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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2001
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.)
2520 Bypass Road, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 219-294-6521
Securities registered pursuant to section 12(b) of the Act:
Shares Outstanding Name of each Exchange on
Title of Class July 12, 2001 which Registered
Common Stock 8,391,244 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
X
The aggregate market value of the voting stock held by non-affiliates of the
registrant (6,810,589 shares) based on the closing price on the New York Stock
Exchange on July 12, 2001 was $173,670,020.
DOCUMENTS INCORPORATED BY REFERENCE:
Title Form 10-K
Proxy Statement dated August 3, 2001 Part III, Items 10 - 12
for Annual Meeting of Shareholders to
be held September 24, 2001.
FORM 10-K
CROSS-REFERENCE INDEX
Certain information required to be included in this Form 10-K is also included
in the registrant's Proxy Statement used in connection with its 2001 Annual
Meeting of Shareholders to be held on September 24, 2001 ("2001 Proxy
Statement"). The following cross-reference index shows the page locations in
the 2001 Proxy Statement of that information which is incorporated by reference
into this Form 10-K and the page location in this Form 10-K of that information
not incorporated by reference. All other sections of the 2001 Proxy Statement
are not required in this Form 10-K and should not be considered a part hereof.
2001
Form Proxy
10-K Statement
PART I
Item 1. Business................. 6
Item 2. Properties.................. 11
Item 3. Legal Proceedings.............. 11
Item 4. Submission of Matters to a Vote of
Security Holders.............. 12
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters.......... 12
Item 6. Selected Financial Data............ 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation....14
Item 8. Financial Statements and
Supplementary Data:
Index to Consolidated Financial Statements... 17
Report of Independent Accountants...... 18
Consolidated Balance Sheets........ 19
Consolidated Statements of Earnings and
Retained Earnings........... 21
Consolidated Statements of Cash Flows..... 22
Notes to Consolidated Financial Statements.. 24
Financial Summary by Quarter........ 29
FORM 10-K
CROSS-REFERENCE INDEX
(Continued)
2001
Form Proxy
10-K Statement
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 29
PART III
Item 10. Directors and Executive Officers of the
Registrant................. 29 3 - 4
Item 11. Executive Compensation........... 6 - 7
Item 12. Security Ownership of Certain Beneficial Owners
and Management............... 3 - 6
Item 13. Certain Relationships and Related
Transactions........... 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) 1. Financial Statements......... 31
All other schedules are omitted
because they are not applicable
or the required information is
shown in the financial statements
or notes thereto.
2. Index to Exhibits........... 31
(b) Reports on Form 8K........... 31
SIGNATURES..................... 32
PART I
Item 1. Business
General Development of Business
Skyline Corporation was originally incorporated in Indiana in 1959, as
successor to a business founded in 1951. Skyline Corporation and its
consolidated subsidiaries (the "Corporation") design, produce and distribute
manufactured housing (mobile homes and multi-sectional homes) and
recreational vehicles (travel trailers, including park models and fifth
wheels, and truck campers).
The Corporation, which is one of the largest producers of manufactured homes in
the United States, produced 10,664 manufactured homes in fiscal year 2001.
The Corporation's manufactured homes are marketed under a number of trademarks.
They are available in lengths ranging from 36' to 80' and in single wide widths
from 12' to 18', double wide widths from 20' to 32', and triple wide widths
from 36' to 42'.
The Corporation's recreational vehicles are sold under the "Nomad," "Layton,"
and "Aljo" trademarks for travel trailers and fifth wheels.
In fiscal year 2001 manufactured homes represented 76% of total sales, while
recreational vehicles accounted for the remaining 24%. In the prior year, the
sales dollars were 77% manufactured homes and 23% recreational vehicles.
Additional financial data relating to these industry segments is included in
Note 5, Industry Segment Information, in the Notes to Consolidated Financial
Statements included in this document under Item 8.
Narrative Description of Business
Principal Markets
The principal markets for manufactured homes are the suburban and rural areas
of the continental United States. The principal buyers continue to be young
married couples and senior citizens, but the market tends to broaden when
conventional housing becomes more difficult to purchase and finance.
The recreational vehicle market is made up of primarily vacationing middle-
income families, retired couples traveling around the country and sportsmen
pursuing four-season hobbies.
Method of Distribution
The Corporation's manufactured homes are distributed by approximately 600
dealers at 1,100 locations throughout the United States and recreational
vehicles are distributed by approximately 310 dealers at 340 locations
throughout the United States. These are generally not exclusive dealerships
and it is believed that most dealers also sell products of other manufacturers.
The Corporation provides the retail purchaser of its products with a full one-
year warranty against defects in materials and workmanship. All recreational
vehicles manufactured after December 1, 1998 are covered by an improved two-
year warranty. The warranties are backed by a corporate service department and
an extensive field service system.
Method of Distribution, continued
The Corporation's products are sold to dealers either through floor plan
financing with various financial institutions or on cash on delivery basis.
Payments to the Corporation are made either directly by the dealer or by
financial institutions, which have agreed to finance dealer purchases of the
Corporation's products. In accordance with industry practice, certain
financial institutions which finance dealer purchases require the Corporation
to execute repurchase agreements which provide that in the event a dealer
defaults on its repayment of the financing, the Corporation will repurchase its
products from the financing institution in accordance with a declining
repurchase price schedule established by the Corporation. Any loss under these
agreements is the difference between the repurchase cost and the resale value
of the units repurchased. Further, the risk of loss is spread over numerous
dealers. There have been no material losses related to repurchases in past
years.
Raw Materials and Supplies
The Corporation is basically an assembler of components purchased from outside
sources. The major components used by the Corporation are lumber, plywood,
shingles, vinyl and wood siding, steel, aluminum, insulation, home appliances,
furnaces, plumbing fixtures, hardware, floor coverings and furniture. The
suppliers are many and range in size from large national companies to very
small local companies. At the present time, the Corporation is obtaining
sufficient materials to fulfill its needs.
Patents, Trademarks, Licenses, Franchises and Concessions
The Corporation does not rely upon any terminable or nonrenewable rights such
as patents, licenses or franchises under the trademarks or patents of others,
in the conduct of any segment of its business.
Seasonal Fluctuations
While the Corporation maintains production of manufactured homes and
recreational vehicles throughout the year, seasonal fluctuations in sales do
occur. Sales and production of manufactured homes are affected by winter
weather conditions at the Corporation's northern plants. Recreational vehicle
sales are generally higher in the spring and summer months than in the fall and
winter months.
Inventory
The Corporation does not build significant inventories of either finished goods
or raw materials at any time. In addition, there are no significant
inventories sold on consignment.
Dependence Upon Individual Customers
The Corporation does not rely upon any single dealer for a significant
percentage of its business in any industry segment.
Backlog
The Corporation does not consider as significant in its business the existence
and extent of backlog at any given date. Because the Corporation's production
is based on dealers' orders, which continuously fluctuate, and a relatively
short manufacturing cycle, the existence of a backlog does not provide a
reliable indication of the status of the Corporation's business.
Government Contracts
The Corporation has had no significant contracts during the past three years.
Competitive Conditions
The manufactured housing and recreational vehicle industries are highly
competitive, with particular emphasis on price and features offered. The
Corporation's competitors are numerous, ranging from multi-billion dollar
corporations to relatively small and specialized manufacturers.
The Manufactured Housing Institute reported that the industry produced
approximately 250,500 homes in calendar year 2000. In the same period, the
Corporation produced 11,700 units for a 4.7% market share. In calendar year
1999, approximately 348,700 homes were manufactured by the industry. In that
period, the Corporation produced 15,300 homes for a 4.4% market share.
The recreational vehicle industry produced 418,300 units in calendar year 2000
compared to 473,800 units in calendar year 1999. The following table shows
the Corporation's competitive position in the recreational vehicle product
lines it sells.
Units Produced Units Produced
Calendar Year 2000 Calendar Year 1999
Industry Skyline Industry Skyline
Travel Trailers 114,500 6,764 117,500 7,414
Fifth Wheels 62,300 1,392 60,500 2,059
Park Models 8,200 403 7,800 504
Truck Campers 9,000 9 11,500 97
Both the manufactured housing and recreational vehicle segments of the
Corporation's business are dependent upon the availability of financing to
dealers and retail financing. Consequently, increases in interest rates and/or
tightening of credit through governmental action or otherwise have adversely
affected the Corporation's business in the past and may do so in the future.
Competitive Conditions, continued
The Corporation considers it impossible to predict the future occurrence,
duration or severity of cost or availability problems in financing either
manufactured homes or recreational vehicles. To the extent that they occur,
such public concerns will affect sales of the Corporation's products.
Regulation
The manufacture, distribution and sale of manufactured homes and recreational
vehicles are subject to government regulations in both the United States and
Canada, at federal, state or provincial and local levels.
Environmental Quality
The Corporation believes that compliance with federal, state and local
requirements respecting environmental quality will not require any material
capital expenditures for plant or equipment modifications which would adversely
affect earnings.
Other Regulations
The U.S. Department of Housing and Urban Development (HUD) has set national
manufactured home construction and safety standards and implemented recall and
other regulations since 1976. The National Mobile Home Construction and Safety
Standards Act of 1974, as amended, under which such standards and regulations
are promulgated, prohibits states from establishing or continuing in effect any
manufactured home standard that is not identical to the federal standards as to
any covered aspect of performance. Implementation of these standards and
regulations involves inspection agency approval of manufactured home designs,
plant and home inspection by states or other HUD-approved third parties,
manufacturer certification that the standards are met, and possible recalls if
they are not or if homes contain safety hazards.
Some components of manufactured homes may also be subject to Consumer Product
Safety Commission standards and recall requirements. In addition, the
Corporation has voluntarily subjected itself to third party inspection of all
of its products nationwide in order to further assure the Corporation, its
dealers, and customers of compliance with established standards.
The Corporation's travel trailers continue to be subject to safety standards
and recall and other regulations promulgated by the U.S. Department of
Transportation under the National Traffic and Motor Vehicle Safety Act of 1966,
as well as state laws and regulations.
The Corporation's operations are subject to the Federal Occupational Safety and
Health Act, and are routinely inspected thereunder.
The transportation and placement (in the case of manufactured homes) of the
Corporation's products are subject to state highway use regulations and local
ordinances which control the size of units that may be transported, the roads
to be used, speed limits, hours of travel, and allowable locations for
manufactured homes and parks.
Other Regulations, continued
The Corporation is also subject to many state manufacturer licensing and
bonding requirements, and to dealer day in court requirements in some states.
Manufactured homes and recreational vehicles may be subject to the
Magnuson-Moss Warranty - Federal Trade Commission Improvement Act, which
regulates warranties on consumer products. The Corporation believes that its
existing warranties meet all requirements of the Act.
HUD has promulgated rules requiring producers of manufactured homes to utilize
wood products certified by their suppliers to meet HUD's established limits on
formaldehyde emissions, and to place in each home written notice to prospective
purchasers of possible adverse reaction from airborne formaldehyde in the
homes. These rules are designated as preemptive of state regulation.
Number of Employees
The Corporation employs approximately 3,000 people at the present time.
Item 2. Properties
The Corporation owns its corporate offices and design facility, which are
located in Elkhart, Indiana.
The Corporation's 24 manufacturing plants, all of which are owned, are as
follows:
Location Products
California, San Jacinto Manufactured Housing/Park Models
California, Hemet Recreational Vehicles
California, Hemet Recreational Vehicles
California, Woodland Manufactured Housing
Florida, Ocala Manufactured Housing
Florida, Ocala Manufactured Housing
Florida, Ocala Manufactured Housing/Park Models
Indiana, Bristol Manufactured Housing
Indiana, Elkhart Manufactured Housing
Indiana, Elkhart Recreational Vehicles
Indiana, Goshen Manufactured Housing
Kansas, Arkansas City Manufactured Housing
Kansas, Halstead Manufactured Housing
Louisiana, Bossier City Manufactured Housing
North Carolina, Mocksville Manufactured Housing
Ohio, Sugarcreek Manufactured Housing
Oregon, McMinnville Manufactured Housing
Oregon, McMinnville Recreational Vehicles
Pennsylvania, Ephrata Manufactured Housing
Pennsylvania, Leola Manufactured Housing
Pennsylvania, Leola Recreational Vehicles
Texas, Mansfield Recreational Vehicles
Vermont, Fair Haven Manufactured Housing
Wisconsin, Lancaster Manufactured Housing
The above facilities range in size from approximately 50,000 square feet to
approximately 160,000 square feet.
It is extremely difficult to determine the unit productive capacity of the
Corporation because of the ever-changing product mix.
The Corporation believes that its plant facilities, machinery and equipment are
well maintained and are in good operating condition.
Item 3. Legal Proceedings
Neither the Corporation nor any of its subsidiaries is a party to any pending
legal proceeding which could have a material effect on operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended May 31, 2001.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Skyline Corporation (SKY) is traded on the New York Stock Exchange. A
quarterly cash dividend of 18 cents ($0.18) per share was paid in fiscal 2001
and 2000. At May 31, 2001, there were approximately 1,400 holders of record of
Skyline Corporation common stock. A quarterly summary of the market price is
listed for the fiscal years ended May 31, 2001 and 2000.
2001 2000
Quarter
High Low High Low
First $23.06 $19.44 $31.44 $27.38
Second $22.44 $19.81 $28.25 $22.38
Third $24.75 $18.56 $25.25 $19.75
Fourth $26.70 $21.15 $22.88 $17.81
Item 6. Selected Financial Data
Dollars in thousands except per share data
2001 2000 1999 1998 1997
FOR THE YEAR
Sales $463,824 $579,551 $653,169 $613,686 $604,676
Net earnings $11,170 $15,028 $25,561 $19,946 $20,831
Cash dividends paid $6,124 $6,410 $6,043 $5,729 $6,098
Capital expenditures $2,499 $4,115 $7,113 $3,069 $3,285
Depreciation $3,919 $4,022 $3,838 $3,775 $3,745
Weighted average
common shares
outstanding 8,468,321 8,858,628 9,136,116 9,511,023 10,070,383
AT YEAR END
Working capital $149,591 $123,401 $147,398 $142,185 $133,942
Current ratio 4.8:1 4.2:1 4.2:1 4.1:1 4.5:1
U. S. Treasury Notes $25,006 $25,072 $ - $ - $29,949
Property, plant and
equipment, net $42,044 $44,188 $44,102 $40,951 $41,952
Total assets $235,678 $235,666 $240,982 $233,004 $217,867
Shareholders' equity $192,021 $192,949 $191,692 $183,523 $176,221
Treasury stock $65,744 $59,770 $52,409 $41,060 $34,145
PER SHARE
Basic earnings $1.32 $1.70 $2.80 $2.10 $2.07
Cash dividends paid $.72 $.72 $.66 $.60 $.60
Shareholders' equity $22.88 $22.22 $21.30 $19.46 $18.23
Item7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited)
Results of Operations - Fiscal 2001 Compared to Fiscal 2000
Sales in 2001 were $463,824,000, a decrease of $115,727,000 from $579,551,000
in 2000. Manufactured housing sales totaled $353,610,000 for 2001 compared to
$447,338,000 in 2000. Manufactured housing unit sales decreased to 10,664 from
13,731. Recreational vehicle sales declined from $132,213,000 in 2000 to
$110,214,000 in 2001. Recreational vehicle unit sales also dropped from 9,780
in 2000 to 8,156 in 2001. The decrease in sales reflects persistently
difficult market conditions in both the manufactured housing and recreational
vehicle industries. These conditions continued as the Corporation began the
2002 fiscal year.
Cost of sales in 2001 was 87.0% of sales compared to 87.4% in 2000.
Manufactured housing cost of sales in 2001 decreased to 86.5% of sales from
87.5% in 2000. Recreational vehicle cost of sales in 2001 increased to 88.7% of
sales from 87.1% in 2000.
Selling and administrative expenses as a percentage of sales were 10.8% in 2001
compared to 9.4% in 2000. The increase is due to a larger proportion of fixed
and semi-fixed costs resulting from lower sales volume.
Manufactured housing operating earnings as a percentage of sales were 3.8% in
2001 and 3.9% in 2000. Recreational vehicle operating earnings as a percentage
of sales decreased to 0.7% of sales in 2001 from 4.0% of sales in 2000. Both
decreases were largely due to either decreased sales volume or gross margins.
Interest income amounted to $7,717,000 in 2001 compared to $6,572,000 in 2000.
Interest income is directly related to the amount available for investment and
the prevailing yields of U.S. Government securities.
Results of Operations - Fiscal 2000 Compared to Fiscal 1999
Sales in 2000 were $579,551,000, a decrease of $73,618,000 from $653,169,000 in
1999. Manufactured housing sales totaled $447,338,000 for 2000 compared to
$525,806,000 in 1999. Manufactured housing unit sales decreased to 13,731
compared to 16,956. The decrease reflected sluggishness in the manufactured
housing market due to industry-wide excess retail inventories, higher interest
rates and the tightening of credit standards by lenders. Recreational vehicle
sales increased to $132,213,000 in 2000 compared to $127,363,000 in 1999.
Recreational vehicle unit sales decreased to 9,780 in 2000 compared to 9,846 in
1999. The unit sales increase in travel trailers was not enough to offset the
decrease in demand for fifth wheels and truck campers. However, dollar sales
increased due to higher average sales prices and product mix changes in the
fifth wheel and travel trailer product lines.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited), continued
Cost of sales in 2000 was 87.4% of sales compared to 85.8% in 1999.
Manufactured housing cost of sales in 2000 increased to 87.5% of sales compared
to 85.6% in 1999. Recreational vehicle cost of sales in 2000 increased to
87.1% of sales compared to 86.3% in 1999. The increases are primarily due to
rising raw material costs and increased price competition on sales.
Selling and administrative expenses as a percentage of sales were 9.4% in 2000
compared to 8.7% in 1999. The increase is due to a larger proportion of fixed
and semi-fixed costs resulting from lower sales volume.
Manufactured housing operating earnings as a percentage of sales were 3.9% in
2000 and 6.7% in 1999. Recreational vehicle operating earnings as a percentage
of sales decreased to 4.0% of sales in 2000 from 5.2% of sales in 1999. Both
decreases were largely due to decreased sales volumes and gross margins.
Interest income amounted to $6,572,000 in 2000 compared to $6,264,000 in 1999.
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 May 31, 2001 cash and short-term investments in U.S. Treasury Bills totaled
$116,415,000, an increase of $7,477,000 from $108,938,000 at May 31, 2000.
Current assets exclusive of cash and investments in U.S. Treasury Bills totaled
$73,091,000 at the end of fiscal 2001, an increase of $19,593,000 from fiscal
2000's total of $53,498,000. The increase was primarily due to the current
classification of investment in U. S. Treasury Notes ($25,006,000), and a
decrease in accounts receivable ($4,673,000) which reflects the reduction in
sales volume. Current liabilities increased $880,000 from $39,035,000 at May
31, 2000 to $39,915,000 at May 31, 2001.
Capital expenditures totaled $2,499,000 in fiscal 2001 compared to $4,115,000
in the prior year. Capital expenditures during the current fiscal year were
made primarily to replace or refurbish machinery and equipment, improve
manufacturing efficiencies, and increase manufacturing capacity. Cash was also
used to purchase $5,974,000 of the Corporation's stock in fiscal 2001, compared
to $7,361,000 in fiscal 2000. The cash provided by operating activities in
fiscal 2002, along with current cash and 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited), continued
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.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Accountants......... 18
Consolidated Balance Sheets.......... 19
Consolidated Statements of Earnings
and Retained Earnings.............. 21
Consolidated Statements of Cash Flows....... 22
Notes to Consolidated Financial Statements.... 24
Financial Summary by Quarter.......... 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Skyline Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings and retained earnings, and of cash flows
present fairly, in all material respects, the financial position of Skyline
Corporation and its subsidiaries at May 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended May 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of Skyline Corporation's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
June 15, 2001
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
May 31, 2001 and 2000
Dollars in thousands
ASSETS
2001 2000
Current Assets
Cash $ 5,450 $ 7,006
Treasury Bills, at cost plus accrued interest 110,965 101,932
Accounts receivable, trade, less allowance for
doubtful accounts of $40 30,757 35,430
Investments in U.S. Treasury Notes 25,006 -
Inventories 9,026 9,807
Deferred income tax benefits 7,975 7,911
Other current assets 327 350
Total Current Assets 189,506 162,436
Investments in U.S. Treasury Notes - 25,072
Property, Plant and Equipment, at cost
Land 6,637 6,662
Buildings and improvements 62,268 63,308
Machinery and equipment 26,633 25,770
95,538 95,740
Less accumulated depreciation 53,494 51,552
Net Property, Plant and Equipment 42,044 44,188
Other Assets 4,128 3,970
$235,678 $235,666
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
May 31, 2001 and 2000
Dollars in thousands except per share data
LIABILITIES AND SHAREHOLDERS' EQUITY
2001 2000
Current Liabilities
Accounts payable, trade $ 7,187 $ 6,350
Accrued salaries and wages 8,245 8,144
Accrued profit sharing 2,380 2,518
Accrued marketing programs 7,386 8,435
Accrued warranty and related expenses 10,084 10,063
Other accrued liabilities 2,593 1,966
Income taxes 2,040 1,559
Total Current Liabilities 39,915 39,035
Other Deferred Liabilities 3,742 3,682
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 252,525 247,479
Treasury stock, at cost,
2,825,900 shares in 2001 and
2,534,200 shares in 2000 (65,744) (59,770)
Total Shareholders' Equity 192,021 192,949
$235,678 $235,666
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 Years Ended May 31, 2001, 2000, and 1999
Dollars in thousands except per share data
2001 2000 1999
EARNING
Sales $463,824 $579,551 $653,169
Cost of sales 403,622 506,651 560,254
Gross profit 60,202 72,900 92,915
Selling and administrative
expenses 50,055 54,401 56,562
Operating earnings 10,147 18,499 36,353
Interest income 7,717 6,572 6,264
Gain (loss) on sale of property,
plant and equipment 666 14 (16)
Earnings before income taxes 18,530 25,085 42,601
Provision for income taxes
Federal 6,248 8,363 13,990
State 1,112 1,694 3,050
7,360 10,057 17,040
Net earnings $ 11,170 $ 15,028 $ 25,561
Basic earnings per share $ 1.32 $ 1.70 $ 2.80
Weighted average common
shares outstanding 8,468,321 8,858,628 9,136,116
RETAINED EARNINGS
Balance at beginning of year $247,479 $238,861 $219,343
Add net earnings 11,170 15,028 25,561
Less cash dividends paid
($.72 per share in 2001
and 2000, and $.66 per
share in 1999) 6,124 6,410 6,043
Balance at end of year $252,525 $247,479 $238,861
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Years Ended May 31, 2001, 2000, and 1999
Increase (Decrease) in Cash
Dollars in Thousands
2001 2000 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net earnings $ 11,170 $ 15,028 $ 25,561
Adjustment to reconcile net
earnings to net cash
provided by operating
activities:
Interest income earned on
U. S. Treasury Bills and
Notes (7,717) (6,572) (6,264)
Depreciation 3,919 4,022 3,838
Amortization of discount or
premium on U. S.
Treasury Notes 66 61 -
(Gain) loss on sale of property,
plant and equipment (666) (14) 16
Working capital items:
Accounts receivable 4,673 6,357 1,111
Inventories 781 664 (1,316)
Other current assets (41) (503) (112)
Accounts payable, trade 837 (2,146) (4,376)
Accrued liabilities (438) (3,467) 3,628
Income taxes payable 481 (1,012) 111
Other assets (158) (148) (251)
Other deferred liabilities 60 52 446
Total Adjustments 1,797 (2,706) (3,169)
Net cash provided by operating
activities 12,967 12,322 22,392
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows, continued
For the Years Ended May 31, 2001, 2000, and 1999
Increase (Decrease) in Cash
Dollars in Thousands
2001 2000 1999
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale or maturity
of U.S. Treasury Bills $397,702 $446,701 $511,761
Purchase of U. S. Treasury
Notes - (25,133) -
Purchase of U. S. Treasury
Bills (400,456) (414,480) (516,157)
Interest received from U. S.
Treasury Notes 1,438 1,194 -
Proceeds from sale of property,
plant and equipment 1,390 22 108
Purchase of property, plant and
equipment (2,499) (4,115) (7,113)
Net cash (used in) provided by
investing activities (2,425) 4,189 (11,401)
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash dividends paid (6,124) (6,410) (6,043)
Purchase of treasury stock (5,974) (7,361) (11,349)
Net cash used in financing
activities (12,098) (13,771) (17,392)
Net (decrease) increase in
cash (1,556) 2,740 (6,401)
Cash at beginning of year 7,006 4,266 10,667
Cash at end of year $ 5,450 $ 7,006 $ 4,266
The accompanying notes are a part of the consolidated financial statements.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 1 Nature of Operations and Accounting Policies
Nature of operations -- Skyline Corporation designs, manufactures and sells at
wholesale both a broad line of single and multi-sectional manufactured homes
and a large selection of non-motorized recreational vehicle models. Both
product lines are sold through numerous independent dealers throughout the
United States who often utilize floor plan financing arrangements with lending
institutions.
The following is a summary of the accounting policies that have a significant
effect on the consolidated financial statements.
Basis of presentation -- The consolidated financial statements include the
accounts of Skyline Corporation and all of its subsidiaries (Corporation), each
of which is wholly-owned. All significant intercompany transactions have been
eliminated. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue recognition -- Substantially all of the Corporation's products are made
to order. Revenue is recognized upon shipment.
In December 1999, the Securities Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." It states the SEC's position in applying generally accepted
accounting principles to revenue recognition issues. The Corporation adopted
SAB 101 in the fourth quarter of fiscal 2001 with no material impact on the
consolidated financial statements.
Consolidated statements of cash flows -- For purposes of the statements of cash
flows, investments in treasury bills are included as investing activities. The
Corporation's cash flows from operating activities were reduced by income taxes
paid of $6.9 million, $11.9 million and $17.9 million in 2001, 2000 and 1999,
respectively.
Inventory -- Inventories are stated at cost, which includes the cost of raw
materials, labor and overhead, determined under the first-in, first-out method,
which is not in excess of market. At May 31, 2001, total inventories consisted
of raw materials, $3,891,000, work in process, $5,098,000, and finished goods,
$37,000. At May 31, 2000, raw materials inventory totaled $4,772,000, work in
process inventory totaled $4,771,000, and finished goods totaled $264,000.
Depreciation -- Depreciation is computed over the estimated useful lives of the
assets using the straight-line method for financial statement reporting and
accelerated methods for income tax purposes.
Investments -- The Corporation invests in United States Government securities.
These securities are typically held until maturity or reasonable proximity to
maturity and are therefore classified as held-to-maturity and carried at
amortized cost.
Notes to Consolidated Financial Statements
NOTE 1 Nature of Operations and Accounting Policies, continued
The cost of the U. S. Treasury Bills, which approximates their fair market
value, totaled $110,965,000 and $101,932,000 at May 31, 2001 and 2000,
respectively. These securities mature within one year. The investment in
U. S. Treasury Notes has a gross unamortized cost of $25,006,000 and matures in
less than one year at May 31, 2001. The fair market value of the U.S. Treasury
Notes totaled $25,031,000, resulting in a gross unrealized gain of $25,000.
The Corporation does not have any other financial instruments which have market
values differing from recorded values.
Warranty -- The Corporation provides a warranty on its products. Estimated
warranty costs are accrued at the time of sale.
Income taxes -- The difference between the Corporation's statutory federal
income tax rate and the effective income tax rate is due primarily to state
income taxes.
The Corporation's deferred tax assets consist primarily of temporary
differences in the basis of certain liabilities for financial statement and tax
return purposes and its deferred tax liabilities are due to the use of
accelerated depreciation methods for tax purposes. The amounts of such
deferred tax items are not significant individually or in the aggregate.
Recently issued accounting pronouncements -- During the third fiscal quarter of
2001, the Corporation adopted Financial Accounting Standards Board (FASB)
Emerging Issues Task Force (EITF) 00-10, "Accounting for Shipping and Handling
Fees and Costs." As required by this new EITF, freight billed to customers is
considered sales revenue and the related freight costs as a cost of sales. Net
freight costs had historically been classified as a selling expense. During
this same period, the Corporation adopted the new EITF 00-22, "Accounting for
Points and Certain Other Time or Volume-Based Sales Incentive Offers.".
Volume based rebates are now required to be classified as a reduction in sales
revenue. The Corporation previously classified these expenditures as a selling
expense. Both accounting standards had no impact on net earnings or basic
earnings per share.
On April 19, 2001, the FASB'S EITF reached a consensus on Issue Number 00-25,
"Vendor Income Statement Characterization of Consideration Paid to a Reseller
of the Vendor's Products." This issue addresses the income statement
classification of consideration from a vendor to a reseller of the vendor's
products. The Corporation plans to adopt Issue 00-25 by the end of fiscal
2002 and anticipates that it will not have a material impact on the
consolidated financial statements.
The Corporation has determined that the effects on the financial statements
from any other recently issued accounting standards will not be material.
Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year presentation.
Notes to Consolidated Financial Statements
NOTE 2 Contingencies
The Corporation was contingently liable at May 31, 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.
NOTE 3 Purchase of Treasury Stock
The Corporation's board of directors from time to time has authorized the
repurchase of shares of the Corporation's common stock, in the open market or
through negotiated transactions, at such times and at such prices as management
may decide.
In fiscal 2001 the Corporation acquired 291,700 shares of its common stock for
$5,974,000. In fiscal 2000 it acquired 317,000 shares for $7,361,000, and in
fiscal 1999 it acquired 433,200 shares for $11,349,000. The effect of the
aggregate repurchases on basic earnings per share was $ .32 per share in 2001,
$.36 per share in 2000, and $.52 per share in 1999. At May 31, 2001, the
Corporation had authorization to repurchase an additional 391,300 shares of its
common stock.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 4 Employee Benefits
A) PROFIT SHARING AND 401(K) PLANS
The Corporation has two deferred profit sharing Plans which together cover
substantially all of its employees. The Plans are defined contribution plans
to which the Corporation has the right to modify, suspend or discontinue
contributions. For the years ended May 31, 2001, 2000 and 1999, contributions
to the Plans were $2,484,000, $2,554,000 and $2,740,000, respectively.
The Corporation has an employee savings plan (the "401(k) Plan") that is
intended to provide participating employees with an additional method of saving
for retirement. The 401(k) Plan covers all employees who meet certain minimum
participation requirements. The Corporation does not currently provide a
matching contribution to the 401(k) Plan.
B) RETIREMENT AND DEATH BENEFIT PLANS
The Corporation has entered into arrangements with certain employees which
provide for benefits to be paid to the employees' estates in the event of death
during active employment or retirement benefits to be paid over 10 years
beginning at the date of retirement. To fund all such arrangements, the
Corporation purchased life insurance or annuity contracts on the covered
employees. The present value of the principal cost of such arrangements is
being accrued over the period from the date of such arrangements to full
eligibility using a discount rate of 8.0% in 2001, 2000 and 1999. The amount
charged to operations under these arrangements was $252,000 in fiscal 2001 and
2000, and $540,000 in 1999.
Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 5 Industry Segment Information
Dollars in thousands
2001 2000 1999
SALES
Manufactured housing $353,610 $447,338 $525,806
Recreational vehicles 110,214 132,213 127,363
Total sales $463,824 $579,551 $653,169
EARNINGS BEFORE INCOME TAXES
OPERATING EARNINGS
Manufactured housing $ 13,412 $ 17,499 $ 35,202
Recreational vehicles 824 5,343 6,632
General corporate expenses (4,089) (4,343) (5,481)
Total operating earnings 10,147 18,499 36,353
Interest income 7,717 6,572 6,264
Gain (loss) on sale of property,
plant and equipment 666 14 (16)
Earnings before income taxes $ 18,530 $ 25,085 $ 42,601
IDENTIFIABLE ASSETS
OPERATING ASSETS
Manufactured housing $ 80,182 $ 89,460 $ 93,113
Recreational vehicles 19,525 19,202 19,093
Total operating assets 99,707 108,662 112,206
U. S. TREASURY BILLS 110,965 101,932 128,776
U. S. TREASURY NOTES 25,006 25,072 -
Total assets $235,678 $235,666 $240,982
DEPRECIATION
Manufactured housing $ 3,344 $ 3,454 $ 3,325
Recreational vehicles 575 568 513
Total depreciation $ 3,919 $ 4,022 $ 3,838
CAPITAL EXPENDITURES
Manufactured housing $ 2,213 $ 3,508 $ 6,122
Recreational vehicles 286 607 991
Total capital expenditures $ 2,499 $ 4,115 $ 7,113
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.
Identifiable assets, depreciation and capital expenditures, by industry
segment, are those items that are used in operations in each industry segment,
with jointly used items being allocated based on a percentage of sales.
Financial Summary by Quarter
Unaudited
Dollars in thousands except per share data
2001 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Sales $132,152 $120,907 $ 90,838 $119,927 $463,824
Gross profit 16,858 16,476 9,656 17,212 60,202
Net earnings 3,130 3,134 262 4,644 11,170
Basic earnings per
share .36 .37 .03 .55 1.32
2000 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Sales $163,791 $157,426 $117,320 $141,014 $579,551
Gross profit 20,962 20,397 13,270 18,271 72,900
Net earnings 4,895 4,750 1,010 4,373 15,028
Basic earnings per
share .54 .53 .12 .50 1.70
Certain prior quarter and prior year amounts have been reclassified to conform
with current year-end presentation.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Executive Officers of the Registrant (Officers are elected annually)
Name Age Position
Arthur J. Decio 70 Chairman of the Board
Ronald F. Kloska 67 Vice Chairman and Chief Executive Officer
William H. Murschel 56 President - Chief Operations Officer
Terrence M. Decio 49 Senior Executive Vice President
Charles W. Chambliss 51 Vice President - Product Development and Engineering
Christopher R. Leader 42 Vice President - Operations
James R. Weigand 46 Vice President - Finance & Treasurer and
Chief Financial Officer
Jon S. Pilarski 38 Controller
Arthur J. Decio, Chairman of the Board, served as the Corporation's Chairman
and Chief Executive Officer since its incorporation in 1959 to 1998.
Ronald F. Kloska, Vice Chairman, Chief Executive Officer and Chief
Administration Officer, joined the Corporation in 1963 as Treasurer. He was
elected Vice President and Treasurer in 1964, Executive Vice President in 1967,
President in 1974, Vice Chairman and Chief Administration Officer in 1991,
Secretary in 1994, Deputy Chief Executive Officer in 1995, and Chief Executive
Officer in 1998.
William H. Murschel, President - Chief Operations Officer, joined the
Corporation in 1969. He was elected Vice President in 1986, and President and
Chief Operations Officer in 1991.
Terrence M. Decio, Senior Executive Vice President, joined the Corporation in
1973. He was elected Vice President in 1985, Senior Vice President in 1991,
and Senior Executive Vice President in 1993.
Charles W. Chambliss, Vice President - Product Development and Engineering,
joined the Corporation in 1973 and was elected Vice President in 1996.
Christopher R. Leader, Vice President - Operations, joined the Corporation and
was elected Vice President in 1997. He was previously Vice President -
Operations of Trek Bicycle Corporation from October 1994 to 1996. From 1993 to
September 1994 he was employed at the Ford Motor Corporation as a Vehicle
Evaluation Manager and Production Manager. Trek Bicycle Corporation and the
Ford Motor Company are not affiliated with the Corporation.
James R. Weigand, Vice President - Finance & Treasurer and Chief Financial
Officer, joined the Corporation in 1991 as Controller. He was elected an
officer in 1994 and Vice President-Finance & Treasurer and Chief Financial
Officer in 1997.
Jon S. Pilarski, Controller, joined the Corporation in 1994 as General
Accounting Manager and was elected Controller in 1997.
Terrence M. Decio is the son of Arthur J. Decio. No other family relationship
exists among any of the executive officers.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
Financial statements for the Corporation are listed in the index
under Item 8 of this document.
(a)(2) Index to Exhibits
Exhibits (Numbered according to Item 601 of Regulation S-K, Exhibit
Table)
(3) (i) Articles of Incorporation
(3)(ii) By-Laws
(21) Subsidiaries of the Registrant
(b) Reports on Form 8K
No reports on Form 8K were filed during the quarter ended May 31,
2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Registrant
DATE: July 12, 2001 BY:
Ronald F. Kloska, Vice Chairman,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DATE: July 12, 2001 BY:
Arthur J. Decio, Chairman of the Board
DATE: July 12, 2001 BY:
William H. Murschel, President and
Chief Operations Officer and Director
DATE: July 12, 2001 BY:
Terrence M. Decio, Senior Executive
Vice President and Director
DATE: July 12, 2001 BY:
James R. Weigand, Vice
President - Finance & Treasurer and Chief
Financial Officer
DATE: July 12, 2001 BY:
Jon S. Pilarski, Controller
DATE: July 12, 2001 BY:
Jerry Hammes, Director
DATE: July 12, 2001 BY:
William H. Lawson, Director
DATE: July 12, 2001 BY:
David T. Link, Director
DATE: July 12, 2001 BY:
Andrew J. McKenna, Director
DATE: July 12, 2001 BY:
V. Dale Swikert, Director
EXHIBIT (3) (i)
Articles of Incorporation
No changes were made to the Articles of Incorporation during the fiscal year
ended May 31, 2001. The Articles of Incorporation were filed with and are
incorporated by reference from the Corporation's Form 10-K for the fiscal year
ended May 31, 1996.
EXHIBIT (3) (ii)
By-Laws
No changes were made to the By-Laws during the fiscal year ended May 31, 2001.
The By-Laws were filed with and are incorporated by reference from the
Corporation's Form 10-K for the fiscal year ended May 31, 1997.
EXHIBIT (21)
Subsidiaries of the Registrant
Parent (Registrant) -Skyline Corporation (an Indiana Corporation)
Subsidiaries -Skyline Homes, Inc. (a California Corporation)
-Homette Corporation (an Indiana Corporation)
-Layton Homes Corp. (an Indiana Corporation)
These wholly-owned subsidiaries are included in the consolidated financial
statements.