SECURITIES AND EXCHANGE COMMISSION
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 November 30, 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 (574)
(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 January 11, 2002
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 November 30, 2001 and May 31, 2001
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
and six-month periods ended
November 30, 2001 and 2000
Consolidated Statements of Cash Flows 5-6
for the six-month periods ended
November 30, 2001 and 2000
Notes to the Consolidated Financial 7-8
Statements for the six-month period
ended November 30, 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 6.
Exhibits and Reports on Form 8-K 12
Signatures 12
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
Dollars in thousands
November 30, 2001 May 31, 2001
(Unaudited)
ASSETS
Current Assets
Cash $ 9,439 $ 5,450
Treasury Bills, at cost plus accrued interest 141,119 110,965
Investment in U. S. Treasury Notes - 25,006
Accounts receivable, trade, less allowance for
doubtful accounts of $40 25,559 30,757
Inventories 9,107 9,026
Other current assets 8,415 8,302
Total Current Assets 193,639 189,506
Property, Plant and Equipment, At Cost
Land 6,637 6,637
Buildings and improvements 64,121 62,268
Machinery and equipment 26,668 26,633
97,426 95,538
Less accumulated depreciation 55,130 53,494
Net Property, Plant and Equipment 42,296 42,044
Other Assets 4,252 4,128
$240,187 $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
November 30, 2001 May 31, 2001
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 4,641 $ 7,187
Accrued salaries and wages 7,906 8,245
Accrued profit sharing 1,359 2,380
Accrued marketing programs 13,303 7,386
Accrued warranty and related expenses 10,410 10,084
Other accrued liabilities 1,787 2,593
Income taxes 610 2,040
Total Current Liabilities 40,016 39,915
Other Deferred Liabilities 3,860 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 256,815 252,525
Treasury stock, at cost 2,825,900 shares at
November 30, 2001 and May 31, 2001 (65,744) (65,744)
Total Shareholders' Equity 196,311 192,021
$240,187 $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 and six-month periods ended November 30, 2001 and 2000
(Unaudited)
Dollars in thousands except per share data
Three-Months Ended Six-Months Ended
November 30, November 30,
2001 2000 2001 2000
Sales $118,054 $120,907 $240,279 $253,059
Cost of sales 100,451 104,431 205,497 219,725
Gross profit 17,603 16,476 34,782 33,334
Selling and administrative
expenses 12,600 13,261 25,407 26,914
Operating earnings 5,003 3,215 9,375 6,420
Interest income 1,189 2,027 2,670 3,954
Earnings before income taxes 6,192 5,242 12,045 10,374
Provision for income taxes:
Federal 2,070 1,797 4,038 3,525
State 374 311 696 585
2,444 2,108 4,734 4,110
Net earnings 3,748 3,134 7,311 6,264
Retained earnings, beginning of
period 254,577 249,045 252,525 247,479
258,325 252,179 259,836 253,743
Less cash dividends paid 1,510 1,539 3,021 3,103
Retained earnings, end of period $256,815 $250,640 $256,815 $250,640
Basic earnings per share $ .45 $ .37 $ .87 $ .73
Cash dividends per share $ .18 $ .18 $ .36 $ .36
Weighted average common shares
outstanding 8,391,244 8,475,784 8,391,244 8,544,731
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the six-month periods ended November 30, 2001 and 2000
Increase (Decrease) in Cash
(Unaudited)
Dollars in thousands
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 7,311 $ 6,264
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Interest income earned on U.S. Treasury Bills
and Notes (2,670) (3,954)
Depreciation 1,832 1,936
Amortization of premium on U.S. Treasury Notes 6 33
Working Capital Items:
Accounts receivable 5,198 8,986
Inventories (81) 127
Other current assets (113) (1,710)
Accounts payable, trade (2,546) 254
Accrued liabilities 4,077 2,485
Income taxes payable (1,430) 1,570
Other assets (124) (38)
Other deferred liabilities 118 27
Total Adjustments 4,267 9,716
Net cash provided by operating activities 11,578 15,980
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows, continued
For the six-month periods ended November 30, 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 $ 196,822 $ 201,335
Purchase of U.S. Treasury Bills (225,026) (208,610)
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 21 -
Purchase of property, plant and equipment (2,104) (959)
Net cash used in investing activities (4,568) (7,515)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (3,021) (3,103)
Purchase of treasury stock - (5,724)
Net cash used in financing activities (3,021) (8,827)
Net increase (decrease) in cash 3,989 (362)
Cash at beginning of year 5,450 7,006
Cash at end of quarter $ 9,439 $ 6,644
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Notes to the Consolidated Financial Statements
For the six-month period ended November 30, 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 November 30, 2001, the
consolidated results of operations for the three-month and six-month periods
ended November 30, 2001 and 2000, and the consolidated cash flows for the
six-month periods ended November 30, 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 November 30, 2001, total inventories
consisted of raw materials, $4,075,000 work in process, $4,949,000, and
finished goods, $83,000. 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 November 30,
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 six-month period ended November 30, 2001
NOTE 2 Industry Segment Information
(Unaudited)
Dollars in thousands
Three-Months Ended Six-Months Ended
November 30, November 30,
2001 2000 2001 2000
SALES
Manufactured Housing $ 96,160 $ 98,461 $187,107 $200,580
Recreational Vehicles 21,894 22,446 53,172 52,479
Total sales $118,054 $120,907 $240,279 $253,059
EARNINGS BEFORE INCOME TAXES
OPERATING EARNINGS (LOSS)
Manufactured housing 6,902 4,835 12,069 8,649
Recreational vehicles (679) (586) (118) 8
General corporate expense (1,220) (1,034) (2,576) (2,237)
Total operating earnings 5,003 3,215 9,375 6,420
Interest income 1,189 2,027 2,670 3,954
Earnings before income taxes $ 6,192 $ 5,242 $ 12,045 $ 10,374
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
December 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 November 30, 2001, and the related
consolidated statements of earnings and retained earnings for each of the
three-month and six-month periods ended November 30, 2001 and 2000 and the
consolidated statement of cash flows for the six-month periods ended
November 30, 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 November 30, 2001 were $118,054,000, a decrease of
$2,853,000 from $120,907,000 in the comparable quarter of the prior year.
Fiscal 2002 sales through November 30 were $240,279,000, a $12,780,000
decrease from prior year's sales of $253,059,000. Manufactured housing sales
for the second quarter totaled $96,160,000 compared to $98,461,000 at November
30, 2000. Manufactured housing unit sales decreased from 2,978 to 2,792. This
segment's fiscal year sales were $187,107,000 versus $200,580,000 while unit
sales declined from 6,083 to 5,459. Second quarter recreational vehicle sales
decreased from $22,446,000 in fiscal 2001 to $21,894,000 in fiscal 2002.
Recreational vehicle unit sales for the quarter declined from 1,673 to 1,555.
Fiscal year sales through November 30 were $53,172,000 versus $52,479,000.
Unit sales declined from 3,935 to 3,881.
Cost of sales in the second quarter of fiscal 2002 was 85.1 percent of sales
compared to 86.4 percent. Cost of sales for the first six months of fiscal 2002
was 85.5 percent versus 86.8 percent. The decrease is primarily attributable
to a shift in product mix toward multi-section homes.
Quarterly selling and administrative expenses decreased slightly from 11.0
percent in fiscal 2001 to 10.7 percent in fiscal 2002. Fiscal 2002 and 2001
selling and administrative expenses as a percentage of sales were 10.6 percent.
Second quarter operating earnings as a percentage of sales for manufactured
housing were 7.2 percent in fiscal 2002 versus 4.9 percent in the prior year.
Year to date operating earnings were 6.4 percent in fiscal 2002 versus prior
year's 4.3 percent. Recreational vehicle quarterly operating loss as a
percentage of sales increased from 2.6 percent in fiscal 2001 to 3.1 percent.
Fiscal year operating earning through November 30 decreased from breakeven to a
loss of .2 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.
Interest income amounted to $1,189,000 for the second quarter compared to prior
year's $2,027,000. 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, 2001, cash and short-term investments in U. S. Treasury Bills
totaled $150,558,000, an increase of $34,143,000 from $116,415,000 at May 31,
2001. Current assets exclusive of cash and investments in U.S. Treasury Bills
totaled $43,081,000 at November 30, 2001, a decrease of $30,010,000 from the
May 31, 2001 balance of $73,091,000. The decrease was due to the maturity of
investments in U. S. Treasury Notes.
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)
Current liabilities increased $101,000 from $39,915,000 at May 31, 2001 to
$40,016,000 at November 30, 2001. Various factors contributed to the increase.
Accrued marketing programs increased $5,917,000 due to the timing of payments
for an ongoing marketing program. Accrued profit sharing decreased $1,021,000
primarily due to the timing of a yearly contribution to the Corporation's
profit sharing plan. Income taxes decreased $1,430,000 due to a federal income
tax payment during the second quarter. Trade accounts payable decreased
$2,546,000 as a result of the timing of paying vendors at November 30 versus
May 31.
Working capital at November 30, 2001 amounted to $153,623,000 compared to
$149,591,000 at May 31, 2001. Capital expenditures totaled $2,104,000 during
the first two quarters of fiscal 2002 compared to $959,000 in the previous
year. Capital expenditures during the first six 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 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on September 24, 2001. The report summarizes
certain proceedings of a Board of Directors' meeting held that day.
Proceedings that transpired include a By-law amendment increasing the number of
board directors from nine to ten, the election of Thomas G. Deranek to fill the
new director's position, the election of Arthur J. Decio to serve as Chairman
of Directors, and the election of the Corporation's officers.
At a December 18, 2001 Board of Directors' Meeting, By-laws were amended
pertaining to the signing of shareholder certificates, the calling of special
meetings, the organization of meetings, the functions of the Governance and
Compensation Committee, the execution of documents, and the functions of the
Corporate Controller. Amended By-laws, Exhibits (3) (ii), are filed with 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, 2002
James R. Weigand
V. P. Finance & Treasurer,
Chief Financial Officer
DATE: January 11, 2002
Jon S. Pilarski
Corporate Controller