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, 1997
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 1, 1997
Common stock 9,721,344
SKYLINE CORPORATION
Form 10-Q Quarterly Report
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements: 2 - 3
Consolidated Balance Sheets as
of February 28, 1997 and May 31, 1996
Consolidated Statements of Earnings and 4
Retained Earnings for the three and
nine-month periods ended February 28,
1997 and February 29, 1996
Consolidated Statements of Cash 5
Flows for the nine-month periods
ended February 28, 1997 and
February 29, 1996
Notes to the Consolidated Financial 6
Statements
Report of Independent Accountants 7
Item 2. Management's Discussion and Analysis 8 - 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, 1997 May 31, 1996
(Unaudited)
ASSETS
Current Assets:
Cash $ 8,872 $ 10,712
Treasury Bills, at cost plus accrued
interest, which approximates market 73,906 44,381
Accounts receivable, trade, less allowance
for doubtful accounts of $40 39,795 48,727
Inventories
Raw materials 5,847 5,813
Work in process 4,804 4,809
Finished goods 118 -
Total Inventories 10,769 10,622
Other current assets 7,728 9,425
TOTAL CURRENT ASSETS 141,070 123,867
Investment in U.S. Treasury Notes 29,932 59,907
Property, Plant and Equipment, at Cost:
Land 5,409 5,217
Buildings and improvements 56,406 56,684
Machinery and equipment 22,764 22,222
84,579 84,123
Less accumulated depreciation 41,989 40,723
Total Property, Plant and Equipment 42,590 43,400
Other Assets 3,270 3,162
$ 216,862 $ 230,336
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 28, 1997 May 31, 1996
(Unaudited)
Current Liabilities:
Accounts payable, trade $ 7,183 $ 10,249
Accrued salaries and wages 4,721 5,614
Accrued profit sharing 2,288 2,644
Accrued marketing programs 14,480 8,737
Accrued warranty expense 7,157 6,540
Other accrued liabilities 3,371 6,294
Income taxes - 3,028
TOTAL CURRENT LIABILITIES 39,200 43,106
Other Deferred Liabilities 3,031 2,963
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 200,389 190,393
Treasury stock, at cost, 1,414,500 shares
at February 28, 1997 and 644,600 shares
at May 31, 1996
(30,998) (11,366)
TOTAL SHAREHOLDERS' EQUITY 174,631 184,267
$ 216,862 $ 230,336
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, 1997
and February 29, 1996
(Unaudited)
(Dollars in thousands except per share data)
Three-months Ended Nine-months Ended
February 28/29 February 28/29
1997 1996 1997 1996
Sales $ 117,995 $ 138,562 $ 453,909 $ 474,886
Cost of sales 100,323 115,666 375,366 392,365
Gross profit 17,672 22,896 78,543 82,521
Selling and administrative
expenses 16,159 19,199 59,842 64,586
Operating earnings 1,513 3,697 18,701 17,935
Interest income 1,459 1,497 4,645 4,623
Gain (loss) on sale of
property, plant and
equipment 66 20 1,028 (2)
Earnings before income taxes 3,038 5,214 24,374 22,556
Provision for income taxes:
Federal 996 1,690 7,926 7,375
State 225 390 1,825 1,689
1,221 2,080 9,751 9,064
Net earnings 1,817 3,134 14,623 13,492
Retained earnings,
beginning of period 200,075 183,931 190,393 176,187
201,892 187,065 205,016 189,679
Less cash dividends paid 1,503 1,277 4,627 3,891
Retained earnings,
end of period $ 200,389 $ 185,788 $ 200,389 $ 185,788
Net earnings per share $ .18 $ .30 $1.44 $1.25
Cash dividends per share $ .15 $ .12 $ .45 $ .36
Weighted average common
shares outstanding 9,933,965 10,613,331 10,186,408 10,756,836
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, 1997 and February 29, 1996
Increase (decrease) in Cash
(Unaudited)
(Dollars in thousands)
1997 1996
Cash Flows From Operating Activities:
Net earnings $ 14,623 $ 13,492
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (4,674) (4,484)
Depreciation 2,779 2,553
Amortization of discount or premium on
U.S. Treasury Notes (25) 8
(Gain) loss on sale of property, plant
and equipment (1,028) 2
Working Capital Items:
Accounts receivable 8,198 (3,944)
Inventories (147) 3,367
Other current assets 1,697 1,237
Accounts payable, trade (3,066) 1,957
Accrued liabilities 2,188 11,161
Income taxes payable (3,028) (647)
Other assets (108) (113)
Other deferred liabilities 68 112
Total Adjustments 2,854 11,209
Net cash provided by operating activities 17,477 24,701
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 347,409 145,496
Purchase of U.S. Treasury Bills (374,113) (159,090)
Proceeds from maturity of U.S. Treasury Notes 30,000 -
Interest received from U.S. Treasury Notes 2,587 2,587
Proceeds from sale of property, plant
and equipment 1,508 588
Purchase of property, plant and equipment (2,449) (1,987)
Net cash provided by (used in) investing
activities 4,942 (12,406)
Cash Flows From Financing Activities:
Cash dividends paid (4,627) (3,891)
Purchase of treasury stock (19,632) (9,671)
Net cash used in financing activities (24,259) (13,562)
Net decrease in cash (1,840) (1,267)
Cash at beginning of year 10,712 10,754
Cash at end of quarter $ 8,872 $ 9,487
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, 1997
and February 29, 1996
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, 1997, the consolidated results of operations for the three
and nine-month periods ended February 28, 1997 and February 29, 1996, and
the consolidated cash flows for the nine-month periods ended February 28,
1997 and February 29, 1996.
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 LLP, the registrant's independent accountants, whose
report is included on page 7 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
28, 1997 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.
Report of Independent Accountants
March 14, 1997
To The Board of Directors and Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of
February 28, 1997 and the related consolidated statements of earnings
and retained earnings for the three-month and nine-month periods ended
February 28, 1997 and February 29, 1996 and the consolidated statements
of cash flows for the nine-month periods ended February 28, 1997 and
February 29, 1996 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, 1996, 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 18, 1996 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, 1996, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it
has been derived.
PRICE WATERHOUSE 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, 1997 amounted to $117,995,000,
a 14.8 percent decrease from $138,562,000 in the comparable quarter of
the prior year. Manufactured housing sales decreased 21.2 percent to
$90,467,000 in 1997 compared to $114,818,000 in 1996. Manufactured
housing unit sales decreased to 3,252 compared to 4,250 in 1996.
Recreational vehicle sales increased 15.9 percent to $27,528,000 in the
third quarter of fiscal 1997 compared to $23,744,000 for the same
period last year. Recreational vehicle unit sales increased to 2,075
compared to 1,898 in 1996.
Sales for the third quarter, historically the slowest in the
Corporation's fiscal year, were further depressed by severe weather
conditions in some parts of the country and by a decline in
manufactured housing demand. November 1996 marked the first month
since November 1991 that industry shipments were below the same month
of the prior year, and this trend continued in December 1996 and
January 1997 (February 1997 statistics are not yet available). In
addition, many dealers are reducing inventories because of overstocked
conditions relative to current demand.
Cost of sales in the third quarter increased to 85.0 percent of sales
compared with 83.5 percent in 1996. The increase in costs is due to the
larger proportion of fixed and semi-fixed costs resulting from the
decreased sales volume.
Selling and administrative expenses for the third quarter were 13.7
percent of sales compared with 13.8 percent in 1996. The slight
decrease is due primarily to the reduction in the costs of marketing
programs which was partially offset by the impact of the reduced sales
volume.
Interest income amounted to $1,459,000 in the third quarter of fiscal
1997 compared to $1,497,000 one year earlier. Interest income is
directly related to the amount available for investment and the
prevailing yields of U.S. Government securities.
Results of Operations for the Current Year-To-Date Compared to the Same
Period Last Year
Sales during the first nine months of fiscal 1997 amounted to
$453,909,000, a 4.4 percent decrease from $474,886,000 in the
comparable period of the prior year. Manufactured housing sales
decreased 8.7 percent to $370,849,000 in 1997 compared to $406,195,000
in 1996. Manufactured housing unit sales decreased to 13,123 compared
to 15,277 in 1996. Recreational vehicle sales increased 20.9 percent
to $83,060,000 in the first nine months of fiscal 1997 compared to
$68,691,000 in fiscal 1996. Recreational vehicle unit sales increased
to 6,364 compared to 5,535 in 1996.
The healthy demand for manufactured housing experienced in early fiscal
1997 was not enough to offset the industry's fall and winter decline in
demand and severe weather noted above. The recreational vehicle sales
reflect a reversal of last year's overall industry slowdown in the RV
marketplace.
Cost of sales for year-to-date fiscal 1997 increased slightly to 82.7
percent of sales compared with 82.6 percent in 1996. The increase in
costs is due to the larger proportion of fixed and semi-fixed costs
mentioned above.
Selling and administrative expenses in the first nine months of fiscal
1997 decreased as a percentage of sales to 13.2 percent from 13.6
percent in fiscal 1996. This decrease was due primarily to the
reduction in the cost of marketing programs.
The gain on sale of property, plant and equipment for the first nine
months includes $962,000 from the sale of an unused production facility
in the second quarter of fiscal 1997. This sale had an impact on net
earnings for the period of $577,000, or $.06 per share.
Income Taxes
The provision for federal income taxes approximates the statutory rate
and for state income taxes reflects current state rates effective for
the period based upon activities within the taxable entities.
Liquidity and Capital Resources
At February 28, 1997 cash and investments in U.S. Treasury Bills
totaled $82,778,000, an increase of $27,685,000 from $55,093,000 at May
31, 1996. This increase was due to the reinvestment of the proceeds
from the maturity of $30,000,000 in U.S. Treasury Notes into U.S.
Treasury Bills. Current assets exclusive of cash and investments in
U.S. Treasury Bills totaled $58,292,000 at February 28, 1997, a
decrease of $10,482,000 from the balance at May 31, 1996 of
$68,774,000. A reduction in trade accounts receivable ($8,932,000) due
to the reduced sales volume was the main contributor to this decrease.
Current liabilities decreased $3,906,000 from May 31, 1996 to
$39,200,000 at February 28, 1997. This decrease can mainly be
attributed to reductions in trade accounts payable ($3,066,000), other
accrued liabilities ($2,923,000) and income taxes payable ($3,028,000)
due to the reduced sales volume. These liability decreases were
partially offset by the seasonal increase in marketing program accruals
($5,743,000). Working capital at February 28, 1997 amounted to
$101,870,000 compared to $80,761,000 at May 31, 1996. Capital
expenditures totaled $2,449,000 in the first nine months of fiscal 1997
compared to $1,987,000 in the first nine months of the prior year.
Capital expenditures during the current fiscal year were made primarily
to adopt new manufacturing processes and increase manufacturing
efficiencies. An unused production facility was sold in the second
quarter, resulting in a net gain of $577,000. Cash was also used to
purchase $19,632,000 of Company stock in fiscal 1997, compared to
$9,671,000 in fiscal 1996. The cash provided by operating activities
in fiscal 1997 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.
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, 1996,
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
1997. 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 4, 1997
Joseph B. Fanchi
V.P. Finance & Treasurer,
Chief Financial Officer
DATE: April 4, 1997
James R. Weigand
Corporate Controller