||
Gain on sale of assets associated with discontinued operations | — | (670 | ) | |||||
Share-based compensation | 35 | — | ||||||
Amortization of debt financing costs | 39 | — | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable | 979 | 5,872 | ||||||
Inventories | (1,640 | ) | 469 | |||||
Workers’ compensation security deposit | 940 | 551 | ||||||
Other current assets | (923 | ) | (432 | ) | ||||
Accounts payable, trade | 111 | (3,068 | ) | |||||
Accrued liabilities | 1,329 | (264 | ) | |||||
Other, net | (183 | ) | (424 | ) | ||||
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Net cash from operating activities | 2,079 | (3,556 | ) | |||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from note receivable | — | 25 | ||||||
Proceeds from sale of assets associated with discontinued operations | — | 2,331 | ||||||
Purchase of property, plant and equipment | (245 | ) | (163 | ) | ||||
Other, net | (25 | ) | 156 | |||||
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Net cash from investing activities | (270 | ) | 2,349 | |||||
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Net increase (decrease) in cash | 1,809 | (1,207 | ) | |||||
Cash at beginning of period | 4,995 | 6,031 | ||||||
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Cash at end of period | $ | 6,804 | $ | 4,824 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 | Basis of Presentation |
The accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position as of August 31,November 30, 2015, in addition to the consolidated results of operations for the three-month and thesix-month periods ended November 30, 2015 and 2014, and consolidated cash flows for the three-monthsix-month periods ended August 31,November 30, 2015 and 2014. Due to the seasonal nature of the Corporation’s business, interim results are not necessarily indicative of results for the entire year.
The unaudited interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The audited consolidated balance sheet as of May 31, 2015 and the unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s latest annual report on Form 10-K.
Certain prior period amounts related to assets and liabilities of discontinued operations have been reclassified to conform with current period presentation.
NOTE 2 | Management’s Plan |
The Corporation’s consolidated financial statements were prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business. Due to recurring losses during certain periods, the Corporation has historically experienced negative cash flows from operating activities. The level of historical negative cash flows from operations raise substantial doubt about the Corporation’s ability to continue as a going concern. To continue as a going concern, management determined that certain strategies need to be pursued.
These strategies include but are not limited to:
Increasing Sales
Management is focused on driving profitable growthinvestigating strategies to expand our current market position relative to Real Estate Investment Trusts and other customers who are in the Corporation’s coreManufactured Housing Community and Recreational Resort business. We continue to explore other market niches where we believe our products provide a valuable housing business.
Progress:alternative to apartments or conventional site built homes.
In October 2014,Management is engaged in reviewing our current Marketing Strategies used to reach the Corporation sold its recreational vehicle segmentend consumer of our products. We expect to focus solely on its core housing businesslaunch an improved Web site and social media portfolio designed to raise cash. Additional information regardingreach more consumers and highlight the sale is in Note 3value of Notes to Consolidated Financial Statements.
Skyline products and service. In addition, our internet marketing strategy has been calibrated to the sale of the RV business, the Corporation sold an idle housing facility in fiscal 2015. A buyer is also being sought for an undeveloped parcel of land the Corporation owns.benefit retail customers who are currently underrepresented by our traditional distribution channels with no downside to our existing dealers and communities.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
NOTE 2 | Management’s Plan — (Continued) |
Management has empowered each of the company’s Operating Divisions to develop products which meet consumer expectations for design and features within their respective market regions. We believe that this new approach to product development will further enhance our ability to reach more consumers and capture additional market share.
Management has expanded the number of Operating Divisions which produce our popular Shore Park brand of recreational park models from three to eight. Management believes that we can improve top line revenue appreciably for each of our divisions with the addition of these popular products.
Decreasing Costs
Management has been, and continues to be, actively engaged in driving material costs lower by more effectively controlling material costs during the procurement process.
Management is undergoing a detailed review of all current pricing strategies and market programs and plans to introduce new initiatives designed to increase, recognize, and reward Dealer commitment and sales to manufactured housing dealers by gaining a greater presence on their properties.
Progress:
Manufactured housing net sales in the first quarter of fiscal 2016 decreased 0.9 percent compared to the first quarter of fiscal 2015. Management believes the decrease is attributable to a temporary softness in demand among the Corporation’s manufactured housing dealers and communities.
Park model net sales in the first quarter of fiscal 2016 decreased 21.8 percent compared with the first quarter of fiscal 2015. Management also believes the decrease is due to a temporary softness in demand among dealers, communities and campgrounds.
Modular housing net sales for the first quarter of fiscal 2016 increased 1.6 percent as compared to the fiscal quarter of 2015.growth.
Progress:
The Corporation’s Purchasing Department has obtained significant price concessions from certain suppliers.
Progress:
On March 20, 2015, the Corporation entered into a Loan and Security Agreement with First Business Capital Corp. providing for a renewable three-year secured revolving credit facility. Under the new credit facility, the Corporation may obtain loan advances up to a maximum of $10 million, subject to certain collateral-obligation ratios.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
Progress – (Continued):
Outstanding loan advances under the facility will bear interest at 3.75% in excess ofThe Wall Street Journal’s published one year LIBOR rate. The facility will be used to support the Company’s working capital needs and other general corporate purposes, and is secured by substantially all of the Corporation’s assets. Additional information regarding the revolving credit facility is in Note 9 of Notes to Consolidated Financial Statements.
NOTE 3 | Discontinued Operations |
During September 2014, the Corporation made a strategic decision to exit the recreational vehicle industry in order to focus on its core housing business. As a result, on October 7, 2014, (“Closing Date”), the Corporation completed the sale of certain assets associated with its recreational vehicle segment (the “Transaction”) to Evergreen Recreational Vehicles, LLC (“ERV”).
The Transaction was completed pursuant to the terms of an Asset Purchase Agreement entered into between the Corporation and ERV on the Closing Date, as well as the terms of a Real Property Purchase Agreement entered into on that same date between the Corporation and an affiliate of ERV, Skyline RE Holding LLC (which, collectively with ERV, is referred to herein as “Evergreen”). The assets of the recreational vehicle segment disposed of in the Transaction include:
The amount and nature of the consideration received by the Corporation for the assets sold included:
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
In addition, under the Asset Purchase Agreement, Evergreen did not assume or agree to pay, perform, or discharge any of the Corporation’s liabilities or obligations, which remained the liabilities and obligations of the Corporation.
The Bristol facility, and assets other than raw material and finished goods inventories, were sold at approximately net book value.LLC.
The following table summarizes the results of discontinued operations:
Three-Months Ended August 31, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Net Sales | $ | 21 | $ | 7,825 | ||||
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Operating income (loss) of discontinued operations | $ | 61 | $ | (2,564 | ) | |||
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Income (loss) before income taxes | 61 | (2,564 | ) | |||||
Income tax benefit | — | — | ||||||
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Income (loss) from discontinued operations, net of taxes | $ | 61 | $ | (2,564 | ) | |||
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The Corporation’s park model business, which was formerly reported in the recreational vehicle segment, was not disposed as part of the transaction with Evergreen and is now reported in continuing operations because the level of net sales do not warrant separate segment reporting.
Three-Months Ended November 30, | Six-Months Ended November 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
Net Sales | $ | 45 | $ | 1,890 | $ | 66 | $ | 9,715 | ||||||||
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Operating (loss) income of discontinued operations | $ | (42 | ) | $ | (3,294 | ) | $ | 19 | $ | (5,858 | ) | |||||
Loss on disposal of discontinued operations | — | (231 | ) | — | (231 | ) | ||||||||||
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(Loss) income before income taxes | (42 | ) | (3,525 | ) | 19 | (6,089 | ) | |||||||||
Income tax expense | — | — | — | — | ||||||||||||
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(Loss) income from discontinued operations, net of taxes | $ | (42 | ) | $ | (3,525 | ) | $ | 19 | $ | (6,089 | ) | |||||
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Item 1. |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
The following is a summary of assets and liabilities of discontinued operations at the dates indicated:
August 31, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Current Assets: | ||||||||
Accounts receivable | $ | 87 | $ | 30 | ||||
Inventories | 50 | 110 | ||||||
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$ | 137 | $ | 140 | |||||
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Current Liabilities: | ||||||||
Accounts payable, trade | $ | 40 | $ | 8 | ||||
Accrued marketing programs | — | 37 | ||||||
Other accrued liabilities | 68 | 59 | ||||||
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$ | 108 | $ | 104 | |||||
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In accordance with the Asset Purchase Agreement, the Corporation is responsible for the payment of product warranty claims associated with recreational vehicles sold by the Corporation. Consequently, this obligation is not included in the liabilities of discontinued operations on the Consolidated Balance Sheets at August 31, 2015 and May 31, 2015.
Total inventories from continuing operations consist of the following:
August 31, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Raw materials | $ | 6,010 | $ | 5,788 | ||||
Work in process | 3,041 | 3,137 | ||||||
Finished goods | 1,447 | 83 | ||||||
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| |||||
$ | 10,498 | $ | 9,008 | |||||
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Other assets consist primarily of the cash surrender value of life insurance policies which totaled $6,687,000 and $6,677,000 at August 31, 2015 and May 31, 2015, respectively.
Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
NOTE 4 | Inventories |
Total inventories consist of the following:
November 30, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Raw materials | $ | 6,611 | $ | 5,828 | ||||
Work in process | 2,970 | 3,137 | ||||||
Finished goods | 1,178 | 154 | ||||||
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| |||||
$ | 10,759 | $ | 9,119 | |||||
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NOTE 5 | Other Assets |
Other assets consist primarily of the cash surrender value of life insurance policies which totaled $6,713,000 and $6,677,000 at November 30, 2015 and May 31, 2015, respectively.
NOTE 6 | Warranty |
A reconciliation of accrued warranty is as follows:
Three-Months Ended August 31, | Six-Months Ended November 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
Balance at the beginning of the period | $ | 6,911 | $ | 5,697 | $ | 6,911 | $ | 5,697 | ||||||||
Accruals for warranties | 1,545 | 1,695 | 3,439 | 3,543 | ||||||||||||
Settlements made during the period | (1,574 | ) | (1,731 | ) | (3,332 | ) | (3,502 | ) | ||||||||
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| |||||||||||||
Balance at the end of the period | 6,882 | 5,661 | 7,018 | 5,738 | ||||||||||||
Non-current balance included in other deferred liabilities | 2,400 | 2,000 | ||||||||||||||
Non-current balance | 2,400 | 2,000 | ||||||||||||||
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| |||||||||||||
Accrued warranty | $ | 4,482 | $ | 3,661 | $ | 4,618 | $ | 3,738 | ||||||||
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At August 31,November 30, 2015, the total current obligation for warranty associated with the recreational vehicle segment that was discontinued is estimated to be approximately $409,000.$158,000.
NOTE 7 | Income Taxes |
At August 31,November 30, 2015, the Corporation’s gross deferred tax assets of approximately $50 million consist of approximately $35$34 million in federal net operating loss and tax credit carryforwards, $8 million in state net operating loss carryforwards and $7$8 million resulting from temporary differences between financial and tax reporting. The federal net operating loss and tax credit carryforwards have a life expectancy of between thirteen and twenty years.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
NOTE 7 | Income Taxes — (Continued) |
The state net operating loss carryforwards have a life expectancy, depending on the state where a loss was incurred, between one and twenty years. The Corporation has recorded a full valuation allowance against this asset. 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 three months and six months ended November 30, 2015, the Corporation reported the utilization of previously fully-reserved federal net operating loss carryforwards of $307,000 and state operating loss carryforwards of $74,000 and released corresponding amounts of the valuation allowance to offset federal income tax expense of $307,000 and state income tax expense of $74,000.
NOTE 8 | Commitments and Contingencies |
The Corporation was contingently liable at August 31,November 30, 2015 and May 31, 2015, 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 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.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (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 for continuing and discontinued operations, without reduction for the resale value of the repurchased units, was approximately $55$52 million at August 31,November 30, 2015 and approximately $60 million at May 31, 2015. At August 31,November 30, 2015 and May 31, 2015, the maximum potential repurchase liability, without reduction for the resale value of the repurchased units, associated with discontinued operations was approximately $14$11 million and $19 million, respectively. As a result of favorable experience regarding repurchased units, which is largely due to the strength of dealers selling the Corporation’s products, the Corporation maintained at August 31,November 30, 2015 and May 31, 2015, a $100,000 loss reserve that is a component of other accrued liabilities. The amount of this loss reserve that pertains to discontinued operations is $9,000, and Management believes that the Corporation’s exit from the recreational vehicle business will not further impact the loss reserve.
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 August 31,November 30, 2015 will not be material to its financial position or results of operations.
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
NOTE 8 | Commitments and Contingencies — (Continued) |
The amounts of obligations from repurchased units, all of which were from discontinued operations, and incurred net losses for the periods presented are as follows:
Three-Months Ended August 31, | Six-Months Ended November 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
Number of units repurchased | — | 11 | — | 11 | ||||||||||||
Obligations from units repurchased | $ | — | $ | 203 | $ | — | $ | 203 | ||||||||
Net losses on repurchased units | $ | — | $ | 43 | $ | — | $ | 43 |
The Corporation is a party to various pending legal proceedings in the normal course of business. Management believes that any losses resulting from such proceedings would not have a material adverse effect on the Corporation’s results of operations or financial position.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
The Corporation utilizes a combination of insurance coverage and self-insurance for certain items, including workers’ compensation and group health benefits. Liabilities for workers’ compensation are recognized for estimated future medical costs and indemnity costs.
Liabilities for group health benefits are recognized for claims incurred but not paid. Insurance reserves are estimated based upon a combination of historical data and actuarial information. Actual results could differ from these estimates.
NOTE 9 | Secured Revolving Credit Facility |
On March 20, 2015, the Corporation entered into a Loan and Security Agreement (the “Loan Agreement”) with First Business Capital Corp. (“First Business Capital”). Under the Loan Agreement, First Business Capital will provide a secured revolving credit facility to the Corporation for a term of three years, renewable on an annual basis thereafter with each renewal for a successive one-year term. The Corporation may obtain loan advances up to a maximum of $10,000,000 subject to certain collateral-obligation ratios. In addition, loan advances bear interest at 3.75% in excess ofThe Wall Street Journal’s published one year LIBOR rate, and are secured by substantially all of the Corporation’s assets, now owned or hereafter acquired. Interest is payable monthly, in arrears, and all principal and accrued but unpaid interest is due and payable upon termination of the Loan Agreement.
Also under the Loan Agreement, First Business Capital agreed to issue, or cause to be issued by a bank affiliate or other bank, letters of credit for the account of the Corporation. However, no advances have yet been made in connection with such letters of credit.
As part of the financing, the Company paid First Business Capital a facility fee of $150,000 at closing, and also agreed to pay the following fees to First Business Capital during the term of the facility: (i) annual facility fees of $50,000; (ii) an unused line fee payable in arrears at the rate of 0.25% per annum on the average daily unused amount of the facility during the prior calendar month; (iii) monthly bank assessment fees equal to 0.25% per annum of the maximum loan amount; (iv) certain overadvance fees (currently $1,000 per day) in the event outstanding obligations and letter of credit liabilities under the facility exceeds the amount permitted under the Loan Agreement; and (v) monthly letter of credit fees payable in arrears at the rate of 0.25% on the outstanding amount of letters of credit issued and outstanding during the prior month.
The Loan Agreement contains covenants that limit the ability of the Corporation to, among other things: (i) incur or guarantee other indebtedness; (ii) create or incur liens, mortgages, or security interests on their assets; (iii) expend more than $600,000 per year for the lease, purchase, or acquisition of any asset; (iv) consummate asset sales, acquisitions, or mergers; (v) pay dividends or repurchase stock; (vi) make certain investments; (vii) enter into certain transactions with affiliates; and (viii) amend a Corporation’s articles of incorporation or bylaws.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
The Loan Agreement also requires compliance with certain financial covenants (in each case calculated as set forth in the Loan Agreement), including: (i) minimum net worth; (ii) minimum net earnings; and (iii) maximum net loss.
If the Corporation defaults in its obligations under the Loan Agreement, then the unpaid balances under the facility will bear interest at 3.0% per annum in excess of the rate that would apply in the absence of a default. Other remedies available to First Business Capital upon an event of default include the right to accelerate the maturity of all obligations, the right to foreclose on and otherwise repossess the collateral securing the obligations, all rights of a secured creditor under applicable law, and all other rights set forth in the Loan Agreement.
The events of default under the Loan Agreement include the following: (i) certain events of bankruptcy and insolvency; (ii) failure to make required payments; (iii) misrepresentations to First Business Capital; (iv) failure to comply with certain covenants and agreements; (v) termination or default under guarantees or subordination agreements; (vi) certain cross-default events; (vii) changes in control of the Corporation; (viii) certain injunctions or attachments are issued against a Corporation’s assets or restricting its business; and (ix) a material adverse change occurs with respect to the Corporation.
During the first quarter of fiscal 2016, the Corporation on two occasions did not meet a covenant requiring a monthly loss not exceeding $500,000. In addition, at least one monthly loss exceeding $500,000 is projected during the third quarter of fiscal 2016; a period where net sales are traditionally at its lowest for the year. The Corporation, however, complied with a covenant specifying that the loss for the first quarter of fiscal 2016 not exceed $1,000,000, as a result of the net income the Corporation earned in the month of August. Subsequent to August 31, 2015,Consequently, the Corporation received in the second quarter a waiver forof the defaults that occurred in the first quarter.occurred. In addition, the following modifications were made to the Loan Agreement:
Item 1. | Financial Statements — (Continued). |
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
NOTE 9 | Secured Revolving Credit Facility — (Continued) |
The Corporation was in compliance with Loan Agreement covenants as of November 30, 2015.
NOTE 10 | Stock-Based Compensation |
On June 25, 2015, the Corporation’s Board of Directors approved the 2015 Stock Incentive Plan (“Plan”), which allows the granting of stock options and other equity awards to directors, officers, employees, and eligible independent contractors of the Corporation and is intended to retain and reward key employees’ performance and efforts as they relate to the Corporation’s long-term objectives and strategic plan. The Plan was subsequently approved by shareholders at the Corporation’s annual shareholder meeting on September 21, 2015. A total of 700,000 shares of Common Stock hashave been reserved for issuance under the Plan. Stock option awards are granted with an exercise price equal to, or greater than, the market price of the Corporation’s stock at the date of grant and vest over a period of time as determined by the Corporation at the date of grant up to the contractual ten year life of the options, at which time the options expire.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
On June 25, 2015, the Corporation granted 200,000 stock options at an exercise price per share of $3.12 with a five year vesting period. Stock-based compensation expense for the fair value of the stock options vested during the three and six months ended August 31,November 30, 2015 was not significant.approximately $35,000.
At August 31,November 30, 2015, the intrinsic value of all options outstanding approximated $38,000$116,000 and had a weighted-average remaining contractual life of tenapproximately 9.5 years. Total unrecognized compensation expense related to stock-based awards outstanding at August 31,November 30, 2015 was $421,000$386,000 and is to be recorded over a weighted-average life of five years.
The Corporation records all stock-based payments, including grants of stock options, in the consolidated statements of operations and retained earnings based on their fair values at the date of grant.
The Corporation currently uses the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock options on the date of grant using an option-pricing model is affected by stock price as well as assumptions that include expected stock price volatility over the term of the awards, expected life of the awards, risk-free interest rate, and expected dividends.
Stock price volatility of .56 is estimated based on historical volatility measured monthly for a time period equal to the expected life of the option ending on the date of grant. The expected life of stock options (estimated average period of time the options will be outstanding) of ten years is estimated based on the contractual life or the vesting periodexpected exercise date of the options. The risk-free interest rate of 2.26% is determined based on observed U.S. Treasury yields in effect at the time of grant for maturities equivalent to the expected life of the options. The expected dividend yield of zero is estimated based on the dividend yield at the time of grant as adjusted for any expected changes during the life of the options.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Corporation designs, produces and markets manufactured housing, modular housing and park models to independent dealers, developers, campgrounds and manufactured housing communities located throughout the United States and Canada. To better serve the needs of its dealers, developers, campgrounds and communities, the Corporation has nine manufacturing facilities in eight states. Manufactured housing, modular housing and park models are sold to customers 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 park models throughout the year, seasonal fluctuations in sales do occur.
Manufactured Housing, Modular Housing and Park Model Industry Conditions
Sales and production of manufactured housing, and modular housing and park models are affected by winter weather conditions at the Corporation’s northern plants. Park model sales are generally higher in the spring and summer months than in the fall and winter months. Manufactured and modular housing are marketed under a number of trademarks, and are available in a variety of dimensions. Park models are marketed under the following trademarks: “Kensington”; “Shore Park”; “Stone Harbor”; and “Vacation Villa”. 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. Park models are built according to specifications established by the American National Standards Institute, and are intended to provide temporary living accommodations for individuals seeking leisure travel and outdoor recreation.
Sales of manufactured housing, modular housing and park models 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. Recent trends regarding calendar year unit shipments of the Corporation’s products and their respective industries are as follows:
Manufactured Housing | 2010 | 2011 | 2012 | 2013 | 2014 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||
Industry | 50,066 | 51,606 | 54,901 | 60,210 | 64,331 | 50,066 | 51,606 | 54,901 | 60,210 | 64,331 | ||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | 3.1 | % | 6.4 | % | 9.7 | % | 6.8 | % | 3.1 | % | 6.4 | % | 9.7 | % | 6.8 | % | ||||||||||||||||||||||||
Corporation | 1,894 | 1,880 | 1,848 | 2,205 | 2,678 | 1,894 | 1,880 | 1,848 | 2,205 | 2,678 | ||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | (.07 | %) | (1.7 | %) | 19.3 | % | 21.5 | % | (.07 | %) | (1.7 | %) | 19.3 | % | 21.5 | % | ||||||||||||||||||||||||
Modular Housing | ||||||||||||||||||||||||||||||||||||||||
*Industry | 12,928 | 12,202 | 13,290 | 14,020 | 13,856 | |||||||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | (5.6 | %) | 8.9 | % | 5.5 | % | (1.2 | %) | ||||||||||||||||||||||||||||||||
**Corporation | 250 | 347 | 382 | 350 | 477 | |||||||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | 38.8 | % | 10.1 | % | (8.4 | %) | 36.3 | % | ||||||||||||||||||||||||||||||||
Park Models | ||||||||||||||||||||||||||||||||||||||||
Industry | 3,486 | 2,761 | 2,780 | 3,598 | 3,781 | |||||||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | (20.8 | %) | 0.7 | % | 29.4 | % | 5.1 | % | ||||||||||||||||||||||||||||||||
Corporation | 129 | 170 | 138 | 171 | 307 | |||||||||||||||||||||||||||||||||||
Percentage Increase (Decrease) | 31.8 | % | (18.8 | %) | 23.9 | % | 79.5 | % |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Manufactured Housing, Modular Housing and Park Model Industry Conditions — (Continued)
Modular Housing | ||||||||||||||||||||
*Industry | 12,928 | 12,202 | 13,290 | 14,020 | 13,856 | |||||||||||||||
Percentage Increase (Decrease) | (5.6 | %) | 8.9 | % | 5.5 | % | (1.2 | %) | ||||||||||||
**Corporation | 250 | 347 | 382 | 350 | 477 | |||||||||||||||
Percentage Increase (Decrease) | 38.8 | % | 10.1 | % | (8.4 | %) | 36.3 | % | ||||||||||||
Park Models | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Industry | 3,486 | 2,761 | 2,780 | 3,598 | 3,781 | |||||||||||||||
Percentage Increase (Decrease) | (20.8 | %) | 0.7 | % | 29.4 | % | 5.1 | % | ||||||||||||
Corporation | 129 | 170 | 138 | 171 | 307 | |||||||||||||||
Percentage Increase (Decrease) | 31.8 | % | (18.8 | %) | 23.9 | % | 79.5 | % |
* | Domestic shipments only. Canadian industry shipments not available. |
** | Includes domestic and Canadian unit shipments |
Discontinued Operations
During September 2014, the Corporation made a strategic decision to exit the recreational vehicle industry in order to focus on its core housing business. As a result, on October 7, 2014, (“Closing Date”), the Corporation completed the sale of certain assets associated with its recreational vehicle segment (the “Transaction”) to Evergreen Recreational Vehicles, LLC (“ERV”). The Transaction was completed pursuant to the terms of an Asset Purchase Agreement entered into between the Corporation and ERV on the Closing Date, as well as the terms of a Real Property Purchase Agreement entered into on that same date between the Corporation and an affiliate of ERV, Skyline RE Holding LLC (which, collectively with ERV, is referred to herein as “Evergreen”).
The assets of the recreational vehicle segment disposed of in the Transaction included, but were not are limited to:
The amount and nature of the consideration received by the Corporation for the assets sold included:
In addition, under the Asset Purchase Agreement, Evergreen did not assume or agree to pay, perform, or discharge any of the Corporation’s liabilities or obligations, which remained the liabilities and obligations of the Corporation.
The Bristol facility, and assets other than raw material and finished goods inventories, were sold at approximately net book value.
Discontinued Operations — (Continued)
LLC.
The following table summarizes the results of discontinued operations:
Three-Months Ended August 31, | ||||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Net Sales | $ | 21 | $ | 7,825 | ||||
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| |||||
Operating income (loss) of discontinued operations | $ | 61 | $ | (2,564 | ) | |||
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Income (loss) before income taxes | 61 | (2,564 | ) | |||||
Income tax benefit | — | — | ||||||
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| |||||
Income (loss) from discontinued operations, net of taxes | $ | 61 | $ | (2,564 | ) | |||
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The Corporation’s park model business, which was formerly reported in the recreational vehicle segment, was not disposed as part of the transaction with Evergreen and is now reported in the housing segment because the level of net sales do not warrant separate segment reporting.
The following is a summary of assets and liabilities of discontinued operations at the dates indicated:
August 31, 2015 | May 31, 2015 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Current Assets: | ||||||||
Accounts receivable | $ | 87 | $ | 30 | ||||
Inventories | 50 | 110 | ||||||
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$ | 137 | $ | 140 | |||||
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Current Liabilities: | ||||||||
Accounts payable, trade | $ | 40 | $ | 8 | ||||
Accrued marketing programs | — | 37 | ||||||
Other accrued liabilities | 68 | 59 | ||||||
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$ | 108 | $ | 104 | |||||
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In accordance with the Asset Purchase Agreement the Corporation is responsible for the payment of product warranty claims associated with recreational vehicles sold by the Corporation. Consequently, this obligation is not included in the liabilities of discontinued operations on the Consolidated Balance Sheets at August 31, 2015 and May 31, 2015.
Three-Months Ended November 30, | Six-Months Ended November 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Unaudited ) | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net Sales | $ | 45 | $ | 1,890 | $ | 66 | $ | 9,715 | ||||||||
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Operating (loss) income of discontinued operations | $ | (42 | ) | $ | (3,294 | ) | $ | 19 | $ | (5,858 | ) | |||||
Loss on disposal of discontinued operations | — | (231 | ) | — | (231 | ) | ||||||||||
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(Loss) income before income taxes | (42 | ) | $ | (3,525 | ) | 19 | (6,089 | ) | ||||||||
Income tax expense | — | — | — | — | ||||||||||||
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(Loss) income from discontinued operations, net of taxes | $ | (42 | ) | $ | (3,525 | ) | $ | 19 | $ | (6,089 | ) | |||||
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
FirstSecond Quarter Fiscal 2016 Results
The Corporation experienced the following results during the firstsecond quarter of fiscal 2016:
The Corporation experienced decreased net sales from continuing operations in fiscal 2016 as compared to fiscal 2015, which management believes is the result of a temporary softness in demand from its customers.
Secured Revolving Credit Facility
On March 20, 2015, the Corporation entered into a Loan and Security Agreement (the “Loan Agreement”) with First Business Capital Corp. (“First Business Capital”). Under the Loan Agreement, First Business Capital will provide a secured revolving credit facility to the Corporation for a term of three years, renewable on an annual basis thereafter with each renewal for a successive one-year term. The Corporation may obtain loan advances up to a maximum of $10,000,000 subject to certain collateral-obligation ratios. In addition, loan advances bear interest at 3.75% in excess ofThe Wall Street Journal’s published one year LIBOR rate, and are secured by substantially all of the Corporation’s assets, now owned or hereafter acquired. Interest is payable monthly, in arrears, and all principal and accrued but unpaid interest is due and payable upon termination of the Loan Agreement.
Also under the Loan Agreement First Business Capital agreed to issue, or cause to be issued by a bank affiliate or other bank, letters of credit for the account of the Corporation. However, no advances have yet been made in connection with such letters of credit.
As part of the financing, the Corporation paid First Business Capital a facility fee of $150,000 at closing, and also agreed to pay the following fees to First Business Capital during the term of the facility: (i) annual facility fees of $50,000; (ii) an unused line fee payable in arrears at the rate of 0.25% per annum on the average daily unused amount of the facility during the prior calendar month; (iii) monthly bank assessment fees equal to 0.25% per annum of the maximum loan amount; (iv) certain overadvance fees (currently $1,000 per day) in the event outstanding obligations and letter of credit liabilities under the facility exceeds the amount permitted under the Loan Agreement; and (v) monthly letter of credit fees payable in arrears at the rate of 0.25% on the outstanding amount of letters of credit issued and outstanding during the prior month.
Secured Revolving Credit Facility — (Continued)
The Loan Agreement contains covenants that limit the ability of the Corporation to, among other things: (i) incur or guarantee other indebtedness; (ii) create or incur liens, mortgages, or security interests on their assets; (iii) expend more than $600,000 per year for the lease, purchase, or acquisition of any asset; (iv) consummate asset sales, acquisitions, or mergers; (v) pay dividends or repurchase stock; (vi) make certain investments; (vii) enter into certain transactions with affiliates; and (viii) amend a Corporation’s articles of incorporation or bylaws.
The Loan Agreement also requires compliance with certain financial covenants (in each case calculated as set forth in the Loan Agreement), including: (i) minimum net worth; (ii) minimum net earnings; and (iii) maximum net loss.
If the Corporation defaults in its obligations under the Loan Agreement, then the unpaid balances under the facility will bear interest at 3.0% per annum in excess of the rate that would apply in the absence of a default. Other remedies available to First Business Capital upon an event of default include the right to accelerate the maturity of all obligations, the right to foreclose on and otherwise repossess the collateral securing the obligations, all rights of a secured creditor under applicable law, and all other rights set forth in the Loan Agreement.
The events of default under the Loan Agreement include the following: (i) certain events of bankruptcy and insolvency; (ii) failure to make required payments; (iii) misrepresentations to First Business Capital; (iv) failure to comply with certain covenants and agreements; (v) termination or default under guarantees or subordination agreements; (vi) certain cross-default events; (vii) changes in control of the Corporation; (viii) certain injunctions or attachments are issued against a Corporation’s assets or restricting its business; and (ix) a material adverse change occurs with respect to the Corporation.
During the first quarter of fiscal 2016, the Corporation on two occasions did not meet a covenant requiring a monthly loss not exceeding $500,000. In addition, at least one monthly loss exceeding $500,000 is projected during the third quarter of fiscal 2016; a period where net sales are traditionally at its lowest for the year. The Corporation, however, complied with a covenant specifying that the loss for the first quarter of fiscal 2016 not exceed $1,000,000, as a result of the net income the Corporation earned in the month of August. Subsequent to August 31, 2015,Consequently, the Corporation received in the second quarter a waiver forof the defaults that occurred in the first quarter.occurred. In addition, the following modifications were made to the Loan Agreement:Agreement.
The Corporation was in compliance with Loan Agreement covenants as of November 30, 2015.
Management’s Plan
The Corporation’s consolidated financial statements were prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business. Due to recurring losses during certain periods, the Corporation has historically experienced negative cash flows from operating activities.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Management’s Plan — (Continued)
The level of historical negative cash flows from operations raise substantial doubt about the Corporation’s ability to continue as a going concern. To continue as a going concern, management determined that certain strategies need to be pursued. These strategies include but are not limited to:
Increasing Sales
Management is focused on driving profitable growthinvestigating strategies to expand our current market position relative to Real Estate Investment Trusts and other customers who are in the Corporation’s coreManufactured Housing Community and Recreational Resort business. We continue to explore other market niches where we believe our products provide a valuable housing business.
Progress:alternative to apartments or conventional site built homes.
In October 2014,Management is engaged in reviewing our current Marketing Strategies used to reach the Corporation sold its recreational vehicle segmentend consumer of our products. We expect to focus solely on its core housing businesslaunch an improved Web site and social media portfolio designed to raise cash. Additional information regardingreach more consumers and highlight the sale is in “Discontinued Operations.”
value of Skyline products and service. In addition, our internet marketing strategy has been calibrated to the sale of the RV business, the Corporation sold an idle housing facility in fiscal 2015. A buyer is also being sought for an undeveloped parcel of land the Corporation owns.
Progress:
Manufactured housing net sales in the first quarter of fiscal 2016 decreased 0.9 percent compared to the first quarter of fiscal 2015. Management believes the decrease is attributable of a temporary softness in demand among the Corporation’s manufactured housingour existing dealers and communities.
Park model net sales in the first quarter of fiscal 2016 decreased 21.8 percent compared to the first quarter of fiscal 2015. Management also believes the decrease is due to a temporary softness in demand among dealers, communities and campgrounds.
Modular housing net sales for the first quarter of fiscal 2016 increased 1.6 percent as compared to the first quarter of fiscal 2015.
Management’s Plan — (Continued)
Progress:
The Corporation’s Purchasing Department has obtained significant price concessions from certain suppliers.
Progress:
On March 20, 2015, the Corporation entered into a Loan and Security Agreement with First Business Capital Corp. providing for a renewable three-year secured revolving credit facility. Under the new credit facility, the Corporation may obtain loan advances up to a maximum of $10 million, subject to certain collateral-obligation ratios.
Outstanding loan advances under the facility will bear interest at 3.75% in excess ofThe Wall Street Journal’s published one year LIBOR rate. The facility will be used to support the Company’s working capital needs and other general corporate purposes, and is secured by substantially allempowered each of the Corporation’s assets. Additional information regardingcompany’s Operating Divisions to develop products which meet consumer expectations for design and features within their respective market regions. We believe that this new approach to product development will further enhance our ability to reach more consumers and capture additional market share.
Management has expanded the revolving credit facility is described in “Secured Revolving Credit Facility.”
number of Operating Divisions which produce our popular Shore Park brand of recreational park models from three to eight. Management believes that it willwe can improve top line revenue appreciably for each of our divisions with the addition of these popular products.
Decreasing Costs
Management has been, and continues to be, able to execute their strategies as noted above. actively engaged in driving material costs lower by more effectively controlling material costs during the procurement process.
Management is prepared to modify theseundergoing a detailed review of all current pricing strategies as appropriate to meet prevailing business and market conditions.programs and plans to introduce new initiatives designed to increase, recognize, and reward Dealer commitment and sales growth.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Results of Operations – Three-Month Period Ended August 31,November 30, 2015 Compared to Three-Month Period Ended August 31,November 30, 2014
Net Sales and Unit Shipments
August 31, 2015 | Percent | August 31, 2014 | Percent | Increase (Decrease) | November 30, 2015 | Percent | November 30, 2014 | Percent | Increase (Decrease) | |||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
Net Sales | ||||||||||||||||||||||||||||||||||||||||
Manufactured Housing | $ | 39,931 | 81.9 | $ | 40,305 | 81.2 | $ | (374 | ) | $ | 48,660 | 82.9 | $ | 38,997 | 78.5 | $ | 9,663 | |||||||||||||||||||||||
Modular Housing | 6,683 | 13.7 | 6,579 | 13.3 | 104 | 7,904 | 13.5 | 8,327 | 16.8 | (423 | ) | |||||||||||||||||||||||||||||
Park Models | 2,128 | 4.4 | 2,720 | 5.5 | (592 | ) | 2,120 | 3.6 | 2,343 | 4.7 | (223 | ) | ||||||||||||||||||||||||||||
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Total Net Sales | $ | 48,742 | 100.0 | $ | 49,604 | 100.0 | $ | (862 | ) | $ | 58,684 | 100.0 | $ | 49,667 | 100.0 | $ | 9,017 | |||||||||||||||||||||||
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Unit Shipments | ||||||||||||||||||||||||||||||||||||||||
Manufactured Housing | 730 | 82.1 | 776 | 81.8 | (46 | ) | 900 | 84.0 | 726 | 79.7 | 174 | |||||||||||||||||||||||||||||
Modular Housing | 104 | 11.7 | 102 | 10.7 | 2 | 114 | 10.6 | 122 | 13.4 | (8 | ) | |||||||||||||||||||||||||||||
Park Models | 55 | 6.2 | 71 | 7.5 | (16 | ) | 57 | 5.4 | 63 | 6.9 | (6 | ) | ||||||||||||||||||||||||||||
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Total Unit Shipments | 889 | 100.0 | 949 | 100.0 | (60 | ) | 1,071 | 100.0 | 911 | 100.0 | 160 | |||||||||||||||||||||||||||||
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Net sales decreased 1.7increased 18.2 percent. The decreaseincrease was comprised of a 0.924.8 percent decreaseincrease in manufactured housing net sales, a 1.65.1 percent increasedecrease in modular housing net sales, and a 21.89.5 percent decrease in park model net sales.
For the following three-month periods, the percentage increase or decrease in unit shipments from the comparable period last year are as follows:
August 31, 2015 | July 31, 2015 | November 30, 2015 | October 31, 2015 | |||||||||||||
Skyline | Industry | Skyline | Industry | |||||||||||||
Manufactured Housing | (5.9 | %) | 5.4% | 24.0 | % | 6.4% | ||||||||||
Modular Housing | 2.0 | % | Not available | (6.6 | %) | Not available | ||||||||||
Park Models | (22.5 | %) | (6.8%) | (9.5 | %) | (4.8%) | ||||||||||
Total | (6.3 | %) | Not applicable | 17.6 | % | Not applicable |
Management believes the lag in park model unit shipments relative to respective industries is attributable to temporary softness in demand among the Corporation’s dealers, communities and campgrounds.
Compared to the prior year, the average net sales price for manufactured and modular housing increased 0.7 percent and 1.6 percent, respectively. The increase primarily results from the sale of homes and park models with larger square footage and greater amenities. The average net sales price for park models is relatively unchanged.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Results of Operations – Three-Month Period Ended November 30, 2015 Compared to Three-Month Period Ended November 30, 2014 — (Continued)
Cost of Sales
November 30, 2015 | Percent of Net Sales | November 30, 2014 | Percent of Net Sales | Increase | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Cost of Sales | $ | 51,457 | 87.7 | $ | 44,509 | 89.6 | $ | 6,948 |
Cost of sales, in dollars, increased as a result of increased net sales. As a percentage of net sales, cost of sales decreased in part due to more effectively controlling material costs during the procurement process.
Selling and Administrative Expenses
November 30, 2015 | Percent of Net Sales | November 30, 2014 | Percent of Net Sales | Increase | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Selling and administrative expenses | $ | 5,400 | 9.2 | $ | 5,008 | 10.1 | $ | 392 |
Selling and administrative expenses increased primarily as a result of an increase in performance-based compensation and increased marketing costs. As a percentage of net sales, selling and administrative expenses declined due to certain costs remaining fixed amid rising sales. In addition, the Corporation benefited from a $250,000 final payment received in the second quarter on an account that had previously been fully reserved.
Interest Expense
Interest expense of $56,000 and $93,000 for the second quarter of fiscal 2016 and 2015, respectively, related to interest on life insurance policy loans. Interest expense in the second quarter of fiscal 2016 included $20,000 of amortization of debt financing costs and $3,000 of interest expense associated with the secured revolving credit facility.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Results of Operations – Six-Month Period Ended November 30, 2015 Compared to Six-Month Period Ended November 30, 2014
Net Sales and Unit Shipments
November 30, 2015 | Percent | November 30, 2014 | Percent | Increase (Decrease) | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net Sales | ||||||||||||||||||||
Manufactured Housing | $ | 88,591 | 82.4 | $ | 79,303 | 79.9 | $ | 9,288 | ||||||||||||
Modular Housing | 14,587 | 13.6 | 14,906 | 15.0 | (319 | ) | ||||||||||||||
Park Models | 4,248 | 4.0 | 5,062 | 5.1 | (814 | ) | ||||||||||||||
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Total Net Sales | $ | 107,426 | 100.0 | $ | 99,271 | 100.0 | $ | 8,155 | ||||||||||||
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Manufactured Housing | 1,630 | 83.2 | 1,502 | 80.8 | 128 | |||||||||||||||
Modular Housing | 218 | 11.1 | 224 | 12.0 | (6 | ) | ||||||||||||||
Park Models | 112 | 5.7 | 134 | 7.2 | (22 | ) | ||||||||||||||
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Total Unit Shipments | 1,960 | 100.0 | 1,860 | 100.0 | 100 | |||||||||||||||
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Net sales increased 8.2 percent. The increase was comprised of an 11.7 percent increase in manufactured housing net sales, a 2.1 percent decrease in modular housing net sales, and a 16.1 percent decrease in park model net sales.
For the following three-month periods, the percentage increase or decrease in unit shipments from the comparable period last year are as follows:
November 30, 2015 | October 31, 2015 | |||||||
Skyline | Industry | |||||||
Manufactured Housing | 8.5 | % | 5.9% | |||||
Modular Housing | (2.7 | %) | Not available | |||||
Park Models | (16.4 | %) | (5.9%) | |||||
Total | 5.4 | % | Not applicable |
Management believes the lag in park model unit shipments relative to respective industries is attributable to temporary softness in demand among the Corporation’s dealers, communities and campgrounds.
Compared to the prior year, the average net sales price for manufactured housing, modular housing and park models increased 5.32.9 percent, 0.6 percent and 1.00.4 percent, respectively. The increase primarily results from the sale of homes and park models with larger square footage and greater amenities.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Results of Operations – Three-MonthSix-Month Period Ended August 31,November 30, 2015 Compared to Three-MonthSix-Month Period Ended August 31,November 30, 2014 — (Continued)
Net Sales and Unit Shipments — (Continued)
The increase primarily results from the sale of homes and park models with larger square footage and greater amenities. The average net sales price for modular housing is relatively unchanged.
Cost of Sales
August 31, 2015 | Percent of Net Sales | August 31, 2014 | Percent of Net Sales | Decrease | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Cost of Sales | $ | 44,099 | 90.5 | $ | 45,563 | 91.9 | $ | 1,464 |
November 30, 2015 | Percent of Net Sales | November 30, 2014 | Percent of Net Sales | Increase | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Cost of Sales | $ | 95,556 | 89.0 | $ | 90,072 | 90.7 | $ | 5,484 |
Cost of sales, in dollars, decreasedincreased as a result of decreasedincreased net sales. As a percentage of net sales, cost of sales decreased in part due to improvements inmore effectively controlling material cost.costs during the procurement process.
Selling and Administrative Expenses
August 31, 2015 | Percent of Net Sales | August 31, 2014 | Percent of Net Sales | Increase | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Selling and administrative expenses | $ | 5,459 | 11.2 | $ | 5,180 | 10.4 | $ | 279 |
November 30, 2015 | Percent of Net Sales | November 30, 2014 | Percent of Net Sales | Increase | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Selling and administrative expenses | $ | 10,859 | 10.1 | $ | 10,188 | 10.3 | $ | 671 |
Selling and administrative expenses increased primarily as a result of increased salaries, wages, performance-based compensation and increased marketing costs. As a percentage of net sales, selling and administrative expenses rosedeclined due to certain costs remaining fixed amid rising sales. In addition, the aforementioned cost increases.Corporation benefited from a $250,000 final payment received in the second quarter on an account that had previously been fully reserved.
Interest Expense
Interest expense of $56,000$112,000 and $94,000$187,000 for the first quarterhalf of fiscal 2016 and 2015, respectively, related to interest on life insurance policy loans. InInterest expense in the first quarterhalf of fiscal 2016 the Corporation incurred $19,000included $39,000 of amortization of debt financing costs and $4,000$7,000 of interest expense associated with the secured revolving credit facility.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Liquidity and Capital Resources
August 31, 2015 | May 31, 2015 | Increase (Decrease) | November, 30 2015 | May 31, 2015 | Increase | |||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||
Cash | $ | 6,672 | $ | 4,995 | $ | 1,677 | $ | 6,804 | $ | 4,995 | $ | 1,809 | ||||||||||||
Current assets, exclusive of cash | $ | 25,254 | $ | 26,586 | $ | (1,332 | ) | $ | 27,230 | $ | 26,586 | $ | 644 | |||||||||||
Current liabilities | $ | 16,205 | $ | 15,117 | $ | 1,088 | $ | 16,557 | $ | 15,117 | $ | 1,440 | ||||||||||||
Working capital | $ | 15,721 | $ | 16,464 | $ | (743 | ) | $ | 17,477 | $ | 16,464 | $ | 1,013 |
As noted in the Consolidated Statements of Cash Flows, cash increased due to cash flow from operating activities increasing $1,755,000$2,079,000 and cash flow from investing activities decreasing $78,000.$270,000. Current assets, exclusive of cash, decreased mainly due to a $3,137,000$979,000 decrease in accounts receivable partially offset by a $1,429,000$1,640,000 increase in inventories. Accounts receivable declined as a result of the timing of payments from dealers and communities at August 31,November 30, 2015 as compared to May 31, 2015. Inventories increased primarily due to a greater number of display homes and homes awaiting shipment to dealers and communities at August 31,November 30, 2015 as compared to May 31, 2015. Current liabilities increased primarily as a result of accruals for an ongoing marketing program for manufactured housing dealers. Accruals are made monthly, and the majority of payments are made during the Corporation’s fourth fiscal quarter.
Capital expenditures totaled $70,000$245,000 for the first quarterhalf of fiscal 2016 as compared to $26,000$163,000 for the first quarterhalf of fiscal 2015.
TheIf necessary, the Corporation has the ability to borrow money under the Secured Revolving Credit Facility, and against the cash surrender value of certain life insurance policies. In addition, the Corporation anticipates that cash needs associated with discontinued operations will be insignificant in future periods since it will not be funding significant operating losses. As previously referenced, the Corporation has current assets of discontinued operations of $137,000, current liabilities of discontinued operations of $108,000, and an estimated $409,000 of current warranty obligations associated with the recreational vehicle segment that is reported in continuing obligations.
As noted in “Management’s Plan”, the Corporation is aggressively pursuing strategies in order to increase sales and decrease costs. Management believes that it will be able to execute theirits strategies as noted above. Management is prepared to modify these strategies as appropriate to meet prevailing business and market conditions. The Management Plan also references a secured revolving credit facility that the Corporation entered during fiscal 2015.
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 adjusted selling prices in reaction to changing costs due to inflation.
Forward Looking Information
The preceding Management’s Discussion and Analysis contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made elsewhere in this report. The Corporation publishes other forward-looking statements from time to time. Statements that are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued). |
Forward Looking Information — (Continued)
We caution you to be aware of the speculative nature of “forward-looking statements.” Although these statements reflect the Corporation’s good faith belief based on current expectations, estimates, and projections about (among other things) the industry and the markets in which the Corporation operates, they are not guarantees of future performance. Whether actual results will conform to management’s expectations and predictions is subject to a number of known and unknown risks and uncertainties, including the following:
Consequently, all of the Corporation’s forward-looking statements are qualified by these cautionary statements.
The Corporation may not realize the results anticipated by management or, even if the Corporation substantially realizes the results management anticipates, the results may not have the consequences to, or effects on, the Corporation or its business or operations that management expects. Such differences may be material. Except as required by applicable laws, the Corporation does not intend to publish updates or revisions of any forward-looking statements management makes to reflect new information, future events or otherwise.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
Item 4. | Controls and Procedures. |
Management’s conclusionsConclusions Regarding Effectiveness of Disclosure Controls and Procedures
As of August 31,November 30, 2015, 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 design and operation of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). 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 August 31,November 30, 2015 to ensure that material information required to be disclosed by the Corporation in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported as and when required.
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 Act Rule 13a-15(f) or Rule 15d-15(f)) occurred during the firstsecond quarter ended August 31,November 30, 2015 that materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
PART II— OTHER INFORMATION
Item 1. | 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.
Item 1A. | Risk Factors. |
There were no material changes in the risk factors disclosed in Item 1A of the Corporation’s Form 10-K for the year ended May 31, 2015.
On October 14, 2015, the Corporation and its wholly-owned subsidiaries Homette Corporation (“Homette”), Layton Homes Corp. (“Layton”), and Skyline Homes, Inc. (“Homes,” and together with the Corporation, Homette, and Layton, the “Borrowers” and each a “Borrower”) entered into a First Amendment to Loan and Security Agreement and Waiver of Defaults (the “Amendment”) with First Business Capital Corp. (“First Business Capital”) which modifies the Loan and Security Agreement executed between the Borrowers and First Business Capital on March 20, 2015. The material amendments to the Loan Agreement included in the Amendment are as follows:
The Amendment amends certain other provisions of the Loan Agreement as set forth therein.
The foregoing description of the Amendment is a summary and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is attached as Exhibit 10.3 to this Quarterly Report on Form 10-Q and incorporated by reference herein, as well as the full text of the Loan Agreement, a copy of which is attached as Exhibit 10.1 to the Current Report on Form 8-K filed by the Corporation with the SEC on March 26, 2015 and incorporated by reference herein.
PART II— OTHER INFORMATION (CONTINUED)
Item 6. | Exhibits. |
Exhibits (Numbered according to Item 601 of Regulation S-K, Exhibit Table)
10.1 | ||||||
10.2 | ||||||
First Amendment to Loan and Security Agreement and Waiver of Defaults dated October 14, 2015 by and among Skyline Corporation, Homette Corporation, Layton Homes Corp., Skyline Homes, Inc., and First Business Capital | ||||||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Rule 13a-14(a)/15d-14(a). | |||||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Rule 13a-14(a)/15d-14(a). | |||||
32 | 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 | The following materials from the Corporation’s Form 10-Q for the fiscal quarter ended |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SKYLINE CORPORATION | ||||
DATE: | /s/ Jon S. Pilarski | |||
Jon S. Pilarski | ||||
Chief Financial Officer |
DATE: | /s/ Martin R. Fransted | |||
Martin R. Fransted | ||||
Controller |
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