SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended February 29, 2000
Commission File No. 1-4714
SKYLINE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1038277
(State of Incorporation) (IRS Employer Identification No.)
P. O. Box 743, 2520 By-Pass Road Elkhart, IN 46515
(Address of principal executive offices) (Zip)
294-6521 (219)
(Registrant's telephone number) (Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Securities registered pursuant to Section 12 (b) of the Act:
Shares Outstanding
Title of Class April 11, 2000
Common stock 8,682,944
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as 2 - 3
of February 29, 2000 and May 31, 1999
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
and nine-month periods ended
February 29, 2000 and February 28, 1999
Consolidated Statements of Cash 5
Flows for the nine-month periods
ended February 29, 2000 and
February 28, 1999
Notes to the Consolidated Financial 6 - 7
Statements for the nine-month
period ended February 29, 2000
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis 9- 12
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
February 29, 2000 May 31, 1999
(Unaudited)
ASSETS
Current Assets
Cash $ 4,563 $ 4,266
Treasury Bills, at cost plus accrued
interest 107,984 128,776
Accounts receivable, trade, less allowance
for doubtful accounts of $40 34,522 41,787
Inventories
Raw materials 5,078 5,245
Work in process 5,031 5,226
Finished goods - -
Total Inventories 10,109 10,471
Other current assets 7,471 7,758
Total Current Assets 164,649 193,058
Investment in U. S. Treasury Notes 25,089 -
Property, Plant and Equipment, at Cost
Land 6,550 5,801
Buildings and improvements 63,247 61,591
Machinery and equipment 25,646 24,608
95,443 92,000
Less accumulated depreciation 50,581 47,898
Net Property, Plant and Equipment 44,862 44,102
Other Assets 3,976 3,822
$ 238,576 $ 240,982
The accompanying notes are a part of the consolidated financial
statements.
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands except per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29, 2000 May 31, 1999
(Unaudited)
Current Liabilities
Accounts payable, trade $ 6,116 $ 8,496
Accrued salaries and wages 5,837 6,715
Accrued profit sharing 2,065 2,742
Accrued marketing programs 15,196 9,878
Accrued warranty expense 9,877 9,277
Other accrued liabilities 4,405 5,981
Income taxes - 2,571
Total Current Liabilities 43,496 45,660
Other Deferred Liabilities 3,673 3,630
Commitments and Contingencies - -
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 244,682 238,861
Treasury stock, at cost, 2,471,600 shares at
February 29, 2000 and 2,217,200 shares at
May 31, 1999 (58,515) (52,409)
Total Shareholders' Equity 191,407 191,692
$ 238,576 $ 240,982
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 and nine-month periods ended February 29, 2000 and
February 28, 1999
(Unaudited)
(Dollars in thousands except per share data)
Three-months Ended Nine-months Ended
February 29/28 February 29/28
2000 1999 2000 1999
Sales $ 118,969 $ 145,410 $ 445,930 $ 492,869
Cost of sales 100,713 120,038 371,041 401,350
Gross profit 18,256 25,372 74,889 91,519
Selling and administrative
expenses 18,240 20,308 61,896 66,726
Operating earnings 16 5,064 12,993 24,793
Interest income 1,667 1,485 4,798 4,753
Earnings before income taxes 1,683 6,549 17,791 29,546
Provision for income taxes:
Federal 555 2,130 5,869 9,635
State 118 490 1,267 2,185
673 2,620 7,136 11,820
Net earnings 1,010 3,929 10,655 17,726
Retained earnings,
beginning of period 245,266 230,334 238,861 219,343
246,276 234,263 249,516 237,069
Less, cash dividends paid 1,594 1,618 4,834 4,424
Retained earnings,
end of period $ 244,682 $ 232,645 $ 244,682 $ 232,645
Basic earnings per share $.12 $ .44 $1.20 $1.93
Cash dividends per share $ .18 $ .18 $ .54 $ .48
Weighted average common
shares outstanding 8,775,973 8,999,944 8,912,499 9,182,006
The accompanying notes are a part of the consolidated financial
statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the nine-month periods ended February 29, 2000 and February 28, 1999
Increase (decrease) in Cash
(Unaudited)
(Dollars in thousands)
2000 1999
Cash Flows From Operating Activities:
Net earnings $ 10,655 $ 17,726
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (4,798) (4,753)
Depreciation 2,950 2,796
Amortization of premium on U.S. Treasury
Notes 44 -
Working Capital Items:
Accounts receivable 7,265 (2,072)
Inventories 362 (706)
Other current assets 287 1,137
Accounts payable, trade (2,380) (2,847)
Accrued liabilities 2,787 10,647
Income taxes payable (2,571) (2,409)
Other assets (154) (156)
Other deferred liabilities 43 224
Total Adjustments 3,835 1,861
Net cash provided by operating activities 14,490 19,587
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 307,311 352,810
Purchase of U.S. Treasury Bills (282,573) (355,789)
Purchase of U.S. Treasury Note (25,133) -
Interest received from U.S. Treasury Note 852 -
Proceeds from sale of property, plant
and equipment 15 123
Purchase of property, plant and equipment (3,725) (5,207)
Net cash used in investing activities (3,253) (8,063)
Cash Flows From Financing Activities:
Cash dividends paid (4,834) (4,424)
Purchase of treasury stock (6,106) (11,349)
Net cash used in financing activities (10,940) (15,773)
Net increase (decrease) in cash 297 (4,249)
Cash at beginning of year 4,266 10,667
Cash at end of quarter $ 4,563 $ 6,418
The accompanying notes are a part of the consolidated financial
statements.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the nine-month period ended February 29, 2000
NOTE 1 Nature of Operations and Accounting Policies
The accompanying unaudited interim consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position as of
February 29, 2000, the consolidated results of operations for the
three-month and nine-month periods ended February 29, 2000 and
February 28, 1999, and the consolidated cash flows for the nine-month
periods ended February 29, 2000 and February 28, 1999.
The unaudited interim consolidated financial statements included herein
have been prepared pursuant to the rules and regulations for reporting on
Form 10-Q. Accordingly, certain information and footnote disclosures
normally accompanying the annual consolidated financial statements have
been omitted. The interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Corporation's latest annual report on Form 10-K.
The financial data included herein has been subjected to a limited review
by PricewaterhouseCoopers LLP, the registrant's independent accountants,
whose report is included on page 8 of this filing.
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.
The Corporation and its subsidiaries were contingently liable at
February 29, 2000 under agreements to purchase repossessed units on floor
plan financing made by financial institutions to its customers. Losses,
if any, would be the difference between repossession cost and the resale
value of the units. There have been no material losses in past years
under these agreements, and none are anticipated in the future.
The Corporation is a party to various pending legal proceedings in the
normal course of business. Management believes that any losses resulting
from such proceedings would not have a material adverse effect on the
Corporation's results of operations or financial position.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the nine-month period ended February 29, 2000
NOTE 2 Industry Segment Information
(Unaudited)
(Dollars in thousands)
Three-Months Ended Nine-Months Ended
February 29/28 February 29/28
2000 1999 2000 1999
SALES
Manufactured housing $ 91,632 $119,373 $352,462 $406,649
Recreational vehicles 27,337 26,037 93,468 86,220
Total sales $118,969 $145,410 $445,930 $492,869
EARNINGS BEFORE INCOME TAXES
OPERATING EARNINGS
Manufactured housing $ 853 $ 5,753 $ 13,559 $ 25,358
Recreational vehicles 166 560 2,789 3,416
General corporate expenses (1,003) (1,249) (3,355) (3,981)
Total operating earnings 16 5,064 12,993 24,793
Interest income 1,667 1,485 4,798 4,753
Earnings before income taxes $ 1,683 $ 6,549 $ 17,791 $ 29,546
Operating earnings represent earnings before interest income, gain (loss) on
sale of property, plant and equipment and provision for income taxes with
non-traceable operating expenses being allocated to industry segments based
on percentage of sales.
Report of Independent Accountants
March 15, 2000
To The Board of Directors and Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of
February 29, 2000 and the related consolidated statements of earnings
and retained earnings for the three-month and nine-month periods ended
February 29, 2000 and February 28, 1999 and the consolidated statement of
cash flows for the nine-month periods ended February 29, 2000 and
February 28, 1999 of Skyline Corporation and Subsidiary Companies. This
financial information is 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 financial information for it to
be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of May 31, 1999, 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 14, 1999 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, 1999, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it
has been derived.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Current Quarter Compared to the Same
Quarter Last Year
Sales in the quarter ended February 29, 2000 were $118,969,000, a
$26,441,000 decrease from $145,410,000 in the prior year. Fiscal 2000
sales through February 29 were $445,930,000, a $46,939,000 decrease
from prior year's sales of $492,869,000. Manufactured housing sales
for the third quarter totaled $91,632,000 compared to $119,373,000 at
February 28, 1999. During the same period, unit sales decreased from
3,727 to 2,717. This business segment's fiscal year sales through
February 29 were $352,462,000 versus $406,649,000 while unit sales
declined from 12,826 to 10,504. Sales continue to be depressed by
industry-wide high inventories at the retail level. Third quarter
recreational vehicle sales increased to $27,337,000 from $26,037,000
while unit sales also increased from 2,018 to 2,073. Fiscal year sales
for this business segment through February 29 were $93,468,000 versus
$86,220,000 in the prior year. Unit sales increased from 6,803 to
7,085. The increase in recreational vehicle sales is primarily due to
continued demand for travel trailers.
Cost of sales in the third quarter were 84.7 percent of sales compared
to prior year's 82.6 percent. Cost of sales for fiscal 2000 were 83.2
percent versus 81.4 percent. The increase is primarily due to rising
material costs and increased price competition on sales.
Quarterly selling and administrative expenses increased from 14.0
percent of sales to 15.3 percent. As of February 29, 2000 and February
28, 1999, fiscal year expenses increased from 13.5 percent to 13.9
percent. The increase is due to a larger proportion of fixed and semi-fixed
costs resulting from lower sales volume.
Third quarter earnings as a percentage of sales for manufactured
housing were .9 percent versus prior year's 4.8 percent. For the nine
months ended February 29, 2000 and February 28, 1999, operating
earnings were 3.8 percent and 6.2 percent, respectively. Third quarter
operating earnings as a percentage of sales for recreational vehicles
were .6 percent compared to 2.2 percent. For the fiscal year through
February 29, 2000 and February 28, 1999, operating earnings were 3.0
percent and 4.0 percent, respectively. Both segments were affected by
increased cost of sales, while the manufactured housing segment was
further impacted by declining sales.
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Interest income amounted to $1,667,000 for the third quarter versus
$1,485,000. Interest income is directly related to the amount
available for investments and the prevailing yields on U.S. Government
Securities.
Liquidity and Capital Resources
At February 29, 2000 cash and short-term investments in U.S. Treasury
Bills totaled $112,547,000, a decrease of $20,495,000 from $133,042,000
at May 31, 1999. The decrease is primarily due to an investment in
U. S. Treasury Notes. Current assets exclusive of cash and investments
in U.S. Treasury Bills totaled $52,102,000 at February 29, 2000, a
decrease of $7,914,000 from the May 31, 1999 balance of $60,016,000.
This change is primarly due to a decrease in accounts receivable
($7,265,000). Accounts receivable declined because of lower sales this fiscal
year and the seasonality of the Corporations's business. Current liabilities
decreased $2,164,000 from $45,660,000 at May 31, 1999 to $43,496,000 at
February 29, 2000. The net decrease is due to various factors. Decreases
occurred in accounts payable ($2,380,000) and accrued salaries and wages
($878,000) due to the seasonality of the Corporation's business. The change
in accounts payable is further impacted by declining sales volume. Accrued
profit sharing declined $667,000 because the February 29 balance reflects
nine months of estimated liability versus a twelve month estimate at
May 31, 1999. Other accrued liabilities decreased $1,576,000 primarily
due to a lower liability for accrued employment taxes at February 29
versus May 31. Income taxes declined from $2,571,000 at May 31 to $0 at
February 29. The May 31 balance represents a liability for state and
federal income taxes for fiscal year 1999 that is in excess of estimated
payments. The February 29 balance is the estimated liability for fiscal
year 2000 in excess of estimated payments. Accrued marketing programs
increased $5,318,000 due to an ongoing marketing program for manufactured
housing dealers which has historically been paid in the fourth fiscal
quarter. Working capital at February 29, 2000 amounted to $121,153,000
compared to $147,398,000 at May 31, 1999. The decrease is primarily
attributable to an investment of U. S. Treasury Notes.
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital expenditures totaled $3,725,000 in the third quarter of fiscal 2000
compared to $5,207,000 in the previous year. Capital expenditures during the
first nine months were made primarily to replace or refurbish machinery and
equipment, improve manufacturing efficiencies, and increase manufacturing
capacity. The Corporation also acquired $6,106,000 of its stock during the
first three quarters of fiscal 2000. 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.
Year 2000
The Corporation to date has not encountered any significant problems
with its computer hardware or software, nor is it aware of any problems
with its business partners. The monitoring of hardware, software, and
business partners is ongoing and contingency plans are in place if
problems arise. The Corporation has not incurred any material costs
related to Year 2000 issues. As in the past, any future costs will be
expensed as incurred, funded by operating cash flows, and expected to
be immaterial to the Corporation's results of operations, liquidity, or
capital resources.
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.
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Information
Certain statements in this report are considered forward looking as
indicated by the Private Securities Litigation Reform Act of 1995.
These statements involve uncertainties that may cause actual results to
materially differ from expectations as of the report date. These
uncertainties include but are not limited to general economic
conditions, interest rate levels, consumer confidence, market
demographics, competitive pressures, and the success of implementing
administrative strategies.
PART II
Item 1. Legal Proceedings
Information with respect to this Item for the period covered by this
Form 10-Q has been previously reported in Item 3, entitled "Legal
Proceedings" of the Form 10-K for the fiscal year ended May 31, 1999
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 first three quarters of
fiscal 2000. The Exhibit filed as part of this report is listed below.
Exhibit No. Description
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SKYLINE CORPORATION
DATE: April 11, 2000
James R. Weigand
Vice President Finance &
Treasurer, Chief Financial
Officer
DATE: April 11, 2000
Jon S. Pilarski
Controller