Skyline Champion 10Q/A 2005 Q2 Quarterly report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(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, 2004


o		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		(I.R.S. Employer Identification No.)
incorporation or organization)


P. O. Box 743, 2520 By-Pass Road, Elkhart, Indiana		46515

(Address of principal executive offices)		(Zip Code)

(574) 294-6521

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).þ Yes o No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


		Shares Outstanding
Title of Class		March 21, 2005

Common Stock		8,391,244

EXPLANATORY NOTE

This Amendment No. 1 (the “Amendment”) on Form 10-Q/A amends our quarterly report on Form 10-Q for the three months ended August 31, 2004, as filed with the Securities and Exchange Commission on October 12, 2004, for the purpose of re-filing Item 1 “Financial Statements”, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Item 4 “Controls and Procedures” and Item 6 “Exhibits.” See “Restatements” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the consolidated financial statements included in Item 1 “Financial Statements.”

The Corporation has also determined in its review of its Consolidated Financial Statements that historically certain of its accounts have been misclassified. These misclassifications, which the Corporation believes are immaterial and would not themselves require restatement, include the recording of sales of parts as a reduction in cost of sales rather than an increase in revenue, the reporting of certain employee benefits as relating entirely to administrative expenses instead of allocating the amounts related to manufacturing to cost of sales, and the reporting of certain assets and liabilities as current when a portion should properly be classified as non-current. Accordingly, the Corporation’s Consolidated Financial Statements have also been restated for the three-month periods ended August 31, 2004 and 2003 to incorporate the adjustments for the above noted immaterial misclassifications.

This Amendment does not reflect events occurring after the filing of our original Form 10-Q or modify or update those disclosures affected by subsequent events. For the convenience of the reader, we have included in this Amendment our entire 10-Q, as amended.

SKYLINE CORPORATION

Form 10-Q/A Quarterly Report

INDEX


	Page No.
Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets as of August 31, 2004 and May 31, 2004		2-3

Consolidated Statements of Earnings and Retained Earnings for the three-month periods ended August 31, 2004 and 2003		4

Consolidated Statements of Cash Flows for the three-month periods ended August 31, 2004 and 2003		5-6

Notes to the Consolidated Financial Statements		7-11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12-17

Item 4. Controls and Procedures		18

Part II Other Information

Item 1. Legal Proceedings		19

Item 4. Submission of Matters to a Vote of Security Holders		19

Item 6. Exhibits		19

Signatures		20

Index to Exhibits		21

Certifications		22-27
302 Certification of Chief Executive Officer
302 Certification of Chief Financial Officer
Certification of Periodic Financial Report
Certification of Periodic Financial Reports

Part I.

Item 1.Financial Statements

Skyline Corporation and Subsidiary Companies

Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)


	August 31, 2004		May 31, 2004
	(As Restated		(As Restated
	See Note 3)		See Note 3)
ASSETS

Current Assets
Cash	$	6,442	$	8,838
U.S. Treasury Bills, at cost plus accrued interest		94,798		141,611
U.S. Treasury Notes, at cost plus accrued interest		45,177		—
Accounts receivable, trade, less allowance for doubtful accounts of $150		28,468		26,090
Inventories		11,698		9,895
Other current assets		8,444		9,046


Total Current Assets		195,027		195,480


Property, Plant and Equipment, At Cost
Land		6,572		6,572
Buildings and improvements		63,617		63,241
Machinery and equipment		28,031		27,206

		98,220		97,019
Less accumulated depreciation		60,791		60,089


Net Property, Plant and Equipment		37,429		36,930


Other Assets		8,809		8,758


	$	241,265	$	241,168

The accompanying notes are a part of the consolidated financial statements.

Skyline Corporation and Subsidiary Companies

Consolidated Balance Sheets (continued)
(Unaudited)
(Dollars in thousands)


	August 31, 2004			May 31, 2004
	(As Restated			(As Restated
	See Note 3)			See Note 3)
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities
Accounts payable, trade	$	8,243		$	7,776
Accrued salaries and wages		5,365			6,222
Accrued profit sharing		668			2,454
Accrued marketing programs		8,419			5,368
Accrued warranty and related expenses		7,376			7,321
Other accrued liabilities		2,214			2,735
Income taxes payable		428			166


Total Current Liabilities		32,713			32,042


Other Deferred Liabilities		10,773			10,642


Commitments and Contingencies- See Note 1

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		258,283			258,988
Treasury stock, at cost, 2,825,900 shares at August 31, 2004 and May 31, 2004		(65,744	)		(65,744	)


Total Shareholders’ Equity		197,779			198,484


	$	241,265		$	241,168

The accompanying notes are a part of the consolidated financial statements.

Skyline Corporation and Subsidiary Companies

Consolidated Statements of Earnings and Retained Earnings
For the three-month periods ended August 31, 2004 and 2003
(Unaudited)
(Dollars in thousands, except per share data)


	2004		2003
	(As Restated		(As Restated
	See Note 3)		See Note 3)
EARNINGS

Sales	$	117,567	$	110,149
Cost of sales		105,679		96,095

Gross profit		11,888		14,054
Selling and administrative expenses		10,931		11,027

Operating earnings		957		3,027
Interest income		389		332

Earnings before income taxes		1,346		3,359
Provision for income taxes:
Federal		460		1,086
State		80		236

		540		1,322

Net earnings	$	806	$	2,037

Basic earnings per share	$	.10	$	.24


Cash dividends per share	$	.18	$	.18

Weighted average common shares outstanding		8,391,244		8,391,244

RETAINED EARNINGS

Balance at beginning of period	$	258,988	$	258,889
Add net earnings		806		2,037

Less cash dividends paid		1,511		1,510

Balance at end of period	$	258,283	$	259,416

The accompanying notes are a part of the consolidated financial statements.

Skyline Corporation and Subsidiary Companies

Consolidated Statements of Cash Flows
For the three-month periods ended August 31, 2004 and 2003
Increase (Decrease) in Cash
(Unaudited)
(Dollars in thousands)


	2004			2003
	(As Restated			(As Restated
	See Note 3)			See Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings	$	806		$	2,037


Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		802			844
Working Capital Items:
Accounts receivable		(2,378	)		(6,117	)
Accrued interest receivable		(255	)		262
Inventories		(1,803	)		(621	)
Other current assets		602			(734	)
Accounts payable, trade		467			1,351
Accrued liabilities		(58	)		641
Income taxes payable		262			(408	)
Other, net		132			78


Total Adjustments		(2,229	)		(4,704	)


Net cash used in operating activities	$	(1,423	)	$	(2,667	)

The accompanying notes are a part of the consolidated financial statements.

Skyline Corporation and Subsidiary Companies

Consolidated Statements of Cash Flows (continued)
For the three-month periods ended August 31, 2004 and 2003
Increase (Decrease) in Cash
(Unaudited)
(Dollars in thousands)


	2004			2003
	(As Restated			(As Restated
	See Note 3)			See Note 3)
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from principle payments of U.S. Treasury Bills	$	98,673		$	135,891
Purchase of U.S. Treasury Bills		(51,852	)		(132,580	)
Purchase of U.S. Treasury Notes		(44,930	)		—
Purchase of property, plant and equipment		(1,312	)		(444	)
Other, net		(41	)		(47	)

Net cash provided by investing activities		538			2,820


CASH FLOWS FROM FINANCING ACTIVITIES:

Cash dividends paid		(1,511	)		(1,510	)


Net cash used in financing activities		(1,511	)		(1,510	)


Net decrease in cash		(2,396	)		(1,357	)

Cash at beginning of year		8,838			8,736


Cash at end of quarter	$	6,442		$	7,379

The accompanying notes are a part of the consolidated financial statements.

Skyline Corporation and Subsidiary Companies

Notes to the Consolidated Financial Statements
(Unaudited)

NOTE 1 Nature of Operations, Accounting Policies and Restatement of Consolidated Financial Statements

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, 2004, in addition to the consolidated results of operations and consolidated cash flows for three-month periods ended August 31, 2004 and 2003.

The Corporation has restated its Consolidated Financial Statements for the three-month periods ended August 31, 2004 and 2003 as more fully described in Note 3.

The unaudited interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s latest annual report on Form 10-K/A.

Inventories are stated at cost, determined under the first-in, first-out method, which is not in excess of market. Physical inventory counts are taken at the end of each reporting quarter. Total inventories for the periods presented consisted of (dollars in thousands):


	August 31, 2004		May 31, 2004
Raw Materials	$	4,672	$	4,158

Work In Process		5,728		5,650

Finished Goods		1,298		87

	$	11,698	$	9,895

The Corporation provides the retail purchaser of its manufactured homes with a fifteen-month warranty against defects in design, materials and workmanship. Recreational vehicles are covered by a two-year warranty.

Skyline Corporation and Subsidiary Companies

Notes to the Consolidated Financial Statements (continued)
(Unaudited)

NOTE 1 Nature of Operations, Accounting Policies and Restatement of Consolidated Financial Statements (continued)

The warranties are backed by a corporate service department 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. A reconciliation of accrued warranty and related expenses is as follows (dollars in thousands):


	Three-Months Ended
	August 31,
	2004			2003
Balance at the beginning of the period	$	11,121		$	10,609

Accruals for warranties		3,167			2,611

Settlements made during the period		(3,012	)		(2,468	)


Balance at the end of the period		11,276			10,752
Non-current balance included in other deferred liabilities		3,900			3,700

Accrued warranty and related expenses	$	7,376		$	7,052

The Corporation was contingently liable at August 31, 2004 under repurchase agreements with certain financial institutions providing inventory financing for retailers of its products. Under these arrangements, which are customary in the manufactured housing and recreational vehicle industries, the Corporation agrees to repurchase homes in the event of default by the retailer at declining prices over the term of the agreement, generally 12 months. The maximum repurchase liability is the total amount that would be paid upon the default of all the Corporation’s independent dealers. The maximum potential repurchase liability, without reduction for the resale value of the repurchased units, was approximately $94 million at August 31, 2004 and $100 million at May 31, 2004. The risk of loss under these agreements is spread over many retailers 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 allowance for doubtful accounts includes a reserve for potential net losses on repurchased units. There were no repurchases in the three-month periods ending August 31, 2004 and 2003.

Skyline Corporation and Subsidiary Companies

Notes to the Consolidated Financial Statements (continued)
(Unaudited)

NOTE 1 Nature of Operations, Accounting Policies and Restatement of Consolidated Financial Statements (continued)

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.

Certain prior period amounts have been reclassified to conform with the current period presentation.

NOTE 2 Industry Segment Information
(Dollars in thousands)


	Three-Months Ended
	August 31,
	2004			2003
	(As Restated			(As Restated
	See Note 3)			See Note 3
Manufactured housing	$	85,018		$	78,843

Recreational vehicles		32,549			31,306


Total sales	$	117,567		$	110,149


EARNINGS BEFORE INCOME TAXES
OPERATING EARNINGS
Manufactured housing	$	2,784		$	3,630
Recreational vehicles		(1,124	)		457
General corporate expense		(703	)		(1,060	)

Total operating earnings		957			3,027
Interest income		389			332

Earnings before income taxes	$	1,346		$	3,359

Operating earnings represent earnings before interest income, gain (loss) on sale of property, plant and equipment and provision for income taxes with non-traceable operating expenses being allocated to industry segments based on percentages of sales.

NOTE 3 Restatements

Skyline Corporation and Subsidiary Companies

Notes to the Consolidated Financial Statements (continued)
(Unaudited)

NOTE 3 Restatements (continued)

The Corporation has also determined in its review of its Consolidated Financial Statements that historically certain of its accounts have been misclassified. These misclassifications, which the Corporation believes are immaterial and would not themselves require restatement, include the recording of sales of parts as a reduction in cost of sales rather than an increase in revenue, the reporting of certain employee benefits as relating entirely to administrative expenses instead of allocating the amounts related to manufacturing to cost of sales, and the reporting of certain assets and liabilities as current when a portion should properly be classified as non-current. Accordingly, the Corporation’s Consolidated Financial Statements have also been restated for the three-month periods ended August 31, 2004 and 2003, and as of May 31, 2004, to reflect these changes in classification. The restatements had no effect on the total or per-share amount of net earnings or shareholders’ equity for any periods. The restatements of the Consolidated Financial Statements had the following effects:


			August 31, 2004
							As Previously
	As Restated			Adjustments			Reported
Consolidated Balance Sheet

Other current assets	$	8,444		$	(3,487	)	$	11,931
Total current assets	$	195,027		$	(3,487	)	$	198,514
Other assets (non-current)	$	8,809		$	3,487		$	5,322
Accrued warranty and related expenses	$	7,376		$	(3,900	)	$	11,276
Other accrued liabilities	$	2,214		$	(1,100	)	$	3,314
Total current liabilities	$	32,713		$	(5,000	)	$	37,713
Other deferred liabilities	$	10,773		$	5,000		$	5,773


	Three-Months Ended
			August 31, 2004
						As Previously
	As Restated		Adjustments			Reported
Consolidated Statements of Earnings and Retained Earnings

Sales	$	117,567	$	456		$	117,111
Cost of sales	$	105,679	$	1,649		$	104,030
Gross profit	$	11,888	$	(1,193	)	$	13,081
Selling and administrative expenses	$	10,931	$	(1,193	)	$	12,124


				Three-Months Ended
				August 31, 2004
							As Previously
	As Restated			Adjustments			Reported
Consolidated Statements of Cash Flows
Net cash used in operating activities	$	(1,423	)	$	357		$	(1,780	)
Net cash provided by investing activities	$	538		$	(357	)	$	895

Skyline Corporation and Subsidiary Companies

Notes to the Consolidated Financial Statements (continued)
(Unaudited)

NOTE 3 Restatements (continued)


			May 31, 2004
						As Previously
	As Restated		Adjustments			Reported
Consolidated Balance Sheet

Other current assets	$	9,046	$	(3,447	)	$	12,493
Total current assets	$	195,480	$	(3,447	)	$	198,927
Other assets (non-current)	$	8,758	$	3,447		$	5,311
Accrued warranty and related expenses	$	7,321	$	(3,800	)	$	11,121
Other accrued liabilities	$	2,735	$	(1,100	)	$	3,835
Total current liabilities	$	32,042	$	(4,900	)	$	36,942
Other deferred liabilities	$	10,642	$	4,900		$	5,742


	Three-Months Ended
			August 31, 2003
						As Previously
	As Restated		Adjustments			Reported
Consolidated Statements of Earnings and Retained Earnings

Sales	$	110,149	$	470		$	109,679
Cost of sales	$	96,095	$	1,640		$	94,455
Gross profit	$	14,054	$	(1,170	)	$	15,224
Selling and administrative expenses	$	11,027	$	(1,170	)	$	12,197


				Three-Months Ended
				August 31, 2003
							As Previously
	As Restated			Adjustments			Reported
Consolidated Statements of Cash Flows
Net cash used in operating activities	$	(2,667	)	$	646		$	(3,313	)
Net cash provided by investing activities	$	2,820		$	(646	)	$	3,466

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Corporation sells manufactured housing and towable recreational vehicle products to independent dealers and manufactured housing communities located throughout the United States. To better serve the needs of its dealers, the Corporation has twenty-two manufacturing facilities in eleven states. Manufactured housing and recreational vehicles are sold to dealers either through floor plan financing with various financial institutions or on a cash basis. While the Corporation maintains production of manufactured homes and recreational vehicles throughout the year, seasonal fluctuations in sales do occur. Sales and production of manufactured 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.

Sales in both business segments are affected by the strength of the U.S. economy, interest rate levels, consumer confidence and the availability of wholesale and retail financing. The manufactured housing segment is currently affected by an industry recession. This recession, caused primarily by restrictive retail financing, economic uncertainty and global tensions, has resulted in industry sales to be the lowest in decades. In the recreational vehicle segment, the Corporation sells travel trailers, fifth wheels and park models. Industry sales of travel trailers and fifth wheels have seen steady growth in recent years.

Despite the recession in the manufactured housing industry, demand for multi-section homes is increasing. This product is often sold as part of a land-home package and is financed with a conventional mortgage. Multi-section homes have an appearance similar to site-built homes and are notably less expensive. The Corporation is capitalizing on the increased demand for multi-section homes by expanding manufacturing capabilities. Twelve manufacturing housing facilities obtained approval to produce modular homes, which will extend existing product offerings.

The recreational vehicle segment is witnessing a shift in consumer demand for both metal-sided products and products with bonded fiberglass exteriors. The Corporation is positioning itself to take advantage of the expanding towable recreational vehicle segment in which it competes.

Restatements

The Corporation has historically recorded all proceeds received from the sale or maturity of U.S. Treasury Bills as an investing activity in the Consolidated Statement of Cash Flows. Management has determined that the proceeds received upon sale or maturity of the U.S. Treasury Bills represents an investing cash inflow for the amount of the original investment and an operating cash inflow for the interest received. The Corporation has also determined in its review of its Consolidated Financial Statements that historically certain of its accounts have been misclassified. These misclassifications, which the Corporation believes are immaterial and would not themselves require restatement, include the recording of sales of parts as a reduction in cost of sales rather than an increase in revenue, the reporting of certain employee benefits as relating entirely to administrative expenses instead of allocating the amounts related to manufacturing to cost of sales, and the reporting of certain assets and liabilities as current when a portion should more properly be classified as non-current.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Restatements (continued)

The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects the restatement of the interest received in the Consolidated Statement of Cash Flows and the immaterial misclassifications in the Consolidated Financial Statements for the three-month periods ended August 31, 2004 and 2003, as described in Note 3 to the Consolidated Financial Statements.

Results of Operations – Three-Month Period Ended August 31, 2004 Compared to the Three-Month Period Ended August 31, 2003

Sales and Unit Shipments
(Dollars in thousands)


									Change
									Increase
	2004		Percent		2003		Percent		(Decrease)
Sales
Manufactured Housing	$	85,018		72.3	$	78,843		71.6	$	6,175
Recreational Vehicles		32,549		27.7		31,306		28.4		1,243

Total Sales	$	117,567		100.0	$	110,149		100.0	$	7,418


Unit Shipments Manufactured Housing		1,975		46.6		2,010		48.4		(35	)
Recreational Vehicles		2,261		53.4		2,144		51.6		117

Total Unit Shipments		4,236		100.0		4,154		100.0		82

Manufactured housing unit sales continue to be affected by difficult market conditions, restrictive retail financing, economic uncertainty and increased global tensions. Average sales per unit rose due to increased selling prices, and a product mix shift toward multi-section homes. Selling prices increased as a result of unprecedented increases in the cost of lumber, lumber-related materials and steel. Multi-section homes represent 82.1 percent of total unit sales for the three-month period ended August 31, 2004 versus 81.3 percent for the three-month period ended August 31, 2003.

Recreational vehicle sales rose due to greater demand for travel trailers, and increased selling prices meant to offset increased material costs.

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations – Three-Month Period Ended August 31, 2004 Compared to the
Three-Month Period Ended August 31, 2003 (continued)

Cost of Sales
(Dollars in thousands)


									Change
			Percent of				Percent of		Increase
	2004		Segment Sales		2003		Segment Sales		(Decrease)
Manufactured Housing	$	75,175		88.4	$	68,231		86.5	$	6,944

Recreational Vehicles	$	30,504		93.7	$	27,864		89.0	$	2,640


			Percent of				Percent of
			Total Sales				Total Sales
Consolidated	$	105,679		89.9	$	96,095		87.2	$	9,584

Cost of sales for both business segments rose primarily due to increased cost of lumber, lumber-related materials and steel. In addition, the Corporation experienced rising costs associated with workers compensation and warranty. The recreational vehicles segment was also impacted by startup costs for a new recreational vehicle facility.

Selling and Administrative Expenses
(Dollars in thousands)


									Change
			Percent of				Percent of		Increase
	2004		Sales		2003		Sales		(Decrease)
Selling and Administrative Expenses	$	10,931		9.3	$	11,027		10.0	$	(96	)

The percentage decrease is primarily due to controlling costs while sales increased.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations – Three-Month Period Ended August 31, 2004 Compared to the
Three-Month Period Ended August 31, 2003 (continued)

Operating Earnings
(Dollars in thousands)


											Change in
											Operating
											Earnings
				Percent of					Percent of		Increase
	2004			Segments Sales			2003		Segment Sales		(Decrease)
Manufactured Housing	$	2,784			3.3		$	3,630		4.6	$	(846	)

Recreational Vehicles	$	(1,124	)		(3.5	)		457		1.5	$	(1,581	)


				Percent of					Percent of
				Total Sales					Total Sales
General Corporate Expenses	$	(703	)		0.6		(1,060	)		1.0		357


Total Operating Earnings	$	957			0.8	$	3,027			2.7	$	(2,070	)

As noted above, increased costs of material, workers compensation and warranty negatively affected operating earnings for both segments. The recreational vehicle segment was further impacted by startup costs for a new facility. General corporate expenses decreased primarily due to a decrease in the accrual for performance based compensation.

Interest Income
(Dollars in thousands)


					Change
					Increase
	2004		2003		(Decrease)
Interest Income	$	389	$	332	$	57

Interest income is directly related to the amount available for investment and the prevailing yields of U.S. Government Securities.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations – Three-Month Period Ended August 31, 2004 Compared to the
Three-Month Period Ended August 31, 2003 (continued)

Liquidity and Capital Resources
(Dollars in thousands)


					Change
	August 31,		May 31,		Increase
	2004		2004		(Decrease)
Cash and U.S. Treasury Bills and Notes	$	146,417	$	150,449	$	(4,032	)

Current Assets Exclusive of Cash and U.S. Treasury Bills and Notes	$	48,610	$	45,031	$	3,579

Current Liabilities	$	32,713	$	32,042	$	671

Working Capital	$	162,314	$	163,438	$	(1,124	)

The Corporation’s policy is to invest in U.S. Government Securities when cash exceeds immediate operating requirements. Current assets exclusive of cash and U.S. Treasury Bill and Notes increased due to a rise in accounts receivables, $2,378,000, and inventories, $1,803,000. Accounts receivable increased as a result of higher amount of sales in August 2004 versus May 2004. Inventories rose due to a greater number of finished manufactured homes in inventory at August 31, 2004 versus May 31, 2004. These homes are primarily models on display at manufacturing facilities.

Various factors contributed to the increase in current liabilities. Accrued profit sharing decreased $1,786,000 due to the timing of a yearly contribution to the Corporation’s profit sharing plan. Accrued salaries and wages decreased $857,000 as a result of the timing of payments to employees at August 31, 2004 versus May 31, 2004. Accrued marketing programs increased $3,051,000 due to higher sales.

Capital expenditures totaled $1,312,000 for the three-months ended August 31, 2004 compared to $444,000 in the previous year. Capital expenditures during this period were made primarily to replace or refurbish machinery, equipment and facilities in addition to improving manufacturing efficiencies.

The cash provided by operating activities, along with current cash and other short-term investments, is expected to be adequate to fund any capital expenditures and treasury stock purchases during the year. Historically, the Corporation’s financing needs have been met through funds generated internally.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Skyline Corporation and Subsidiary Companies
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Other Matters

The provisions for federal income taxes in each year approximates the statutory rate and for state income taxes reflects current state rates effective for the period based upon activities within the taxable entities.

The consolidated financial statements included in this report reflect transactions in the dollar values in which they were incurred and, therefore, do not attempt to measure the impact of inflation. The Corporation believes that inflation has not had a material effect on its operations during the three-month period ended August 31, 2004. The Corporation however, recently experienced significant increases in the cost of lumber, lumber-related materials and steel. Although the Corporation was unable to recover all of the increases in the first quarter of fiscal 2005, on a long-term basis it has demonstrated an ability to adjust selling prices in reaction to changing costs due to inflation.

Forward Looking Information

Certain statements in this report are considered forward looking as indicated by the Private Securities Litigation Reform Act of 1995. These statements involve uncertainties that may cause actual results to materially differ from expectations as of the report date. These uncertainties include but are not limited to:

	•	Cyclical nature of the manufactured housing and recreational vehicle industries

	•	General or seasonal weather conditions affecting sales

	•	Potential periodic inventory adjustments by independent retailers

	•	Availability of wholesale and retail financing

	•	Interest rate levels

	•	Impact of inflation

	•	Cost of labor and raw materials

	•	Competitive pressures on pricing and promotional costs

	•	Catastrophic events impacting insurance costs

	•	Consumer confidence and economic uncertainty

	•	Market demographics

	•	Management’s ability to attract and retain executive officers and key personnel

	•	Increased global tensions, market disruption resulting from a terrorist or other attack and any armed conflict involving the United States.

Item 4: Controls and Procedures

Evaluation of disclosure controls and procedures: Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Corporation has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this report and have determined such disclosure controls and procedures were ineffective for the reason described below.

Changes in Internal Controls Over Financial Reporting: Subsequent to the filing of the Corporation’s Annual Report on Form 10-K for the period ended May 31, 2004, the Corporation identified a material weakness in its internal control over financial reporting related to classification of items in its Consolidated Statements of Cash Flows. As set forth in Note 3 to the financial statements herein, the Corporation restated its Consolidated Statements of Cash Flows for the three-months ended August 31, 2004 and 2003. The restatement resulted from a material weakness in the Corporation’s internal controls over financial reporting regarding the classification of proceeds received from the sale or maturity of U.S. Treasury Bills.

The Corporation implemented the following changes to its internal controls over financial reporting to address the material weakness noted above, and the misclassifications further discussed in Note 3 to the financial statements:

	•	An extensive review of Generally Accepted Accounting Principles (GAAP) pertaining to proper classifications of accounts in the financial statements of the Corporation.

	•	A quarterly review of newly issued GAAP pronouncements for possible classification impacts on the financial statements of the Corporation.

	•	A quarterly review of the Corporation’s accounts for changes in the nature of the business that may have an impact on classifications within the financial statements and related disclosures.

PART II

Item 1.Legal Proceedings

Information with respect to this Item for the period covered by this Form 10-Q/A has been reported in Item 3, entitled “Legal Proceedings” of the Form 10-K/A for the fiscal year ended May 31, 2004 filed by the registrant with the Commission.

Item 4.Submission of Matters to a Vote of Security Holders

On September 30, 2004, Skyline Corporation held its Annual Meeting of Shareholders at which the following matters were submitted to a vote of the security holders:


Election of Directors
Nominee	Votes For		Votes Against		Votes Withheld
Arthur J. Decio		7,911,231		0		32,247
Thomas G. Deranek		7,695,325		0		248,153
Jerry Hammes		7,867,205		0		76,273
Ronald F. Kloska		7,678,734		0		264,744
William H. Lawson		7,867,406		0		76,072
David T. Link		7,931,306		0		12,172
Andrew J. McKenna		7,685,323		0		258,155

Item 6.Exhibits


(a)		Exhibits
(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)

(32.1)		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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SKYLINE CORPORATION

DATE:March 21, 2005		/s/ James R. Weigand

		James R. Weigand
		Chief Financial Officer

DATE:March 21, 2005		/s/ Jon S. Pilarski

		Jon S. Pilarski
		Corporate Controller

INDEX TO EXHIBITS


Exhibit Number		Descriptions
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)

32.1		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

Skyline Champion (SKY) 10-Q/A2005 Q2 Quarterly report (amended)

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