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 28, 2001
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:
Title of Class Shares Outstanding
Common stock April 11, 2001
8,391,244
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 28, 2001 and May 31, 2000
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
and nine-month periods ended
February 28, 2001 and February 29, 2000
Consolidated Statements of Cash 5
Flows for the nine-month periods
ended February 28, 2001 and February 29, 2000
Notes to the Consolidated Financial 6 - 7
Statements for the nine-month
period ended February 28, 2001
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis 9 - 10
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
Dollars in thousands
February 28, 2001 May 31, 2000
(Unaudited)
ASSETS
Current Assets
Cash $ 6,329 $ 7,006
Treasury Bills,
at cost plus accrued interest 110,876 101,932
Investment in U.S. Treasury Notes 25,022 -
Accounts receivable, trade,
less allowance for doubtful
accounts of $40 28,152 35,430
Inventories 8,999 9,807
Other current assets 7,333 8,261
Total Current Assets 186,711 162,436
Investment in U.S. Treasury Notes - 25,072
Property, Plant and Equipment, At Cost
Land 6,637 6,662
Buildings and improvements 62,247 63,308
Machinery and equipment 26,037 25,770
94,921 95,740
Less accumulated depreciation 52,654 51,552
Net Property, Plant and Equipment 42,267 44,188
Other Assets 4,138 3,970
$ 233,116 $ 235,666
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
February 28, 2001 May 31, 2000
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 5,874 $ 6,350
Accrued salaries and wages 5,159 5,540
Accrued profit sharing 1,904 2,518
Accrued marketing programs 12,983 8,435
Accrued warranty and related expenses 10,527 10,063
Other accrued liabilities 3,794 4,570
Income taxes 264 1,559
Total Current Liabilities 40,505 39,035
Other Deferred Liabilities 3,724 3,682
Commitments and Contingencies - -
Shareholders' Equity
Common stock, $.0277 per value,
15,000,000 shared authorized;
Issued 11,217,144 shares 312 312
Additional paid-in capital 4,928 4,928
Retained earnings 249,391 247,479
Treasury stock, at cost,
2,825,900 shares at February 28, 2001
2,534,200 shares at May 31, 2000 (65,744) (59,770)
Total Shareholders' Equity 188,887 192,949
$ 233,116 $ 235,666
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 28, 2001 and
February 29, 2000
(Unaudited)
Dollars in thousands except per share data
Three-Months Ended Nine-Months Ended
February 28/29 February 28/29
2001 2000 2001 2000
Sales $90,838 $117,320 $343,897 $438,537
Cost of sales 81,182 104,050 300,907 383,908
Gross profit 9,656 13,270 42,990 54,629
Selling and
administrative
expenses 11,916 13,254 38,831 41,636
Operating
earnings (2,260) 16 4,159 12,993
Gain on sale of
property, plant
and equipment 666 - 666 -
Interest income 2,020 1,667 5,975 4,798
Earnings before
income taxes 426 1,683 10,800 17,791
Provision for income
taxes:
Federal 144 555 3,669 5,869
State 20 118 605 1,267
164 673 4,274 7,136
Net earnings 262 1,010 6,526 10,655
Retained earnings,
beginning of period 250,640 245,266 247,479 238,861
250,902 246,276 254,005 249,516
Less cash dividends
paid 1,511 1,594 4,614 4,834
Retained earnings,
end of period $249,391 $244,682 $249,391 $244,682
Basic earnings per
share $.03 $.12 $.77 $1.20
Cash dividends per
share $.18 $.18 $.54 $.54
Weighted average common
shares outstanding 8,391,744 8,775,973 8,494,296 8,912,499
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 28, 2001 and February 29, 2000
Increase (Decrease) in Cash
(Unaudited)
Dollars in thousands
2001 2000
CASH FLOWS FROM OPERATION ACTIVITIES:
Net earnings $6,526 $10,655
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Interest income earned on
U.S. Treasury Bills nd Notes (5,975) (4,798)
Depreciation 2,936 2,950
Amortization of premium on
U.S. Treasury Notes 50 44
Gain on sale of property,
plant and equipment (666) -
Working Capital Items:
Accounts receivable 7,278 7,265
Inventories 808 362
Other current assets 928 287
Accounts payable, trade (476) (2,380)
Accrued liabilities 3,241 2,787
Income taxes payable (1,295) (2,571)
Other assets (168) (154)
Other deferred liabilities 42 43
Total Adjustments 6,703 3,835
Net cash provided by operating activities 13,229 14,490
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale or maturity of
U.S Treasury Bills 283,416 307,311
Purchase of U.S. Treasury Bills (287,823) (282,573)
Purchase of U.S. Treasury Notes - (25,133)
Interest received from U.S. Treasury Notes 1,438 852
Proceeds from sale of
property, plant and equipment 1,473 15
Purchase of property, plant and equipment (1,822) (3,725)
Net cash used in investing activities (3,318) (3,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (4,614) (4,834)
Purchase of treasury stock (5,974) (6,106)
Net cash used in financing activities (10,588) (10,940)
Net (decrease) increase in cash (677) 297
Cash at beginning of year 7,006 4,266
Cash at end of quarter $6,329 $4,563
The accompanying notes are part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the nine-month periods ended February 28, 2001 and 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 28, 2001, the
consolidated results of operations for the three-month and nine-month periods
ended February 28, 2001 and February 29, 2000, and the consolidated cash flows
for the nine-month periods ended February 28, 2001 and February 29, 2000.
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.
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. At February 28, 2001 total inventories
consisted of raw materials, $4,146,000, work in process, $4,742,000, and
finished goods, $111,000. At May 31, 2000 total inventories consisted of raw
materials, $4,772,000, work in process, $4,771,000 and finished goods, $264,000.
The Corporation and its subsidiaries were contingently liable at February 28,
2001 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.
In December 1999, the Securities Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." It states the SEC's position in applying generally accepted
accounting principles to revenue recognition issues. SAB 101 is effective no
later than the fourth quarter of this fiscal year. The Corporation believes
that adoption of this bulletin will not result in any material impact on the
consolidated financial statements.
During the third fiscal quarter of fiscal 2001, the Corporation adopted
Financial Accounting Standards Board Emerging Issues Task Force
(FASB EITF) 00-10, "Accounting for Shipping and Handling Fees and Costs. " As
required by this new EITF, freight billed to customers is considered sales
revenue and the related freight costs as a cost of sales. Net freight costs
have historically been classified as a selling expense. During this same
period, the Corporation adopted the new FASB EITF 00-22, "Accounting for Points
and Certain Other Time or Volume-Based Sales Incentive Offers...". Volume
based rebates are now required to be classified as a reduction in sales
revenue. The Corporation previously classified these expenditures as a
selling expense. Both accounting standards had no impact on net income or
earnings per share. Prior period amounts have been reclassified to conform
with the current presentation.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month and nine-month periods ended February 28, 2001 and
February 29, 2000
NOTE 2 Industry Segment Information
(Unaudited)
Dollars in thousands
Three-Months Ended Nine-Months Ended
February 28/29 February 28/29
2001 2000 2001 2000
SALES
Manufactured Housing $66,894 $89,515 $267,474 $343,496
Recreational Vehicles 23,944 27,805 76,423 95,041
Total sales $90,838 $117,320 $343,897 $438,537
EARNINGS BEORE INCOME
TAXES
OPERATING (LOSS)
EARNINGS
Manufactured housing (428) 853 8,048 13,559
Recreational vehicles (900) 166 (719) 2,789
General corporate
expense (932) (1,003) (3,170) (3,355)
Total operating
(loss) earnings (2,260) 16 4,159 12,993
Gain on sales of
property, plant and
equipment 666 - 666 -
Interest income 2,020 1,667 5,975 4,798
Earnings before income
taxes $426 $1,683 $10,800 $17,791
Operating earnings represent earnings before interest income, gain 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 14, 2001
To The Board of Directors and Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet of Skyline
Corporation and Subsidiary Companies as of February 28, 2001, and the
related consolidated statements of earnings and retained earnings for each of
the three-month and nine-month periods ended February 28, 2001 and
February 29, 2000 and the consolidated statement of cash flows for the
nine-month periods ended February 28, 2001 and February 29, 2000. 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.
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 28, 2001 were $90,838,000, a decrease of
$26,482,000 from $117,320,000 in the comparable quarter of the prior year.
Fiscal 2001 sales through February 28 were $343,897,000, a $94,640,000 decrease
from prior year's sales of $438,537,000. Manufactured housing sales for the
third quarter totaled $66,894,000 compared to $89,515,000 at February 29, 2000.
Manufactured housing unit sales decreased from 2,717 to 2,006. This business
segment's fiscal year sales through February 28 were $267,474,000 versus
$343,496,000 while unit sales declined from 10,504 to 8,089. 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. Third quarter recreational vehicle sales
decreased from $27,805,000 in fiscal 2000 to $23,944,000 in fiscal 2001.
Recreational vehicle unit sales decreased from 2,073 to 1,756. Fiscal year
sales for this business segment through February 28 were $76,423,000 versus
$95,041,000 in the prior year. Unit sales decreased from 7,085 to 5,691. The
decrease in this segment's sales is primarily due to declining demand for
fifth wheels and travel trailers as a result of difficult market conditions.
Cost of sales in the third quarter of fiscal 2001 were 89.4 percent of sales
compared to 88.7 percent in fiscal 2000. Cost of sales for fiscal 2001 and 2000
were both 87.5 percent.
Quarterly selling and administrative expenses increased from 11.3 percent in
fiscal 2000 to 13.1 percent in fiscal 2001. Fiscal selling and administrative
expenses as a percentage of sales increased from 9.5 percent to 11.3 percent.
The increase is primarily due to a larger proportion of fixed and semi-fixed
costs resulting from lower sales volume.
Third quarter operating loss as a percentage of sales for manufactured housing
was .7 percent in fiscal 2001 versus operating earnings of 1.0 percent in the
prior year. Year to date operating earnings were 3.0 percent in fiscal 2001
versus prior year's 3.9 percent. Recreational vehicle quarterly operating
earnings as a percentage of sales decreased from .6 percent in fiscal year 2000
to a loss of 3.8 percent. Fiscal year operating earnings through February 28
decreased from 2.9 percent to a loss of .9 percent. Both segments were affected
by decreased sales volume.
Interest income amounted to $2,020,000 for the third quarter compared to prior
year's $1,667,000. 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 February 28, 2001 cash and short-term investments in U.S. Treasury Bills
totaled $117,205,000 an increase of $8,267,000 from $108,938,000 at May 31,
2000. Current assets exclusive of cash and investments in U.S. Treasury Bills
totaled $69,506,000 at February 28 2001, an increase of $16,008,000 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 ($25,022,000),
coupled with seasonal decreases in Accounts Receivable ($7,278,000) and
Inventories ($808,000).
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Current liabilities increased $1,470,000 from $39,035,000 at May 31, 2000 to
$40,505,000 at February 28, 2001. The net decrease is due to various factors.
Decreases occurred in trade accounts payable ($476,000) and accrued salaries
and wages ($381,000) due to the seasonality of the Corporation's business and
declining sales volume. Accrued profit sharing decreased $614,000 because the
February 28, 2001 balance reflects nine months of estimated liability versus a
twelve month estimate at May 31, 2000. Likewise, other accrued liabilities
declined $776,000 primarily due to accrued holiday pay having nine months of
estimated liability at February 28 versus a twelve month estimate at May 31.
Income taxes decreased from $1,559,000 to $264,000 at February 28. The May 31
balance represents a liability for state and federal income taxes for fiscal
year 2000 that is in excess of estimated payments. The February 28 balance is
the estimated liability for fiscal year 2001 in excess of estimated payments.
Accrued marketing programs increased $4,548,000 due to an ongoing marketing
program for manufactured housing dealers which has historically been paid in
the fourth quarter. Working capital at February 28, 2001 amounted to
$146,206,000 compared to $123,401,000 at May 31, 2000. Capital expenditures
totaled $1,822,000 in fiscal 2001 compared to $3,725,000 in the previous year.
Capital expenditures during the first nine months were made primarily to
replace or refurbish machinery and equipment, and improve manufacturing
efficiencies. Cash was also used to purchase $5,974,000 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.
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
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 third 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: April 11, 2001
James R. Weigand
V. P. Finance & Treasurer,
Chief Financial Officer
DATE: April 11, 2001
Jon S. Pilarski
Controller