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, 1994
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 12 1994
Common stock 11,217,144
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
February 28, 1994 and May 31, 1993
Consolidated Statements of Earnings and
Retained Earnings for the three and
nine month periods ended February 28,
1994 and 1993
Consolidated Statements of Cash Flows
for the nine month periods ended
February 28, 1994 and 1993
Notes to the Consolidated Financial
Statements
Report of Independent Accountants
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Skyline Corporation and Subsidiary Companies
Condensed Consolidated Balance Sheets
(Dollars in thousands)
ASSETS February 28, 1994 May 31, 1993
(Unaudited)
Current Assets:
Cash and temporary cash investments $ 10,625 $ 8,787
Treasury Bills, at cost plus accrued
interest 1,989 4,885
Accounts receivable, net 43,546 40,736
Inventories 22,838 10,724
Other current assets and prepaid
income taxes 5,208 3,017
Total current assets 84,206 68,149
Investments in U.S. Treasury Notes 89,909 90,197
Property, Plant and Equipment, at Cost:
Land 3,848 3,651
Buildings and improvements 45,195 42,158
Machinery and equipment 19,741 18,641
68,784 64,450
Less accumulated depreciation 39,418 37,318
29,366 27,132
Other Assets 2,591 3,033
$ 206,072 $ 188,511
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade $ 14,470 $ 9,672
Accrued liabilities 21,758 14,175
Income taxes - 890
Total current liabilities 36,228 24,737
Other Deferred Liabilities 2,339 1,945
Commitments and Contingencies - -
Shareholders' Equity:
Common stock 312 312
Additional paid-in capital 4,928 4,928
Retained earnings 162,265 156,589
Total shareholders' equity 167,505 161,829
$ 206,072 $ 188,511
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 and Nine Month Periods Ended February 28, 1994 and 1993.
(Unaudited)
(Dollars in thousands except per share data)
Three Months Ended Nine Months Ended
February 28 February 28
1994 1993 1994 1993
Manufactured housing sales $ 99,870 $ 81,580 $ 321,143 $ 264,524
Recreational vehicle sales 30,862 28,791 91,067 89,167
Total sales 130,732 110,371 412,210 353,691
Cost of sales 111,435 94,833 349,200 302,818
Gross profit 19,297 15,538 63,010 50,873
Selling & administrative
expenses 16,687 14,475 51,347 44,286
Operating earnings 2,610 1,063 11,663 6,587
Interest income 1,438 1,329 4,354 4,307
Gain on sale of property
plant and equipment - - 10 746
Earnings before income
taxes and cumulative
effect of accounting
change 4,048 2,392 16,027 11,640
Provision for income taxes:
Federal 1,335 770 5,235 3,745
State 273 150 1,078 740
1,608 920 6,313 4,485
Earnings before cumulative
effect of accounting change 2,440 1,472 9,714 7,155
Cumulative effect of accoun-
ting change - - - (370)
Net earnings 2,440 1,472 9,714 6,785
Retained earnings, begin-
ning of period 161,171 154,653 156,589 152,032
163,611 156,125 166,303 158,817
Less cash dividends paid 1,346 1,346 4,038 4,038
Retained earnings,
end of period $ 162,265 $ 154,779 $ 162,265 $ 154,779
Earnings per share before
cumulative effect of accoun-
ting change $.22 $.13 $.87 $.64
Cumulative effect per share of
accounting change - - - (.03)
Net earnings per share $.22 $.13 $.87 $.61
Cash dividends per share $.12 $.12 $.36 $.36
Common shares outstanding 11,217,144 11,217,144 11,217,144 11,217,144
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 28,1994 and 1993
Increase (decrease) in Cash
(Unaudited)
(Dollars in Thousands)
1994 1993
Cash Flows From Operating Activities:
Net earnings $ 9,714 $ 6,785
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury Bills
and Notes (4,142) (4,164)
Cumulative effect of accounting change - 370
Depreciation 2,103 1,983
Amortization of discount or premium on
U.S. Treasury Notes 16 16
Gain on sale of property, plant and
equipment (10) (746)
Working Capital Items:
Accounts receivable (2,810) (8,871)
Inventories (12,114) (11,984)
Other current assets and income taxes (2,191) (160)
Accounts payable, trade 4,798 1,570
Accrued liabilities 7,583 4,818
Income taxes payable (890) 297
Other assets 442 (92)
Other deferred liabilities 394 214
Total Adjustments (6,821) (16,749)
Net cash provided by (used in)operating
activities $ 2,893 $ (9,964)
Cash Flows From Investing Activities:
Proceeds from sale of U.S. Treasury Bills 11,866 22,612
Proceeds from sale of U.S. Treasury Notes 30,000 -
Purchase of U.S. Treasury Bills (8,700) (9,443)
Purchase of U.S. Treasury Notes (29,728) -
Interest received from U.S. Treasury Notes 3,872 3,867
Proceeds from sale of property, plant
and equipment 10 1,157
Purchase of property, plant and equipment (4,337) (2,679)
Net cash provided by investing
activities 2,983 15,514
Cash Flows From Financing Activities:
Cash dividends paid (4,038) (4,038)
Net cash used in financing activities (4,038) (4,038)
Net increase in cash 1,838 1,512
Cash at beginning of year 8,787 4,385
Cash at end of quarter $ 10,625 $ 5,897
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 and Nine Month Periods Ended February 28, 1994 and 1993
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, 1994 and the consolidated changes in cash for the nine month
periods ended February 28, 1994 and 1993, and the consolidated results of
operations for the three and nine month periods ended February 28, 1994
and 1993.
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 Price Waterhouse, the registrant's independent accountants, whose
report is included in 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. Inventories at February 28,
1994 and May 31, 1993 are as follows:
Finished Work In
Goods Process Materials Total
May 31, 1993 $ 1,192,000 $ 3,885,000 $ 5,647,000 $10,724,000
February 28, 1994 $ 9,430,000 $ 4,656,000 $ 8,752,000 $22,838,000
The Corporation and its subsidiaries were contingently liable at February
28, 1994 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. It is impossible to evaluate the potential
liability, if any, at this time. However, management believes that it is
probable that the Corporation's insurance would offset any material
losses and that any uninsured losses resulting from such proceedings
would not have a material adverse effect on the Corporation's result of
operations or financial position.
The Corporation's board of directors authorized the repurchase of up to
1.2 million shares of common stock, or approximately ten percent of the
shares outstanding, effective December 16, 1993. The purchases would be
made in the open market, or in negotiated transactions, at such times and
at such prices as management may decide.
Report of Independent Accountants
March 15, 1994
To The Board of Directors and
Shareholders of Skyline Corporation
We have reviewed the accompanying condensed consolidated balance sheet as
of February 28, 1994 and the related consolidated statements of earnings
and retained earnings for the three-month and nine-month periods ended
February 28, 1994 and 1993 and the consolidated statements of cash flows
for the nine-month periods ended February 28, 1994 and 1993 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 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 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, 1993, 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, 1993, 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, 1993, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE
Chicago, Illinois
Skyline Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At February 28, 1994 cash and investments in U.S. Treasury Bills totaled
$12,614,000, a decrease of $1,058,000 from $13,672,000 at May 31, 1993.
Working capital at February 28, 1994 amounted to $47,978,000 compared to
$43,412,000 at May 31, 1993. The decrease in cash and investments in
U.S. Treasury Bills was due primarily to an increase in inventories and
capital additions. Capital expenditures amounted to $ 4,337,000 in 1994
compared to $2,679,000 in the first nine months of the prior year.
Capital expenditures were made primarily to increase manufacturing
capacity, adopt new manufacturing processes and increase manufacturing
efficiencies. The cash provided by operating activities in fiscal 1994
is expected to be adequate to fund any capital expenditures which may
become necessary during the year.
Results of Operations for the Quarter and Nine Months Ended
February 28, 1994.
Sales in the quarter ended February 28, 1994 amounted to $130,732,000,
an increase of $20,361,000 from $110,371,000 for the same quarter of the
prior year. Manufactured housing sales increased 22.4 percent to
$99,870,000 in 1994 compared to $81,580,000 in 1993. Manufactured
housing unit sales increased to 4,364 compared to 4,127 in 1993. Sales
of recreational vehicles increased 7.2 percent to $30,862,000 during the
third quarter of fiscal 1994 compared to the $28,791,000 reported for the
third quarter of fiscal 1993. Recreational vehicle unit sales decreased
to 2,535 compared to 2,568 in 1993.
Sales during the first nine months of fiscal 1994 amounted to
$412,210,000, an increase of 58,519,000 from $353,691,000 for the same
time period of the prior year. Manufactured housing sales increased 21.4
percent to $321,143,000 in 1994 compared to $264,524,000 in 1993.
Manufactured housing unit sales increased to 14,369 compared to 13,418 in
1993. Sales of recreational vehicles increased 2.1 percent to
$91,067,000 during the first nine months of fiscal 1994 compared to
$89,167,000 reported for fiscal 1993. Recreational vehicle unit sales
decreased to 7,839 compared to 8,139 in 1993.
Skyline's performance for the third quarter and the first nine months of
fiscal 1994 reflects the continuation of a positive sales trend that
first became evident during the third quarter of fiscal 1993.
Fueling the trend is an increased demand for manufactured housing that
seems to indicate an easing of recessionary conditions in most parts of
the country.
Cost of sales in the third quarter of fiscal 1994 decreased slightly to
85.2 percent of sales compared to 85.9 percent in 1993. Cost of sales
for the first nine months of fiscal 1994 decreased to 84.7 percent
compared to 85.6 percent in fiscal 1993. These decreases are due to
increased sales volume and continued cost containment efforts.
Selling and administrative expenses in the third quarter of fiscal 1994
decreased as a percent of sales to 12.8 percent compared to 13.1 percent
in 1993. Selling and administrative expenses for the first nine months
of fiscal 1994 and 1993 were 12.5 percent of sales.
Interest income amounted to $1,438,000 in the third quarter of fiscal
1994 compared to $1,329,000 in 1993. The increase in interest income was
due to higher interest rates.
Income Taxes
The provision for federal income tax approximates the statutory rate and
for state income taxes reflects current state rates effective for the
period based upon activities within the taxing entities. The Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting
For Income Taxes," effective June 1, 1992. The cumulative effect of this
change in accounting for income taxes on prior years was $370,000 or $.03
per share.
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, 1993, heretofore filed
by the registrant with the Commission.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit (3)(ii) By-laws, as amended
(b) Reports on Form 8-K
1) A report was filed on March 30, 1994 reporting an amendment to
the bylaws regarding responsibilities of the Corporate
Controller.
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 12, 1994 /S/ Joseph B. Fanchi
Joseph B. Fanchi
V. P. Finance & Treasurer,
Chief Financial Officer
DATE: APRIL 12, 1994 /S/ James R. Weigand
James R. Weigand
Corporate Controller