Annual Statements Open main menu

Skyline Champion Corp - Annual Report: 2003 (Form 10-K)

Annual Report
Table of Contents

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, 2003
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 Code)
     
294-6521

(Registrant’s telephone number)
  (574)

(Area Code)

Securities registered pursuant to section 12 (b) of the Act:

         
Title of Class   Shares Outstanding
July 9, 2003
  Name of each Exchange on
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  [   ]

 


TABLE OF CONTENTS

PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant’s Common Stock and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Earnings and Retained Earnings
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Summary by Quarter
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Executive Officers of the Registrant
Item 13. Certain Relationships and Relationships and Related Transactions
Item 14. Controls and Procedures
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
(a)(2) Index to Exhibits
(b) Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
Articles of Incorporation
By-Laws
Subsidiaries of the Registrant
Certification of CEO
Certification of CFO


Table of Contents

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]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  [X]    No  [   ]

The aggregate market value of the voting stock held by non-affiliates of registrant ( 6,818,780 shares) based on the closing price on the New York Stock Exchange on July 9, 2003 was $224,133,299.

1


Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE:

     
Title   Form 10-K

 
Proxy Statement dated   Part III, Items 10 – 12
for Annual Meeting of Shareholders to    
be held September 22, 2003    

2


Table of Contents

(This page left intentionally blank)

3


Table of Contents

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 2003 Annual Meeting of Shareholders to be held on September 22, 2003 (“2003 Proxy Statement”). The following cross-reference index shows the page locations in the 2003 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 2003 Proxy Statement are not required in this Form 10-K and should not be considered a part hereof.

                     
                2003
            Form   Proxy
            10-K   Statement
           
 
    PART I          
Item 1.   Business   6        
Item 2.   Properties   12        
Item 3.   Legal Proceedings   13        
Item 4.   Submission of Matters to a Vote of Security Holders   13        
    PART II            
Item 5.   Market for the Registrant’s Common Stock and Related Stockholder Matters   13        
Item 6.   Selected Financial Data   14        
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation   15        
Item 8.   Financial Statements and Supplementary Data            
        Index to Consolidated Financial Statements   18        
        Report of Independent Auditors   19        
        Consolidated Balance Sheets   20        
        Consolidated Statements of Earnings and Retained Earnings   22        
        Consolidated Statements of Cash Flows   23        
        Notes to Consolidated Financial Statements   25        
        Financial Summary by Quarter   32        

4


Table of Contents

FORM 10-K
CROSS-REFERENCE INDEX
(Continued)

                     
                    2003
                Form   Proxy
                10-K   Statement
               
 
    PART II        
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   33    
    PART III        
Item 10.   Directors and Executive Officers of the Registrant   33   3 – 4
Item 11.   Executive Compensation             9
Item 12.   Security Ownership of Certain Beneficial Owners and Management       3 – 8
Item 13.   Certain Relationships and Related Transactions   34    
Item 14.   Controls and Procedures   34    
    PART IV        
Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K        
    (a)   1. Financial Statements   34    
          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   34    
    (b) Reports on Form 8-K     35    
SIGNATURES AND CERTIFICATIONS       36    

5


Table of Contents

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).
 
      The Corporation, which is one of the largest producers of manufactured homes in the United States, produced 7,922 manufactured homes in fiscal year 2003.
 
      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 2003, manufactured homes represented 70% of total sales, while recreational vehicles accounted for the remaining 30%. In the prior year, the sales dollars were 75% manufactured homes and 25% 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 families, retired couples traveling around the country and sportsmen pursuing four-season hobbies.

6


Table of Contents

Item 1.     Business

      Method of Distribution
 
      The Corporation’s manufactured homes are distributed by approximately 460 dealers at 840 locations throughout the United States and recreational vehicles are distributed by approximately 270 dealers at 290 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 manufactured homes with a full one-year warranty against defects in materials and workmanship. Recreational vehicles are covered by a two-year warranty. The warranties are backed by a corporate service department and an extensive field service system.
 
      The Corporation’s products are sold to dealers either through floor plan financing with various financial institutions or on a cash 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. Additional information regarding these repurchase agreements is included in Note 2, Contingencies, in the Notes to Consolidated Financial Statements included in this document under Item 8.
 
      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.

7


Table of Contents

Item 1.     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. 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 the existence and extent of backlog to be significant in its business. The Corporation’s production is based on a relatively short manufacturing cycle and dealer’s orders, which continuously fluctuate. As such, the existence of backlog is not significant at any given date and does not typically provide a reliable indication of the status of the Corporation’s business.
 
      Government Contracts
 
      The Corporation has had no significant government 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.

8


Table of Contents

Item 1.   Business

      Competitive Conditions, continued
 
      The Manufactured Housing Institute reported that the industry produced approximately 168,500 homes in calendar year 2002. In the same period, the Corporation produced 8,711 units for a 5.2% market share. In calendar year 2001, approximately 193,200 homes were manufactured by the industry. In that period, the Corporation produced 10,148 homes for a 5.3% market share.
 
      The recreational vehicle industry produced 378,700 units in calendar year 2002 compared to 321,000 units in calendar year 2001. The following table shows the Corporation’s competitive position in the recreational vehicle product lines it sells.
                                             
    Units Produced   Units Produced
    Calendar Year 2002   Calendar Year 2001        
   
 
       
    Industry   Skyline       Industry   Skyline        
   
 
     
 
       
Travel Trailers     119,700       6,886           102,200       6,126  
Fifth Wheels     63,500       1,884           54,700       1,550  
Park Models     7,700       391           7,400       365  

      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.
 
      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.

9


Table of Contents

Item 1.      Business

      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 and the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, 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.
 
      The corporation is also subject to many state manufacturer licensing and bonding requirements, and to dealer day in court requirements in some states.

10


Table of Contents

Item 1.     Business

      Other Regulations, continued
 
      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 2,500 people at the present time.
 
      Available Information
 
      The Corporation makes available, free of charge, through the Investors section of its internet website its annual reports on Form   
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as practicable after such material is electronically filed or furnished to the Securities Exchange Commission. The Corporation’s internet address is http://www.skylinecorp.com.

11


Table of Contents

Item 2.     Properties

      The Corporation owns its corporate offices and design facility, which are located in Elkhart, Indiana.
 
      The Corporation’s 23 manufacturing plants, all of which are owned, are as follows:
     
Location   Products

 
California, San Jacinto
California, Hemet
California, Hemet
California, Woodland
Florida, Ocala
Florida, Ocala
Florida, Ocala
Indiana, Bristol
Indiana, Elkhart
Indiana, Goshen
Kansas, Arkansas City
Kansas, Halstead
Louisiana, Bossier City
North Carolina, Mocksville
Ohio, Sugarcreek
Oregon, McMinnville
Oregon, McMinnville
Pennsylvania, Ephrata
Pennsylvania, Leola
Pennsylvania, Leola
Texas, Mansfield
Vermont, Fair Haven
Wisconsin, Lancaster
  Manufactured Housing
Recreational Vehicles
Recreational Vehicles
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Recreational Vehicles
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Manufactured Housing
Recreational Vehicles
Manufactured Housing
Manufactured Housing
Recreational Vehicles
Recreational Vehicles
Manufactured Housing
Manufactured Housing

      The above facilities range in size from approximately 50,000 square feet to approximately 160,000 square feet.
 
      The Corporation also has one property that is not currently in use and is available for sale. The net book value of this property is not significant to the assets of the Corporation.
 
      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.

12


Table of Contents

Item 3.     Legal Proceedings

      Neither the Corporation nor any of its subsidiaries is a party to any pending legal proceedings 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 fiscal year ended May 31, 2003.

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 2003 and 2002. At May 31, 2003, there were approximately 1,200 holders of record of Skyline Corporation common stock. A quarterly summary of the market price is listed for the fiscal years ended May 31, 2003 and 2002.
                                 
    2003   2002
   
 
Quarter   High   Low   High   Low
First
  $ 34.40     $ 27.20     $ 28.50     $ 23.84  
Second
  $ 31.10     $ 26.30     $ 30.40     $ 22.80  
Third
  $ 30.10     $ 24.60     $ 32.25     $ 27.45  
Fourth
  $ 30.33     $ 24.60     $ 37.76     $ 29.30  

13


Table of Contents

Item 6.     Selected Financial Data

      Dollars in thousands except per share data
                                         
    2003   2002   2001   2000   1999
   
 
 
 
 
FOR THE YEAR
                                       
Sales
  $ 419,817     $ 450,722     $ 463,824     $ 579,551     $ 653,169  
Net earnings
  $ 6,193     $ 12,254     $ 11,170     $ 15,028     $ 25,561  
Cash dividends paid
  $ 6,041     $ 6,042     $ 6,124     $ 6,410     $ 6,043  
Capital expenditures
  $ 1,523     $ 3,330     $ 2,499     $ 4,115     $ 7,113  
Depreciation
  $ 3,785     $ 3,884     $ 3,919     $ 4,022     $ 3,838  
Weighted average common shares outstanding
    8,391,244       8,391,244       8,468,321       8,858,628       9,136,116  
AT YEAR END
                                       
Working capital
  $ 158,795     $ 156,360     $ 149,591     $ 123,401     $ 147,398  
Current ratio
    5.4:1       5.3:1       4.8:1       4.2:1       4.2:1  
U.S. Treasury Notes
  $     $     $ 25,006     $ 25,072     $  
Property, plant and equipment, net
  $ 39,131     $ 41,477     $ 42,044     $ 44,188     $ 44,102  
Total assets
  $ 239,141     $ 238,752     $ 235,678     $ 235,666     $ 240,982  
Shareholders’ equity
  $ 198,385     $ 198,233     $ 192,021     $ 192,949     $ 191,692  
Treasury stock
  $ 65,744     $ 65,744     $ 65,744     $ 59,770     $ 52,409  
PER SHARE
                                       
Basic earnings
  $ .74     $ 1.46     $ 1.32     $ 1.70     $ 2.80  
Cash dividends paid
  $ .72     $ .72     $ .72     $ .72     $ .66  
Shareholders’ equity
  $ 23.64     $ 23.62     $ 22.88     $ 22.22     $ 21.30  

14


Table of Contents

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      Results of Operations - Fiscal 2003 Compared to Fiscal 2002
 
      Sales in 2003 were $419,817,000, a decrease of $30,905,000 from $450,722,000 in 2002. Manufactured housing sales totaled $293,448,000 for 2003 compared to $339,260,000 in 2002. Manufactured housing unit sales decreased to 7,922 from 9,849. Recreational vehicle sales increased from $111,462,000 in 2002 to $126,369,000 in 2003. Recreational vehicle unit sales increased from 8,028 in 2002 to 8,720 in 2003. Manufactured housing sales continue to be affected by difficult market conditions, restrictive retail financing, economic uncertainty and increased global tensions. The increase in recreational vehicle sales is a reflection of an industry-wide improvement in market conditions for towable recreational vehicles. This trend began in early calendar year 2002. There was, however, a softening of demand in the Corporation’s fourth fiscal quarter. Fourth quarter sales for the recreational vehicle segment totaled $31,762,000 versus $36,527,000 from the prior year.
 
      Cost of sales in 2003 was 87.3% compared to 85.9% in 2002. Manufactured housing cost of sales in 2003 decreased to 81.0% from 84.9% in 2002. The decrease is primarily attributable to the Corporation’s effort to control manufacturing costs. Recreational vehicle cost of sales increased to 89.8% of sales from 89.0% in 2002 due to increased raw material cost and a shift in model mix within this segment.
 
      Selling and administrative expenses as a percentage of sales increased slightly to 10.7% in 2003 from 10.5% in 2002, while expenditures decreased $2,702,000.
 
      As a percentage of sales, operating earnings for manufactured housing were 3.8% in 2003 versus prior year’s 5.6 %. Earnings for manufactured housing declined due to the continuation of difficult market conditions noted above. Recreational vehicle operating earnings as a percentage of sales were 0.3% for 2003 and 0.8% for 2002. The decrease is due to increased cost of sales as noted above.
 
      Interest income amounted to $1,995,000 in 2003 compared to $4,102,000 in 2002. Interest income is directly related to the prevailing yields of U.S. Government securities and the amount available for investment.
 
      Results of Operations - Fiscal 2002 Compared to Fiscal 2001
 
      Sales in 2002 were $450,722,000, a decrease of $13,102,000 from $463,824,000 in 2001. Manufactured housing sales totaled $339,260,000 for 2002 compared to $353,610,000 in 2001. Manufactured housing unit sales decreased to 9,849 from 10,664.

15


Table of Contents

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

      Recreational vehicle sales increased from $110,214,000 in 2001 to $111,462,000 in 2002. Recreational vehicle unit sales also dropped from 8,156 in 2001 to 8,028 in 2002. The decrease in manufactured housing sales reflects difficult market conditions that persisted throughout the year. Difficult market conditions also existed for recreational vehicle sales for most of the year. Demand, however, did increase for products in this business segment in the fourth fiscal quarter.
 
      Cost of sales in 2002 was 85.9% compared to 87.0% in 2001. Manufactured housing cost of sales in 2002 decreased to 84.9% from 86.5% in 2001. The decrease is primarily attributable to the Corporation’s effort to control manufacturing costs. Recreational vehicle cost of sales increased to 89.0% of sales from 88.7% in 2001.
 
      Selling and administrative expenses as a percentage of sales decreased slightly to 10.5% in 2002 from 10.8% in 2001.
 
      Manufactured housing operating earnings as a percentage of sales were 5.6% in 2002 and 3.8% in 2001. The increase is due to improved gross margins and cost control. Recreational vehicle operating earnings as a percentage of sales increased to 0.8% of sales in 2002 from 0.7% of sales in 2001. Earnings of the recreational vehicle segment were impacted by the startup of a new manufacturing process at one recreational vehicle facility.
 
      Interest income amounted to $4,102,000 in 2002 compared to $7,717,000 in 2001. 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, 2003, cash and short-term investments in U.S. Treasury Bills totaled $154,457,000, an increase of $7,431,000 from $147,026,000 at May 31, 2002. Current assets exclusive of cash and investments in U.S. Treasury Bills totaled $40,514,000 at the end of 2003, a decrease of $5,283,000 from 2002’s total of $45,797,000. The decrease was primarily due to a decline in accounts receivable ($5,736,000) which is attributable to decreased fourth quarter sales. Current liabilities decreased $287,000 from $36,463,000 at May 31, 2002 to $36,176,000 at May 31, 2003.
 
      Capital expenditures totaled $1,523,000 in 2003 compared to $3,330,000 in the prior year. Capital expenditures during 2002 included $820,000 to implement a new manufacturing process at one recreational vehicle facility. Other capital expenditures in both years were made primarily to replace or refurbish machinery and equipment and improve manufacturing efficiencies.

16


Table of Contents

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

      Liquidity and Capital Resources
 
      The cash provided by operating activities in fiscal 2004, along with current cash and short-term investments, is expected to be adequate to fund any capital expenditures, working capital requirements and treasury stock purchases during the year. Historically, the Corporation’s financing needs have been met through funds generated internally.
 
      Other Matters
 
      The provisions 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:

    Cyclical nature of the manufactured housing and recreational vehicle industries
 
    General or seasonal weather conditions affecting sales
 
    Potential periodic inventory adjustments by independent retailers
 
    Availability of wholesale and retail financing
 
    Interest rate levels
 
    Impact of inflation
 
    Cost of labor and raw materials
 
    Competitive pressures on pricing and promotional costs
 
    Catastrophic events impacting insurance costs
 
    Consumer confidence and economic uncertainty
 
    Market demographics
 
    Management’s ability to attract and retain executive officers and key personnel
 
    Increased global tensions, market disruption resulting from a terrorist attack and any armed conflict involving the United States.

17


Table of Contents

Item 8.     Financial Statements and Supplementary Data

      Index to Consolidated Financial Statements
         
Report of Independent Auditors
    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
    31  

18


Table of Contents

REPORT OF INDEPENDENT AUDITORS

      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, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2003, 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 17, 2003

19


Table of Contents

      Skyline Corporation and Subsidiary Companies
 
      Consolidated Balance Sheets
May 31, 2003 and 2002
Dollars in thousands
 
      ASSETS
                 
    2003   2002
   
 
Current Assets
               
Cash
  $ 8,736     $ 8,699  
U.S. Treasury Bills, at cost plus accrued interest
    145,721       138,327  
Accounts receivable, trade, less allowance for doubtful accounts of $150 in 2003 and $40 in 2002
    22,292       28,028  
Inventories
    9,414       9,632  
Deferred income tax benefits
    8,552       7,986  
Other current assets
    256       151  
 
   
     
 
Total Current Assets
    194,971       192,823  
 
   
     
 
Property, Plant and Equipment, At Cost
               
Land
    6,637       6,637  
Buildings and improvements
    64,806       64,595  
Machinery and equipment
    26,937       27,305  
 
   
     
 
 
    98,380       98,537  
Less accumulated depreciation
    59,249       57,060  
 
   
     
 
Net Property, Plant and Equipment
    39,131       41,477  
 
   
     
 
Other Assets
    5,039       4,452  
 
   
     
 
 
  $ 239,141     $ 238,752  
 
   
     
 

      The accompanying notes are a part of the consolidated financial statements.
 
       

20


Table of Contents

      Skyline Corporation and Subsidiary Companies
 
      Consolidated Balance Sheets
May 31, 2003 and 2002
Dollars in thousands except per share data
 
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                 
    2003   2002
   
 
Current Liabilities
               
Accounts payable, trade
  $ 5,990     $ 5,859  
Accrued salaries and wages
    6,290       7,405  
Accrued profit sharing
    2,327       2,412  
Accrued marketing programs
    5,397       6,375  
Accrued warranty and related expenses
    10,609       10,100  
Other accrued liabilities
    3,777       3,156  
Income taxes payable
    1,786       1,156  
 
   
     
 
Total Current Liabilities
    36,176       36,463  
 
   
     
 
Other Deferred Liabilities
    4,580       4,056  
 
   
     
 
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
    258,889       258,737  
Treasury stock, at cost, 2,825,900 shares in 2003 and 2002
    (65,744 )     (65,744 )
 
   
     
 
Total Shareholders’ Equity
    198,385       198,233  
 
   
     
 
 
  $ 239,141     $ 238,752  
 
   
     
 

      The accompanying notes are a part of the consolidated financial statements.

21


Table of Contents

      Skyline Corporation and Subsidiary Companies
 
      Consolidated Statements of Earnings and Retained Earnings
For the Years Ended May 31, 2003, 2002 and 2001
Dollars in thousands except per share data
                           
      2003   2002   2001
     
 
 
EARNINGS
                       
Sales
  $ 419,817     $ 450,722     $ 463,824  
Cost of sales
    366,633       387,050       403,622  
 
   
     
     
 
Gross profit
    53,184       63,672       60,202  
Selling and administrative expenses
    44,843       47,545       50,055  
 
   
     
     
 
Operating earnings
    8,341       16,127       10,147  
Interest income
    1,995       4,102       7,717  
Gain on sales of property, plant and equipment
                666  
 
   
     
     
 
Earnings before income taxes
    10,336       20,229       18,530  
Provision for income taxes
 
Federal
    3,545       6,825       6,248  
 
State
    598       1,150       1,112  
 
   
     
     
 
 
    4,143       7,975       7,360  
 
   
     
     
 
Net earnings
  $ 6,193     $ 12,254     $ 11,170  
 
   
     
     
 
Basic earnings per share
  $ .74     $ 1.46     $ 1.32  
 
   
     
     
 
Weighted average common shares outstanding
    8,391,244       8,391,244       8,468,321  
 
   
     
     
 
RETAINED EARNINGS
                       
Balance at beginning of year
  $ 258,737     $ 252,525     $ 247,479  
Add net earnings
    6,193       12,254       11,170  
Less cash dividends paid ($.72 per share in 2003, 2002 and 2001)
    6,041       6,042       6,124  
 
   
     
     
 
Balance at end of year
  $ 258,889     $ 258,737     $ 252,525  
 
   
     
     
 

      The accompanying notes are a part of the consolidated financial statements.

22


Table of Contents

Skyline Corporation and Subsidiary Companies

Consolidated Statements of Cash Flows
For the Years Ended May 31, 2003, 2002 and 2001
Increase (Decrease) in Cash
Dollars in thousands

                             
        2003   2002   2001
       
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
                       
Net earnings
  $ 6,193     $ 12,254     $ 11,170  
 
   
     
     
 
Adjustment to reconcile net earnings to net cash provided by operating activities:
                       
 
Interest income earned on U.S. Treasury Bills and Notes
    (1,995 )     (4,102 )     (7,717 )
 
Depreciation
    3,785       3,884       3,919  
 
Amortization of discount or premium on U.S. Treasury Notes
          6       66  
 
Gain on sale of property, plant and equipment
                (666 )
 
Working capital items:
                       
   
Accounts receivable
    5,736       2,729       4,673  
   
Inventories
    218       (606 )     781  
   
Other current assets
    (671 )     165       (41 )
   
Accounts payable, trade
    131       (1,328 )     837  
   
Accrued liabilities
    (1,048 )     (1,240 )     (438 )
   
Income taxes payable
    630       (884 )     481  
Other assets
    (587 )     (324 )     (158 )
Other deferred liabilities
    524       314       60  
 
   
     
     
 
Total Adjustments
    6,723       (1,386 )     1,797  
 
   
     
     
 
Net cash provided by operating activities
    12,916       10,868       12,967  
 
   
     
     
 

The accompanying notes are a part of the consolidated financial statements.

23


Table of Contents

Skyline Corporation and Subsidiary Companies

Consolidated Statements of Cash Flows, continued
For the Years Ended May 31, 2003, 2002 and 2001
Increase (Decrease) in Cash
Dollars in thousands

                           
      2003   2002   2001
     
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
                       
 
Proceeds from sale or maturity of U.S. Treasury Bills
  $ 366,398     $ 410,274     $ 397,702  
 
Purchase of U.S. Treasury Bills
    (371,797 )     (434,253 )     (400,456 )
 
Maturity of U.S. Treasury Notes
          25,000        
 
Interest received from U.S. Treasury Notes
          719       1,438  
 
Proceeds from sale of property, plant and equipment
    84       13       1,390  
 
Purchase of property, plant and equipment
    (1,523 )     (3,330 )     (2,499 )
 
   
     
     
 
 
Net cash used in investing activities
    (6,838 )     (1,577 )     (2,425 )
 
   
     
     
 
CASH FLOWS FROM FINANCING ACTIVITIES
                       
 
Cash dividends paid
    (6,041 )     (6,042 )     (6,124 )
 
Purchase of treasury stock
                (5,974 )
 
   
     
     
 
Net cash used in financing activities
    (6,041 )     (6,042 )     (12,098 )
 
   
     
     
 
Net increase (decrease) in cash
    37       3,249       (1,556 )
Cash at beginning of year
    8,699       5,450       7,006  
 
   
     
     
 
Cash at end of year
  $ 8,736     $ 8,699     $ 5,450  
 
   
     
     
 

The accompanying notes are a part of the consolidated financial statements.

24


Table of Contents

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-section 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 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 revenue 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.

Freight billed to customers is considered sales revenue, and the related freight costs are cost of sales. Volume based rebates paid to dealers are classified as a reduction in sales revenue.

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 $4,079,000, $8,870,000 and $6,943,000 in 2003, 2002 and 2001, respectively.

Inventory--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.

25


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 1 Nature of Operations and Accounting Policies, continued

Total inventories for the periods presented consisted of (dollars in thousands):

                 
    May 31, 2003   May 31, 2002
   
 
Raw Materials
  $ 4,132     $ 4,280  
Work In Process
    5,282       5,183  
Finished Goods
          169  
 
   
     
 
 
  $ 9,414     $ 9,632  
 
   
     
 

Property, plant and equipment--Property, plant and equipment is stated at cost. 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.

The carrying value of U.S. Treasury Bills, which approximates their fair market value, totaled $145,721,000 and $138,327,000 at May 31, 2003 and 2002, respectively. These securities mature within one year. The Corporation does not have any other financial instruments which have market values differing from recorded values.

Warranty--The Corporation provides the retail purchaser of its manufactured homes with a one-year warranty against defects in design, materials and workmanship. Recreational vehicles are covered by a two-year warranty. The warranties are backed by a corporate service department and an extensive field service system. Estimated warranty costs are accrued at the time of sale based upon current sales, historical experience and management’s judgment regarding anticipated rates of warranty claims. The adequacy of the recorded warranty liability is periodically assessed and the amount is adjusted as necessary.

26


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

Note 1 Nature of Operations and Accounting Policies, continued

A reconciliation of accrued warranty and related expenses is a follows (dollars in thousands):

                 
    Year Ended   Year Ended
    May 31, 2003   May 31, 2002
   
 
Balance at the beginning of the period
  $ 10,100     $ 10,084  
Accruals for warranties
    11,425       12,853  
Settlements made during the period
    (10,916 )     (12,837 )
 
   
     
 
Balance at the end of the period
  $ 10,609     $ 10,100  
 
   
     
 

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 fiscal 2002 the Financial Accounting Standards Board, (FASB), enacted FAS No.143, “Accounting for Obligations Associated with the Retirement of Long-Lived Assets.” This statement provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. The Corporation will adopt FAS No. 143 in fiscal year 2004, and anticipates no 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 are not applicable.

27


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 2 Contingencies

The Corporation was contingently liable at May 31, 2003 under repurchase agreements with certain financial institutions providing inventory financing for retailers of its products. Under these arrangements, which are customary in the manufactured housing and recreational vehicle industries, the Corporation agrees to repurchase homes and recreational vehicles in the event of default by the retailer at declining prices over the term of the agreement, generally 12 months. The maximum repurchase liability is the total amount that would be paid upon the default of the Corporation’s independent dealers. The maximum potential repurchase liability, without reduction for the resale value of the repurchase units, was approximately $100 million at May 31, 2003 and $120 million at May 31, 2002. The risk of loss under these agreements is spread over many retailers and financial institutions. The loss, if any, under these agreements is the difference between the repurchase cost and the resale value of the units. The allowance for doubtful accounts includes a reserve for potential net losses on repurchased units. The amounts of obligations from repurchased units and incurred net losses for the periods presented are as follows (dollars in thousands):

                         
    Year Ended May 31,
    2003   2002   2001
   
 
 
Obligations from units repurchased
  $ 1,001     $ 922     $ 2,019  
Net losses on repurchased units
    50       179       152  

The Corporation leases office and manufacturing equipment under operating lease agreements. Leases generally provide that the Corporation pays the cost of insurance, taxes and maintenance. Rent expense for each of the fiscal years ended May 31, 2003, 2002 and 2001 was approximately $1,200,000. Future minimum lease commitments under operating leases are as follows (dollars in thousands):

         
Year Ending        
May 31,     Amount  

 
2004
  $ 1,028  
2005
    620  
2006
    256  
2007
    145  
2008
    62  
Thereafter
     
 
   
 
 
  $ 2,111  
 
   
 

28


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 2 Contingencies, continued

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 2003 and 2002, the Corporation did not acquire any shares of its common stock. In fiscal 2001 it acquired 291,700 shares of its common stock for $5,974,000.

The effect of the aggregate repurchases on basic earnings per share was $.19 per share in 2003, $.37 per share in 2002 and $.32 per share in 2001. At May 31, 2003, the Corporation had authorization to repurchase an additional 391,300 shares of its common stock.

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, 2003, 2002 and 2001, contributions to the Plans were $2,356,000, $2,413,000 and $2,484,000, 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.

29


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 4 Employee Benefits, continued

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 6.0% in 2003, 7.0% in 2002 and 8.0% in 2001. The amount charged to operations under these arrangements was $252,000 in fiscal year 2003, $352,000 in fiscal 2002 and $252,000 in fiscal year 2001.

30


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 5 Industry Segment Information
Dollars in thousands

                             
        2003   2002   2001
SALES
                       
Manufactured housing
  $ 293,448     $ 339,260     $ 353,610  
Recreational vehicles
    126,369       111,462       110,214  
 
   
     
     
 
Total sales
  $ 419,817     $ 450,722     $ 463,824  
 
   
     
     
 
EARNINGS BEFORE INCOME TAXES
                       
OPERATING EARNINGS
                       
 
Manufactured housing
  $ 11,116     $ 19,107     $ 13,412  
 
Recreational vehicles
    439       925       824  
 
General corporate expenses
    (3,214 )     (3,905 )     (4,089 )
 
   
     
     
 
Total operating earnings
    8,341       16,127       10,147  
Interest income
    1,995       4,102       7,717  
Gain on sale of property, plant and equipment
                666  
 
   
     
     
 
Earnings before income taxes
  $ 10,336     $ 20,229     $ 18,530  
 
   
     
     
 
IDENTIFIABLE ASSETS
                       
OPERATING ASSETS
                       
 
Manufactured housing
  $ 71,225     $ 77,846     $ 80,182  
 
Recreational vehicles
    22,195       22,579       19,525  
 
   
     
     
 
Total operating assets
    93,420       100,425       99,707  
U.S. TREASURY BILLS
    145,721       138,327       110,965  
U. S. TREASURY NOTES
                25,006  
 
   
     
     
 
Total assets
  $ 239,141     $ 238,752     $ 235,678  
 
   
     
     
 
DEPRECIATION
                       
 
Manufactured housing
  $ 3,103     $ 3,268     $ 3,344  
 
Recreational vehicles
    682       616       575  
 
   
     
     
 
Total depreciation
  $ 3,785     $ 3,884     $ 3,919  
 
   
     
     
 
CAPITAL EXPENDITURES
                       
   
Manufactured housing
  $ 1,230     $ 2,085     $ 2,213  
   
Recreational vehicles
    293       1,245       286  
 
   
     
     
 
Total capital expenditures
  $ 1,523     $ 3,330     $ 2,499  
 
   
     
     
 

31


Table of Contents

Skyline Corporation and Subsidiary Companies

Notes to Consolidated Financial Statements

NOTE 5 Industry Segment Information
Dollars in thousands

Operating earnings represent earnings before interest income, gain 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

                                         
    1st   2nd   3rd   4th        
2003   Quarter   Quarter   Quarter   Quarter   Year

 
 
 
 
 
Sales
  $ 116,492     $ 112,467     $ 87,709     $ 103,149     $ 419,817  
Gross profit
    14,941       14,911       8,878       14,454       53,184  
Net earnings (loss)
    1,822       1,951       (827 )     3,247       6,193  
Basic earnings (loss) per share
    .22       .23       (.10 )     .39       .74  
                                         
    1st   2nd   3rd   4th        
2002   Quarter   Quarter   Quarter   Quarter   Year

 
 
 
 
 
Sales
  $ 122,225     $ 118,054     $ 96,080     $ 114,363     $ 450,722  
Gross profit
    17,179       17,603       11,973       16,917       63,672  
Net earnings
    3,563       3,748       869       4,074       12,254  
Basic earnings per share
    .42       .45       .10       .49       1.46  

32


Table of Contents

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

 
 
Thomas G. Deranek     67     Vice Chairman and Chief Executive Officer
             
William H. Murschel     58     President – Chief Operations Officer
             
Terrence M. Decio     51     Senior Executive Vice President
             
James R. Weigand     48     Vice President – Finance & Treasurer and Chief Financial Officer
             
Christopher R. Leader     44     Vice President – Operations
             
Charles W. Chambliss     53     Vice President – Product Development and Engineering
             
Jon S. Pilarski     40     Corporate Controller

      Thomas G. Deranek, Vice Chairman and Chief Executive Officer, joined the Corporation in 1964. He served as Chief of Staff from 1991 to 2001 and was elected Vice Chairman and Chief Executive Officer in September 2001.
 
      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.
 
      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.
 
      Christopher R. Leader, Vice President-Operations, joined the Corporation in January 1997 and was elected Vice President in September 1997.

33


Table of Contents

     
Item 10.   Executive Officers of the Registrant (Officers are elected annually), continued
     
    Charles W. Chambliss, Vice President-Product Development and Engineering, joined the Corporation in 1973 and was elected Vice President in 1996.
     
    Jon S. Pilarski, Corporate Controller, joined the Corporation in 1994 and was elected Corporate Controller in 1997.
     
Item 13.   Certain Relationships and Relationships and Related Transactions
     
    None
     
Item 14.   Controls and Procedures
         
    (a)   Evaluation of disclosure controls and procedures: The Company’s Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15-d-14(c)) as of a date within 90 days of filing date of the annual report (the “Evaluation Date”), have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to them by others within the Company, particularly during the period in which this annual report was being prepared.
         
    (b)   Changes in internal controls: There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such internal controls and procedures requiring corrective actions.
     
Item 15.   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

34


Table of Contents

                 
          (21 )   Subsidiaries of the Registrant
                 
          (99.1 )   Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350.
                 
          (99.2 )   Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350.
                 
    (b)           Reports on Form 8K
                 
                Form 8K was filed on March 20, 2003. The filing was made to publicize the Corporation’s financial results for the quarter ended February 28, 2003.

35


Table of Contents

     
     
  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 9, 2003   BY:    
     
     
              Thomas G. Deranek, 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 9, 2003   BY:    
     
     
              William H. Murschel, President and
Chief Operations Officer and Director
               
  DATE:   July 9, 2003   BY:    
     
     
              Terrence M. Decio, Senior Executive
Vice President and Director
               
  DATE:   July 9, 2003   BY:    
     
     
              James R. Weigand, Vice
President-Finance & Treasurer and
Chief Financial Officer
               
  DATE:   July 9, 2003   BY:    
     
     
              Jon S. Pilarski, Corporate Controller
               
  DATE:   July 9, 2003   BY:    
     
     
              Arthur J. Decio, Director, Chairman of the
Board, serving in a non-executive officer
capacity
               
  DATE:   July 9, 2003   BY:    
     
     
              Jerry Hammes, Director
               
  DATE:   July 9, 2003   BY:    
     
     
              Ronald F. Kloska, Director
               
  DATE:   July 9, 2003   BY:    
     
     
              William H. Lawson, Director
               
  DATE:   July 9, 2003   BY:    
     
     
              David T. Link, Director
               
  DATE:   July 9, 2003   BY:    
     
     
              Andrew J. McKenna, Director
               
  DATE:   July 9, 2003   BY:    
     
     
              V. Dale Swikert, Director

36


Table of Contents

CERTIFICATIONS

I, Thomas G. Deranek, Chief Executive Officer of Skyline Corporation, certify that:

1.   I have reviewed this annual report on Form 10-K of Skyline Corporation;
 
2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
  b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
 
  c)   presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

  a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 9, 2003

/s/ Thomas G. Deranek


Thomas G. Deranek
Chief Executive Officer

37


Table of Contents

I, James R. Weigand, Chief Financial Officer of Skyline Corporation, certify that:

1.   I have reviewed this annual report on Form 10-K of Skyline Corporation;
 
2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
  b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
 
  c)   presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

  a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 9, 2003

/s/ James R. Weigand


James R. Weigand
Chief Financial Officer

38