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 November 30, 1996 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 January 14, 1997 Common stock 9,995,844
SKYLINE CORPORATION Form 10-Q Quarterly Report INDEX Page No. Part I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets as of November 30, 1996 and May 31, 1996 2 - 3 Consolidated Statements of Earnings and 4 Retained Earnings for the three and six-month periods ended November 30, 1996 and 1995 Consolidated Statements of Cash 5 Flows for the six-month periods ended November 30, 1996 and 1995 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 6. Exhibits and Reports on Form 8-K 10 Signatures 10
Skyline Corporation and Subsidiary Companies Consolidated Balance Sheets (Dollars in thousands) November 30, 1996 May 31, 1996 (Unaudited) ASSETS Current Assets: Cash $ 7,763 $ 10,712 Treasury Bills, at cost plus accrued interest, which approximates market 85,547 44,381 Accounts receivable, trade, less allowance for doubtful accounts of $40 37,858 48,727 Inventories Raw materials 5,830 5,813 Work in process 5,000 4,809 Finished goods 79 - Total Inventories 10,909 10,622 Other current assets 9,108 9,425 TOTAL CURRENT ASSETS 151,185 123,867 Investment in U.S. Treasury Notes 29,915 59,907 Property, Plant and Equipment, at Cost: Land 5,409 5,217 Buildings and improvements 56,069 56,684 Machinery and equipment 22,440 22,222 83,918 84,123 Less accumulated depreciation 41,046 40,723 Total Property, Plant and Equipment 42,872 43,400 Other Assets 3,187 3,162 $ 227,159 $ 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 November 30, 1996 May 31, 1996 (Unaudited) Current Liabilities: Accounts payable, trade $ 9,642 $ 10,249 Accrued salaries and wages 4,130 5,614 Accrued profit sharing 1,620 2,644 Accrued marketing programs 15,590 8,737 Accrued warranty expense 7,001 6,540 Other accrued liabilities 6,263 6,294 Income taxes 214 3,028 TOTAL CURRENT LIABILITIES 44,460 43,106 Other Deferred Liabilities 2,993 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 200,075 190,393 Treasury stock, at cost, 1,192,500 shares at November 30, 1996 and 644,600 shares at May 31, 1996 (25,609) (11,366) TOTAL SHAREHOLDERS' EQUITY 179,706 184,267 $ 227,159 $ 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 six-month periods ended November 30, 1996 and 1995 (Unaudited) (Dollars in thousands except per share data) Three-months Ended Six-months Ended November 30, November 30, 1996 1995 1996 1995 Sales $ 164,378 $ 172,469 $ 335,914 $ 336,324 Cost of sales 135,171 141,853 275,043 276,699 Gross profit 29,207 30,616 60,871 59,625 Selling and administrative expenses 20,208 22,612 42,721 45,409 Operating earnings 8,999 8,004 18,150 14,216 Interest income 1,560 1,576 3,186 3,126 Earnings before income taxes 10,559 9,580 21,336 17,342 Provision for income taxes: Federal 3,430 3,135 6,930 5,685 State 790 719 1,600 1,299 4,220 3,854 8,530 6,984 Net earnings 6,339 5,726 12,806 10,358 Retained earnings, beginning of period 195,274 179,485 190,393 176,187 201,613 185,211 203,199 186,545 Less, cash dividends paid 1,538 1,280 3,124 2,614 Retained earnings, end of period $ 200,075 $ 183,931 $ 200,075 $ 183,931 Net earnings per share $ .62 $ .54 $1.24 $ .96 Cash dividends per share $ .15 $ .12 $ .30 $ .24 Weighted average common shares outstanding 10,162,287 10,655,689 10,310,560 10,828,196 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, 1996 and 1995 Increase (Decrease) in Cash (Unaudited) (Dollars in thousands) 1996 1995 Cash Flows From Operating Activities: Net earnings $ 12,806 $ 10,358 Adjustments to reconcile net earnings to net cash provided by operating activities: Interest income earned on U.S. Treasury Bills and Notes (3,177) (3,006) Gain of sale of property, plant & equipment (962) - Depreciation 1,796 1,636 Amortization of discount or premium on U.S. Treasury Notes (8) 5 Working capital items: Accounts receivable 10,519 4,213 Inventories (287) 3,246 Other current assets 317 (1,502) Accounts payable, trade (607) 3,306 Accrued liabilities 4,775 9,827 Income taxes payable (2,814) (571) Other assets (25) (12) Other deferred liabilities 30 69 Total adjustments 9,557 17,211 Net cash provided by operating activities 22,363 27,569 Cash Flows From Investing Activities: Proceeds from sale or maturity of U.S. Treasury Bills 234,932 84,492 Purchase of U.S. Treasury Bills (274,390) (106,336) Proceeds from maturity of U.S. Treasury Notes 30,000 - Interest received from U.S. Treasury Notes 1,819 1,799 Proceeds from sale of property, plant and equipment 1,442 555 Purchase of property, plant and equipment (1,748) (1,517) Net cash used in investing activities (7,945) (21,007) Cash Flows From Financing Activities: Cash dividends paid (3,124) (2,614) Purchase of treasury stock (14,243) (8,207) Net cash used in financing activities (17,367) (10,821) Net decrease in cash (2,949) (4,259) Cash at beginning of year 10,712 10,754 Cash at end of quarter $ 7,763 $ 6,495 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 six-month periods ended November 30, 1996 and 1995 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, 1996, the consolidated results of operations for the three and six-month periods ended November 30, 1996 and 1995, and the consolidated cash flows for the six month periods ended November 30, 1996 and 1995. 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 November 30, 1996 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 December 16, 1996 To The Board of Directors and Shareholders of Skyline Corporation We have reviewed the accompanying consolidated balance sheet as of November 30, 1996 and the related consolidated statements of earnings and retained earnings for the three-month and six-month periods ended November 30, 1996 and 1995 and the consolidated statements of cash flows for the six-month periods ended November 30, 1996 and 1995 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, 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 Liquidity and Capital Resources At November 30, 1996 cash and investments in U.S. Treasury Bills totaled $93,310,000, an increase of $38,217,000 from $55,093,000 at May 31, 1996. The majority of 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 $57,875,000 at November 30, 1996, a decrease of $10,899,000 from the balance at May 31, 1996 of $68,774,000. A reduction in trade accounts receivable ($10,869,000) contributed to this decrease. Current liabilities increased $1,354,000 from May 31, 1996 to $44,460,000 at November 30, 1996. This increase can mainly be attributed to a seasonal increase in marketing program accruals ($6,853,000) and decreased income taxes ($2,814,000). Working capital at November 30, 1996 amounted to $106,725,000 compared to $80,761,000 at May 31, 1996. Capital expenditures totaled $1,748,000 in the first half of fiscal 1997 compared to $1,517,000 in the first half 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 $14,243,000 of Company stock in fiscal 1997, compared to $8,207,000 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. Results of Operations for the Quarter and Six-months Ended November 30, 1996 Sales in the quarter ended November 30, 1996 amounted to $164,378,000, a 4.7 percent decrease from $172,469,000 in the comparable quarter of the prior year. Manufactured housing sales decreased 8.9 percent to $136,657,000 in 1996 compared to $150,079,000 in 1995.
Manufactured housing unit sales decreased to 4,796 compared to 5,657 in 1995. Recreational vehicle sales increased 23.8 percent to $27,721,000 in the second quarter of fiscal 1997 compared to $22,390,000 in fiscal 1996. Recreational vehicle unit sales increased to 2,055 compared to 1,776 in fiscal 1996. Sales during the first half of fiscal 1997 amounted to $335,914,000 a 0.1 percent decrease from $336,324,000 in the comparable period of the prior year. Manufactured housing sales decreased 3.8 percent to $280,381,000 in 1996 compared to $291,377,000 in 1995. Manufactured housing unit sales decreased to 9,871 compared to 11,027 in 1995. Recreational vehicle sales increased 23.6 percent to $55,533,000 in the first half of fiscal 1997 compared to $44,947,000 in fiscal 1996. Recreational vehicle unit sales increased to 4,289 compared to 3,637 in 1995. Sales for the first half of fiscal 1997 reflect a softening in demand for manufactured housing and a reversal of last year's overall industry slowdown in the RV marketplace. In addition, second quarter results were negatively affected by the unusually early November onset of winter weather conditions, particularly in the Midwest. Cost of sales in the second quarter remained unchanged at 82.2 percent of sales, while the cost of sales for the first half of the year decreased slightly (81.9 percent in fiscal 1997 vs 82.3 percent in fiscal 1996). The decrease in costs is due to continued cost containment efforts. Selling and administrative expenses for the second quarter of fiscal 1997 decreased as a percentage of sales to 12.3 percent from 13.1 percent last year. Selling and administrative expenses for the first half of the fiscal year also decreased as a percentage of sales to 12.7 percent from 13.5 percent. Both decreases were due primarily to the reduction in the cost of marketing programs. Interest income amounted to $1,560,000 in the second quarter of fiscal 1997 compared to $1,576,000 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 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. 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 8K were filed during the second quarter of fiscal 1996. 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: January 14, 1997 Joseph B. Fanchi V.P. Finance & Treasurer, Chief Financial Officer DATE: January 14, 1997 James R. Weigand Corporate Controller