We have reviewed the accompanying consolidated balance sheet of Skyline Corporation and Subsidiary Companies as of November 30, 2000, and the related consolidated statements of earnings and retained earnings for each of the three-month and six-month periods ended November 30, 2000 and 1999 and the consolidated statement of cash flows for the six-month period ended November 30, 2000 and 1999. These financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of May 31, 2000, and the related consolidated statements of earnings and retained earnings and of cash flows for the year then ended (not presented herein), and in our report dated June 15, 2000 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2000, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.
SKYLINE CORPORATION AND SUBSIDIARY COMPANIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for the Current Quarter Compared to the Same Quarter Last Year
Sales in the quarter ended November 30, 2000 were $123,087,000, a decrease of $37,162,000 from $160,249,000 in the comparable quarter of the prior year. Fiscal 2001 sales through November 30 were $257,367,000, a $69,594,000 decrease from prior year’s sales of $326,961,000. Manufactured housing sales for the second quarter totaled $100,983,000 compared to $128,294,000 at November 30, 1999. Manufactured housing unit sales decreased from 3,806 to 2,978. This business segment’s fiscal year sales through November 30 were $205,772,000 versus $260,830,000 while unit sales declined from 7,787 to 6,083. Sales were negatively affected by difficult market conditions, high inventories at the retail level and a restrictive retail financing environment. These conditions emerged in early fiscal 2000. Second quarter recreational vehicle sales decreased from $31,955,000 in fiscal 2000 to $22, 104,000 in fiscal 2001. Recreational vehicle unit sales decreased from 2,363 to 1,673. Fiscal year sales for this business segment through November 30 were $51,595,000 versus $66,131,000 in the prior year. Unit sales decreased from 5,012 to 3,935. The decrease in this segment’s sales is primarily due to declining demand for fifth wheels and travel trailers.
Cost of sales in the second quarter of fiscal 2001 were 81.9 percent of sales compared to 82.6 percent in fiscal 2000. Cost of sales for fiscal 2001 were 82.4 percent versus 82.7 percent. The decrease is primarily due to a decrease in material costs, particularly lumber and lumber related products.
Quarterly selling and administrative expenses increased from 13.4 percent in fiscal 2000 to 15.5 percent in fiscal 2001. Fiscal selling and administrative expenses as a percentage of sales increased from 13.4 percent to 15.1 percent. The increase is primarily due to a larger proportion of fixed and semi-fixed costs resulting from lower sales volume.
Second quarter operating earnings as a percentage of sales for manufactured housing were 4.8 percent in fiscal 2001 versus 5.0 percent in the prior year. Year to date operating earnings were 4.2 percent in fiscal 2001 versus prior year’s 4.9 percent. Recreational vehicle quarterly operating earnings as a percentage of sales decreased from 3.2 percent in fiscal year 2000 to a loss of 2.7 percent. Fiscal year operating earnings through November 30 decreased from 4.0 percent to breakeven. Both segments were affected by decreased sales volume.
Interest income amounted to $2,027,000 for the second quarter compared to $1,594,000. Interest income is directly related to the amount available for investment and the prevailing yields of U.S. Government securities.
Liquidity and Capital Resources
At November 30, 2000 cash and short-term investments in U.S. Treasury Bills totaled $119,086,000, an increase of $10,148,000 from $108,938,000 at May 31, 2000. Current assets exclusive of cash and investments in U.S. Treasury Bills totaled $71,134,000 at November 30, 2000, an increase of $17,636,000 from May 31, 2000 balance of $53,498,000. The increase was primarily due to the current classification of investment in U.S. Treasury Notes.
Current liabilities increased $4,309,000 from $39,035,000 at May 31, 2000 to $43,344,000 at November 30, 2000. An increase in accrued marketing programs ($5,171,000) was a contributing cause to the increase. Working capital at November 30, 2000 amounted to $146,876,000 compared to $123,401,000 at May 31, 2000. Capital expenditures totaled $959,000 in fiscal 2001 compared to $2,532,000 in the previous year. Capital expenditures during the first six months were made primarily to replace or refurbish machinery and equipment, and improve manufacturing efficiencies. Cash was also used to purchase $5,724,000 of the Corporation’s stock.
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.
7
Other Matters
The provision for federal income taxes in each year approximates the statutory rate and for state income taxes reflects current state rates effective for the period based upon activities within the taxable entities.
The consolidated financial statements included in this report reflect transactions in the dollar values in which they were incurred and, therefore, do not attempt to measure the impact of inflation. However, the Corporation believes that inflation has not had a material effect on its operations during the past three years. On a long-term basis the Corporation has demonstrated an ability to adjust the selling prices of its products in reaction to changing costs due to inflation.
Forward Looking Information
Certain statements in this report are considered forward looking as indicated by the Private Securities Litigation Reform Act of 1995. These statements involve uncertainties that may cause actual results to materially differ from expectations as of the report date. These uncertainties include but are not limited to general economic conditions, interest rate levels, consumer confidence, market demographics, competitive pressures, and the success of implementing administrative strategies.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this Item for the period covered by this Form 10-Q has been previously reported in Item 3, entitled “Legal Proceedings” of the Form 10-K for the fiscal year ended May 31, 2000 heretofore filed by the registrant with the Commission.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of fiscal 2001. There are no Exhibits filed as part of this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | SKYLINE CORPORATION
|
| Date: January 11, 2001 | | | |
| | |
|
| | | James R. Weigand
V. P. Finance & Treasurer,
Chief Financial Officer |
| | |
|
| Date: January 11, 2001 | | | |
| | |
|
| | | Jon S. Pilarski
Controller |
8