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 August 31, 2001
Commission File No. 1-4714
SKYLINE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1038277
(State of Incorporation) (IRS Employee 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 October 10, 2001
8,391,244
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item I.
Financial Statements:
Consolidated Balance Sheets as 2-3
of August 31, 2001 and May 31, 2001
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
periods ended August 31, 2001 and 2000
Consolidated Statements of Cash Flows 5-6
for the three-month periods ended
August 31, 2001 and 2000
Notes to the Consolidated Financial 7-8
Statements for the three-month period
Ended August 31, 2001
Report of Independent Accountants 9
Item 2.
Management's Discussion and Analysis 10-11
of Financial Condition and Results of
Operations
Part II
Other Information
Item 1.
Legal Proceedings 12
Item 4.
Submission of Matters to a Vote of 12
Security Holders
Item 6.
Exhibits and Reports on Form 8-K 12
Signatures 12
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
Dollars in thousands
August 31, 2001 May 31, 2001
(Unaudited)
ASSETS
Current Assets
Cash $ 8,163 $ 5,450
Treasury Bills, at cost plus accrued interest 136,019 110,965
Investment in U. S. Treasury Notes - 25,006
Accounts receivable, trade, less allowance for
doubtful accounts of $40 30,289 30,757
Inventories 9,519 9,026
Other current assets 8,246 8,302
Total Current Assets 192,236 189,506
Property, Plant and Equipment, At Cost
Land 6,637 6,637
Buildings and improvements 63,534 62,268
Machinery and equipment 26,574 26,633
96,745 95,538
Less accumulated depreciation 54,335 53,494
Net Property, Plant and Equipment 42,410 42,044
Other Assets 4,159 4,128
$238,805 $235,678
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
August 31, 2001 May 31, 2001
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 6,640 $ 7,187
Accrued salaries and wages 6,748 8,245
Accrued profit sharing 685 2,380
Accrued marketing programs 10,761 7,386
Accrued warranty and related expenses 10,246 10,084
Other accrued liabilities 3,160 2,593
Income taxes 2,749 2,040
Total Current Liabilities 40,989 39,915
Other Deferred Liabilities 3,743 3,742
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 254,577 252,525
Treasury stock, at cost 2,825,900 shares at
August 31, 2001 and May 31, 2001 (65,744) (65,744)
Total Shareholders' Equity 194,073 192,021
$238,805 $235,678
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, 2001 and 2000
(Unaudited)
Dollars in thousands except per share data
2001 2000
Sales $122,225 $132,152
Cost of sales 105,046 115,294
Gross profit 17,179 16,858
Selling and administrative expenses 12,807 13,654
Operating earnings 4,372 3,204
Interest income 1,481 1,928
Earnings before income taxes 5,853 5,132
Provision for income taxes:
Federal 1,968 1,728
State 322 274
2,290 2,002
Net earnings 3,563 3,130
Retained earnings, beginning of period 252,525 247,479
256,088 250,609
Less cash dividends paid 1,511 1,564
Retained earnings, end of period $254,577 $249,045
Basic earnings per share $ .42 $ .36
Cash dividends per share $ .18 $ .18
Weighted average common shares outstanding 8,391,244 8,612,930
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, 2001 and 2000
Increase (Decrease) in Cash
(Unaudited)
Dollars in thousands
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,563 $ 3,130
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (1,481) (1,928)
Depreciation 916 968
Amortization of premium on U.S. Treasury
Notes 6 17
Working Capital Items:
Accounts receivable 468 188
Inventories (493) 127
Other current assets 56 270
Accounts payable, trade (547) 1,689
Accrued liabilities 912 937
Income taxes payable 709 669
Other assets (31) (29)
Other deferred liabilities 1 17
Total Adjustments 516 2,925
Net cash provided by operating activities 4,079 6,055
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows, continued
For the three-month periods ended August 31, 2001 and 2000
Increase (Decrease) in Cash
(Unaudited)
Dollars in thousands
2001 2000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale or maturity of U. S.
Treasury Bills $ 82,356 $ 90,536
Purchase of U.S. Treasury Bills (106,649) (93,504)
Maturity of U.S. Treasury Notes 25,000 -
Interest received from U. S. Treasury Notes 719 719
Proceeds from sale of property, plant and
equipment 6 -
Purchase of property, plant and equipment (1,287) (378)
Net cash used in investing activities 145 (2,627)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (1,511) (1,564)
Purchase of treasury stock - (2,649)
Net cash used in financing activities (1,511) (4,213)
Net increase (decrease) in cash 2,713 (785)
Cash at beginning of year 5,450 7,006
Cash at end of quarter $ 8,163 $ 6,221
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month period ended August 31, 2001
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 August 31, 2001, the
consolidated results of operations for the three-month periods ended
August 31, 2001 and 2000, and the consolidated cash flows for the three-month
periods ended August 31, 2001 and 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 August 31, 2001, total inventories
consisted of raw materials, $4,000,000, work in process, $5,283,000, and
finished goods, $236,000. At May 31, 2001, total inventories consisted of raw
materials, $3,891,000, work in process, $5,098,000 and finished goods, $37,000.
The Corporation and its subsidiaries were contingently liable at
August 31, 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.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the three-month period ended August 31, 2001
NOTE 2 Industry Segment Information
(Unaudited)
Dollars in thousands
2001 2000
SALES
Manufactured Housing $ 90,947 $102,119
Recreational Vehicles 31,278 30,033
Total sales $122,225 $132,152
EARNINGS BEFORE INCOME TAXES
OPERATING EARNINGS
Manufactured housing 5,167 3,758
Recreational vehicles 561 643
General corporate expense (1,356) (1,197)
Total operating earnings 4,372 3,204
Interest income 1,481 1,928
Earnings before income taxes $ 5,853 $ 5,132
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.
Report of Independent Accountants
September 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 August 31, 2001, and the related
consolidated statements of earnings and retained earnings for each of the
three-month periods ended August 31, 2001 and 2000 and the consolidated
statement of cash flows for the three-month periods ended August 31, 2001 and
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 inquires 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,
2001, 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, 2001 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, 2001, 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 August 31, 2001 were $122,225,000, a decrease of
$9,927,000 from $132,152,000 in the comparable quarter of the prior year.
Manufactured housing sales totaled $90,947,000 compared to $102,119,000.
Manufactured housing unit sales decreased from 3,105 to 2,677. First quarter
recreational vehicle sales increased from $30,033,000 in fiscal 2001 to
$31,278,000 in fiscal 2002. Recreational vehicle unit sales increased from
2,262 to 2,326. Sales continued to be affected by difficult market conditions
in the manufactured housing and recreational vehicle industries and by a
slowdown in the U.S. economy.
Cost of sales in the first quarter of fiscal 2002 was 85.9 percent of sales
compared to 87.2 percent in fiscal 2001. The decrease is primarily
attributable to a shift in product mix toward multi-section homes.
Quarterly selling and administrative expenses increased from 10.3 percent in
fiscal 2001 to 10.5 in fiscal 2002. The increase is primarily due to a larger
proportion of fixed and semi-fixed costs resulting from lower sales volume.
Operating earnings as a percentage of sales for manufactured housing were 5.7
percent in fiscal 2002 and 3.7 percent in fiscal 2001. Operating earnings as a
percentage of sales for recreational vehicles decreased from 2.1 percent to 1.8
percent. Earnings for manufactured housing improved due to a product mix shift
from single-section homes toward multi-section homes. Earnings for
recreational vehicles declined as a result of continued difficult market
conditions and increased material costs.
Interest income amounted to $1,481,000 compared to $1,928,000. 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 August 31, 2001, cash and short-term investments in U. S. Treasury Bills
totaled $144,182,000, an increase of $27,767,000 from $116,415,000 at
May 31, 2001. Current assets exclusive of cash and investments in U.S.
Treasury Bills totaled $48,054,000 at August 31, 2001, a decrease of
$25,037,000 from the May 31, 2001 balance of $73,091,000. The decrease was
due to the maturity of investments in U. S. Treasury Notes.
Current liabilities increased $1,074,000 from $39,915,000 at May 31, 2001 to
$40,989,000 at August 31, 2001. Various factors contributed to the increase.
Accrued marketing programs increased $3,375,000 due to the timing of payments
for an ongoing marketing program. Accrued profit sharing decreased $1,695,000
primarily due to the timing of a yearly contribution to the Corporation's
profit sharing plan. Accrued salaries and wages decreased $1,497,000 as a
result of the timing of paying employees at August 31 versus May 31.
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 (continued)
Working capital at August 31, 2001 amounted to $151,247,000 compared to
$149,591,000 at May 31, 2001. Capital expenditures totaled $1,287,000 in the
first quarter of fiscal 2002 compared to $378,000 in the previous year.
Capital expenditures during the first three months were made primarily to
increase manufacturing capacity, replace or refurbish machinery and equipment,
and improve 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.
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, 2001 heretofore filed by the
registrant with the Commission.
Item 4. Submission of Matters to a Vote of Security Holders
On September 24, 2001, Skyline Corporation held its Annual Meeting of
Shareholders at which the following matters were submitted to a vote of the
security holders:
1. Election of Directors
Nominee Votes For Votes Against Votes Withheld
Arthur J. Decio 7,538,315 0 47,323
Terrence M. Decio 7,538,568 0 47,070
Jerry Hammes 7,538,530 0 47,108
Ronald F. Kloska 7,548,669 0 36,969
William H. Lawson 7,549,984 0 35,654
David T. Link 7,549,483 0 36,155
Andrew J. McKenna 7,536,810 0 48,828
William H. Murschel 7,539,869 0 45,769
Dale Swikert 7,546,909 0 38,729
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal 2002.
Amended By-laws, Exhibits (3) (ii), are filed with this report. The By-laws
were amended to increase the number of board directors from nine to ten.
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: October 10, 2001
James R. Weigand
V. P. Finance & Treasurer,
Chief Financial Officer
DATE: October 10, 2001
Jon S. Pilarski
Corporate Controller