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, 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 October 10, 1997
Common stock 9,433,144
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 August 31, 1997 and May 31, 1997
Consolidated Statements of Earnings and 4
Retained Earnings for the three-month
periods ended August 31, 1997 and 1996
Consolidated Statements of Cash 5
Flows for the three-month period
ended August 31, 1997
Notes to the Consolidated Financial 6
Statements
Report of Independent Accountants 7
Item 2. Management's Discussion and Analysis 8 - 9
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of 10
Security Holders
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Dollars in thousands)
August 31, 1997 May 31, 1997
(Unaudited)
ASSETS
Current Assets:
Cash $ 10,093 $ 9,489
Treasury Bills, at cost plus accrued
interest, which approximates market 77,931 71,059
Investment in U.S. Treasury Notes 29,966 29,949
Accounts receivable, trade, less allowance
for doubtful accounts of $40 44,693 43,360
Inventories
Raw materials 5,579 5,237
Work in process 4,892 4,756
Finished goods 186 -
Total Inventories 10,657 9,993
Other current assets 8,640 8,678
TOTAL CURRENT ASSETS 181,980 172,528
Property, Plant and Equipment, at Cost:
Land 5,335 5,336
Buildings and improvements 55,975 55,711
Machinery and equipment 23,208 22,996
84,518 84,043
Less accumulated depreciation 42,938 42,091
Total Property, Plant and Equipment 41,580 41,952
Other Assets 3,424 3,387
$ 226,984 $ 217,867
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
August 31, 1997 May 31, 1997
(Unaudited)
Current Liabilities:
Accounts payable, trade $ 9,773 $ 9,742
Accrued salaries and wages 4,558 5,194
Accrued profit sharing 765 2,659
Accrued marketing programs 13,207 8,068
Accrued warranty expense 7,588 7,368
Other accrued liabilities 4,052 4,906
Income taxes 3,602 649
TOTAL CURRENT LIABILITIES 43,545 38,586
Other Deferred Liabilities 3,194 3,060
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 209,150 205,126
Treasury stock, at cost 1,551,000 shares (34,145) (34,145)
TOTAL SHAREHOLDERS' EQUITY 180,245 176,221
$ 226,984 $ 217,867
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, 1997 and 1996
(Unaudited)
(Dollars in thousands except per share data)
1997 1996
Sales $ 161,632 $ 171,536
Cost of sales 133,091 139,873
Gross profit 28,541 31,663
Selling and administrative
expenses 20,920 22,512
Operating earnings 7,621 9,151
Interest income 1,473 1,626
Earnings before income taxes 9,094 10,777
Provision for income taxes:
Federal 2,980 3,500
State 640 810
3,620 4,310
Net earnings 5,474 6,467
Retained earnings,
beginning of period 205,126 190,393
210,600 196,860
Less cash dividends paid 1,450 1,586
Retained earnings,
end of period $ 209,150 $ 195,274
Net earnings per share $ .57 $ .62
Cash dividends per share $ .15 $ .15
Weighted average common
shares outstanding 9,666,144 10,457,221
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, 1997 and 1996
Increase (decrease) in Cash
(Unaudited)
(Dollars in thousands)
1997 1996
Cash Flows From Operating Activities:
Net earnings $ 5,474 $ 6,467
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Interest income earned on U.S. Treasury
Bills and Notes (1,473) (1,626)
Depreciation 904 898
Amortization of discount or premium on
U.S. Treasury Notes (17) 2
Working Capital Items:
Accounts receivable (1,333) (6,560)
Inventories (664) (586)
Other current assets 38 682
Accounts payable, trade 31 1,863
Accrued liabilities 1,975 2,309
Income taxes payable 2,953 1,480
Other assets (37) 8
Other deferred liabilities 134 6
Total Adjustments 2,511 (1,524)
Net cash provided by operating activities 7,985 4,943
Cash Flows From Investing Activities:
Proceeds from sale or maturity of
U.S. Treasury Bills 118,630 128,469
Purchase of U.S. Treasury Bills (124,420) (131,057)
Interest received from U.S. Treasury Notes 391 907
Proceeds from sale of property, plant
and equipment 9 44
Purchase of property, plant and equipment (541) (589)
Net cash used in investing activities (5,931) (2,226)
Cash Flows From Financing Activities:
Cash dividends paid (1,450) (1,586)
Purchase of treasury stock - (7,335)
Net cash used in financing activities (1,450) (8,921)
Net increase (decrease) in cash 604 (6,204)
Cash at beginning of year 9,489 10,712
Cash at end of quarter $ 10,093 $ 4,508
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, 1997
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, 1997, the consolidated results of operations for the
three-month periods ended August 31, 1997 and 1996, and the consolidated
cash flows for the three-month periods ended August 31, 1997 and 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 August
31, 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.
In the first six months of calendar 1997, the Financial Accounting
Standards Board issued three statements of financial accounting
standards pertaining to earnings per share, reporting comprehensive
income, and disclosures about segments of an enterprise. The
Corporation has determined that the effects on the financial statements
from the adoption of these accounting standards will not be material.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
Report of Independent Accountants
September 15, 1997
To The Board of Directors and Shareholders of Skyline Corporation
We have reviewed the accompanying consolidated balance sheet as of
August 31, 1997 and the related consolidated statements of earnings and
retained earnings for the three-month periods ended August 31, 1997
and 1996 and of cash flows 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, 1997, 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 16, 1997 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, 1997, 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 August 31, 1997 amounted to $161,632,000, a
5.8 percent decrease from $171,536,000 in the comparable quarter of the
prior year. Manufactured housing sales decreased 7.4 percent to
$133,150,000 in 1997 compared to $143,724,000 in 1996. Manufactured
housing unit sales decreased to 4,561 compared to 5,075 in 1996.
Reduced sales in this business segment is consistent with an overall
slowdown in the manufactured housing industry that began in late 1996.
Recreational vehicle sales increased 2.4 percent to $28,482,000 in the
first quarter of fiscal 1998 compared to $27,812,000 for the same
period last year. Recreational vehicle unit sales increased to 2,294
compared to 2,234 in 1996.
Cost of sales in the first quarter increased to 82.3 percent of sales
compared with 81.5 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 first quarter were 12.9
percent of sales compared with 13.1 percent in 1996. The decrease is
primarily due to a reduction in marketing expenses during the period.
Interest income amounted to $1,473,000 in the first quarter of fiscal
1998 compared to $1,626,000 one year earlier. Interest income is
directly related to the amount available for investment and the
prevailing yields of U.S. Government securities.
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 August 31, 1997 cash and short-term investments in U.S. Treasury
Bills and Notes totaled $117,990,000, an increase of $7,493,000 from
$110,497,000 at May 31, 1997. Current assets exclusive of cash and
investments in U.S. Treasury Bills totaled $63,990,000 at August 31,
1997, a increase of $1,959,000 from the balance at May 31, 1997 of
$62,031,000. A rise in the amount of trade accounts receivable
($1,333,000) and inventories ($664,000) was the principal reason for
the increase. Current liabilities increased $4,959,000 from May 31,
1997 to $43,545,000 at August 31, 1997. This change is mainly due to
increases in accrued marketing programs ($5,139,000) and income taxes
($2,953,000); along with decreases in accrued profit sharing
($1,894,000), other accrued liabilities ($854,000), and accrued
salaries and wages ($636,000). Working capital at August 31, 1997
amounted to $138,435,000 compared to $133,942,000 at May 31, 1997.
Capital expenditures totaled $541,000 in the first three months of
fiscal 1998 compared to $589,000 in the first three months of the prior
year. Capital expenditures during the current fiscal year were made
primarily to replace or refurbish machinery and equipment and increase
manufacturing efficiencies. The cash provided by operating activities
in fiscal 1998 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 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.
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, 1997
heretofore filed by the registrant with the Commission.
Item 4. Submission of Matters to a Vote of Security Holders
On September 22, 1997, Skyline Corporation held it 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 Votes
Against Withheld
Arthur J. Decio 8,647,790 2,700 68,493
Terrence M. Decio 8,646,790 2,700 69,493
Jerry Hammes 8,648,005 2,700 68,278
Ronald F. Kloska 8,647,990 2,700 68,293
William H. Lawson 8,647,805 2,700 68,478
David T. Link 8,644,754 2,700 71,529
Andrew J. McKenna 8,644,875 2,700 71,408
William H. Murschel 8,647,340 2,700 68,943
Dale Swikert 8,646,695 2,700 68,588
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of fiscal
1998. 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: October 10, 1997
Joseph B. Fanchi
V.P. Finance & Treasurer,
Chief Financial Officer
DATE: October 10, 1997
James R. Weigand
Corporate Controller