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Skyline Champion Corp - Annual Report: 2005 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
For the fiscal year ended
  May 31, 2005
 
   
or
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
             
For the transition period from
      to    
 
           
     
Commission File Number:
  1-4714
 
   
SKYLINE CORPORATION
 

(Exact name of registrant as specified in its charter)
                 
Indiana
          35-1038277    
         
(State or other jurisdiction of
          (I.R.S. Employer    
incorporation or organization)
          Identification No.)
 
               
P. O. Box 743, 2520 By-Pass Road, Elkhart, Indiana       46515    
 
(Address of principal executive offices)       (Zip Code)    
         
Registrant’s telephone number, including area code:
      (574) 294-6521
     
Securities registered pursuant to Section 12 (b) of the Act:
     
Title of each class   Name or each exchange on which registered
 
   
 
   
 
   
 
   
 
   
Securities registered pursuant to section 12 (g) of the Act:
 
(Title of Class)
 
(Title of Class)
     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.                    [X] Yes [  ] No
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§ 229.405 of this chapter) 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 the Form 10-K or an amendment to this Form 10-K.                    [  ]

 


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     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).                    [X] Yes [  ] No
     The aggregate market value of the voting stock held by non-affiliates of registrant (6,818,980 shares) based on the closing price on the New York Stock Exchange on November 30, 2004 was $281,964,823.
     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
         
Title of Class       Shares Outstanding
July 25, 2005
         
Common Stock       8,391,244

 


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DOCUMENTS INCORPORATED BY REFERENCE:
     
Title   Form 10-K
 
   
Proxy Statement dated August 15, 2005 for Annual Meeting of Shareholders to be held September 26, 2005
  Part III, Items 10 – 14

 


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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 2005 Annual Meeting of Shareholders to be held on September 26, 2005 (“2005 Proxy Statement”). The following cross-reference index shows the page locations in the 2005 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 2005 Proxy Statement are not required to be included in this Form 10-K and should not be considered a part hereof.
                         
                    2005    
            Form   Proxy    
            10-K   Statement    
   
 
                   
    PART I                
   
 
                   
Item 1.   Business     3          
   
 
                   
Item 2.   Properties     9          
   
 
                   
Item 3.   Legal Proceedings     10          
   
 
                   
Item 4.   Submission of Matters to a Vote of Security Holders.     10          
   
 
                   
    PART II                
   
 
                   
Item 5.   Market for the Registrant’s Common Stock and Related Stockholder Matters.     10          
   
 
                   
Item 6.   Selected Financial Data     11          
   
 
                   
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operation.     12          
   
 
                   
Item 7A.   Quantitative and Qualitative Disclosures and Market Risk     21          
   
 
                   
Item 8.   Financial Statements and Supplementary Data                
   
 
  Index to Consolidated Financial Statements.     22          
   
 
  Report of Independent Registered Public Accounting Firm.     23          
   
 
  Consolidated Balance Sheets     25          
   
 
  Consolidated Statements of Earnings and Retained Earnings     27          
   
 
  Consolidated Statements of Cash Flows     28          
   
 
  Notes to Consolidated Financial Statements     30          
 Articles of Incorporation
 By-Laws
 Code of Ethics
 Subsidiaries of the Registrant
 302 Certification of Chief Executive Officer
 302 Certification of Chief Financial Officer
 Section 906 Certification
 Section 906 Certification

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FORM 10-K
CROSS-REFERENCE INDEX
(Continued)
                         
                    2005    
            Form   Proxy    
            10-K   Statement    
    PART II                
   
 
                   
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     40          
   
 
                   
Item 9A.   Controls and Procedures     40          
   
 
                   
Item 9B.   Other Information     41          
   
 
                   
    PART III                
   
 
                   
Item 10.   Directors and Executive Officers of the Registrant     42     3-4    
   
 
                   
Item 11.   Executive Compensation           9-10    
   
 
                   
Item 12.   Security Ownership of Certain Beneficial Owners and Management.           3-4
8-9
   
   
 
                   
Item 13.   Certain Relationships and Related Transactions           10-11    
   
 
                   
Item 14.   Principal Accounting Fees and Services           7-8    
   
 
                   
    PART IV                
   
 
                   
Item 15.   Exhibits, Financial Statement Schedules                
   
 
                   
      1. Financial Statements     43          
   
 
  2. Financial Statement Schedules     43          
   
 
  3. Index to Exhibits.     43          
   
 
                   
SIGNATURES AND
CERTIFICATIONS
 
 
        44          

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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 (single section homes, multi-section homes and modular homes) and towable 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 7,685 manufactured homes in fiscal year 2005.
The Corporation’s manufactured homes are marketed under a number of trademarks. They are available in lengths ranging from 32’ to 76’ and in singlewide widths from 12’ to 18’, doublewide widths from 20’ to 32’, and triplewide widths from 36’ to 42’.
The Corporation’s recreational vehicles are sold under a number of trademarks for travel trailers and fifth wheels.
In fiscal year 2005 manufactured homes represented 74 percent of total sales, while recreational vehicles accounted for the remaining 26 percent. In fiscal year 2004 the sales dollars were 72 percent manufactured homes and 28 percent recreational vehicles. In fiscal year 2003 the sales dollars were 70 percent manufactured homes and 30 percent 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 individuals over the age of fifty, 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 sports enthusiasts pursuing four-season hobbies.


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Item 1.
Business, continued
Method of Distribution
The Corporation’s manufactured homes are distributed by approximately 440 dealers at 740 locations throughout the United States and recreational vehicles are distributed by approximately 270 dealers at 300 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 fifteen-month warranty against defects in materials and workmanship. Recreational vehicles are covered by a two-year or less 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.


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Item 1.
Business, continued
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 dealers’ 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.


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Item 1
Business, continued
Competitive Conditions, continued
The manufactured housing industry shipped approximately 131,000 homes in calendar year 2004. In the same period, the Corporation shipped 7,559 homes for a 5.8 percent market share. In calendar year 2003, approximately 131,000 homes were shipped by the industry. In that period, the Corporation shipped 7,760 homes for a 5.9 percent market share.
The recreational vehicle industry shipped 412,100 units in calendar year 2004 compared to 377,800 units in calendar year 2003. The following table shows the Corporation’s competitive position in the recreational vehicle product lines it sells.
                                                 
    Units Shipped   Units Shipped
    Calendar Year 2004   Calendar Year 2003
                    Market                   Market
    Industry   Skyline   Share   Industry   Skyline   Share
Travel Trailers
    150,800       6,787       4.5 %     137,000       5,943       4.3 %
 
                                               
Fifth Wheels
    91,000       1,153       1.3 %     67,400       1,609       2.4 %
 
                                               
Park Models
    9,100       402       4.4 %     7,100       471       6.6 %
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.
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.


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Item 1.
Business, continued
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.
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.
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.
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 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’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 corporation is also subject to many state manufacturer licensing and bonding requirements, and to dealer day in court requirements in some states.


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Item 1.
Business, continued
Other Regulations, continued
The Corporation believes that it is currently in compliance with the above regulations.
The Sarbanes-Oxley Act of 2002 introduced many new requirements applicable to the Corporation regarding corporate governance and reporting. Section 404 of the Act requires management to report on the Corporation’s internal controls over financial reporting. The Corporation has devoted substantial time and cost during fiscal year 2005 to ensure compliance.
Number of Employees
The Corporation employs approximately 2,600 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 United States Securities and Exchange Commission. The Corporation’s internet address is http://www.skylinecorp.com.
A copy of the Corporation’s annual report on Form 10-K will be provided without charge upon written request to Skyline Corporation, Investor Relations Department, Post Office Box 743, Elkhart, Indiana 46515.


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Item 2.
Properties
The Corporation owns its corporate offices and design facility, which are located in Elkhart, Indiana.
The Corporation’s 22 manufacturing facilities, all of which are owned, are as follows:
     
Location   Products
California, San Jacinto
  Manufactured Housing
California, Hemet
  Recreational Vehicles
California, Hemet
  Recreational Vehicles
California, Woodland
  Manufactured Housing
Florida, Ocala
  Manufactured Housing
Florida, Ocala
  Manufactured Housing
Florida, Ocala
  Manufactured Housing
Indiana, Bristol
  Manufactured Housing
Indiana, Elkhart
  Recreational Vehicles
Indiana, Goshen
  Manufactured Housing
Kansas, Arkansas City
  Manufactured Housing
Kansas, Halstead
  Manufactured Housing
Louisiana, Bossier City
  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.


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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, 2005.


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 2005 and 2004. On November 1, 2004, a special dividend of one dollar ($1.00) per share was paid to shareholders of the Corporation’s common stock at the close of business October 14, 2004. At May 31, 2005, there were approximately 1,100 holders of record of Skyline Corporation common stock. A quarterly summary of the market price is listed for the fiscal years ended May 31, 2005 and 2004.
                                 
    2005   2004
Quarter   High   Low   High   Low
First
  $ 41.60     $ 35.19     $ 32.60     $ 27.80  
Second
  $ 42.00     $ 37.90     $ 34.60     $ 31.30  
Third
  $ 42.10     $ 38.03     $ 41.22     $ 31.91  
Fourth
  $ 41.01     $ 35.89     $ 45.39     $ 34.94  


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Item 6.
Selected Financial Data
Dollars in thousands except per share data
                                         
    2005   2004   2003   2002   2001
FOR THE YEAR
                                       
Sales
  $ 454,324     $ 433,900     $ 421,315     $ 453,704     $ 466,716  
 
                                       
Net earnings
  $ 5,452     $ 6,141     $ 6,193     $ 12,254     $ 11,170  
 
                                       
Cash dividends declared
  $ 14,433     $ 6,042     $ 6,041     $ 6,042     $ 6,124  
 
                                       
Capital expenditures
  $ 2,356     $ 1,928     $ 1,523     $ 3,330     $ 2,499  
 
                                       
Depreciation
  $ 3,389     $ 3,450     $ 3,785     $ 3,884     $ 3,919  
 
                                       
Weighted average common shares Outstanding
    8,391,244       8,391,244       8,391,244       8,391,244       8,468,321  
 
                                       
AT YEAR END
                                       
Working capital
  $ 154,663     $ 163,438     $ 160,750     $ 158,200     $ 151,424  
 
                                       
Current ratio
    5.1:1       6.1:1       6.1:1       5.9:1       5.2:1  
 
                                       
Property, plant and equipment, net
  $ 35,838     $ 36,930     $ 39,131     $ 41,477     $ 42,044  
 
                                       
Total assets
  $ 237,437     $ 241,168     $ 239,141     $ 238,752     $ 235,678  
 
                                       
Shareholders’ equity
  $ 189,503     $ 198,484     $ 198,385     $ 198,233     $ 192,021  
 
                                       
Treasury stock
  $ 65,744     $ 65,744     $ 65,744     $ 65,744     $ 65,744  
 
                                       
PER SHARE
                                       
Basic earnings
  $ .65     $ .73     $ .74     $ 1.46     $ 1.32  
 
                                       
Cash dividends declared
  $ 1.72     $ .72     $ .72     $ .72     $ .72  
 
                                       
Shareholders’ equity
  $ 22.58     $ 23.65     $ 23.64     $ 23.62     $ 22.88  


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


Overview
The Corporation sells manufactured housing and towable recreational vehicle products to independent dealers and manufactured housing communities located throughout the United States. To better serve the needs of its dealers, the Corporation has twenty-two manufacturing facilities in eleven states. Manufactured housing and recreational vehicles are sold to dealers either through floor plan financing with various financial institutions or on a cash basis. 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.
Sales in both business segments are affected by the strength of the U.S. economy, interest rate levels, consumer confidence and the availability of wholesale and retail financing. The manufactured housing segment is currently affected by an industry recession. This recession, caused primarily by restrictive retail financing and economic uncertainty has resulted in industry sales to be the lowest in decades. In the recreational vehicle segment, the Corporation sells travel trailers, fifth wheels and park models. Industry sales of travel trailers and fifth wheels have seen steady growth in recent years.
Despite the recession in the manufactured housing industry, demand for multi-section homes is increasing. This product is often sold as part of a land-home package and is financed with a conventional mortgage. Multi-section homes have an appearance similar to site-built homes and are notably less expensive. The Corporation is capitalizing on this increased demand by expanding manufacturing capabilities. Eight manufactured housing facilities have obtained approval from applicable state and local governmental entities to produce modular homes, which will extend existing product offerings.
The recreational vehicle segment in which the Corporation operates is a very competitive ever-changing market. This segment is witnessing an ongoing shift in consumer demand for both metal-sided products and products with bonded wall construction. The Corporation is positioning itself to take advantage of the available opportunities in the towable recreational vehicle segment in which it competes.

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


Results of Operations — Fiscal 2005 Compared to Fiscal 2004
Sales and Unit Shipments (Dollars in thousands)
                                         
                                    Change
                                    Increase
    2005   Percent   2004   Percent   (Decrease)
Sales
                                       
Manufactured Housing
  $ 335,394       73.8     $ 311,354       71.8     $ 24,040  
Recreational Vehicles
    118,930       26.2       122,546       28.2       (3,616 )
 
                                       
Total Sales
  $ 454,324       100.0     $ 433,900       100.0     $ 20,424  
 
                                       
 
                                       
Unit Shipments
                                       
Manufactured Housing
    7,685       49.4       7,723       48.0       (38 )
Recreational Vehicles
    7,865       50.6       8,375       52.0       (510 )
 
                                       
Total Unit Shipments
    15,550       100.0       16,098       100.0       (548 )
 
                                       
Manufactured housing unit sales continue to be affected by difficult market conditions, restrictive retail financing and economic uncertainty. Average sales per unit rose due to increased selling prices and a product mix shift toward multi-section homes. Selling prices increased as a result of unprecedented increases in the cost of lumber, lumber-related materials and steel. Multi-section homes represent 81.6 percent of total unit sales for fiscal 2005 versus 80.2 percent for fiscal 2004.
Recreational vehicle sales decreased as a result of a continued shift in consumer demand toward products with bonded wall construction. The Corporation currently offers a limited number of models with fiberglass exteriors. The following table shows the Corporation’s competitive position in the recreational vehicle product lines it sells relative to the recreational vehicle industry.
                                                 
    Units Shipped   Units Shipped
    Calendar Year 2004   Calendar Year 2003
                    Market                   Market
    Industry   Skyline   Share   Industry   Skyline   Share
Travel Trailers
    150,800       6,787       4.5 %     137,000       5,943       4.3 %
Fifth Wheels
    91,000       1,153       1.3 %     67,400       1,609       2.4 %
Park Models
    9,100       402       4.4 %     7,100       471       6.6 %

13


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


Results of Operations — Fiscal 2005 Compared to Fiscal 2004, continued
Cost of Sales
(Dollars in thousands)
                                         
                                    Change
            Percent of           Percent of   Increase
    2005   Segment Sales   2004   Segment Sales   (Decrease)
Manufactured Housing
  $ 294,613       87.8     $ 272,768       87.6     $ 21,845  
Recreational Vehicles
    110,115       92.6       110,750       90.4       (635 )
 
                                       
                                         
            Percent of           Percent of        
            Total Sales           Total Sales        
Consolidated
  $ 404,728       89.1     $ 383,518       88.4     $ 21,210   
 
                                       
Manufactured housing cost of sales primarily increased due to increases in the costs of lumber, lumber-related materials and steel. In addition, this segment experienced rising costs associated with workers’ compensation and warranty.
Recreational vehicle cost of sales decreased as a result of fewer units sold in fiscal 2005 versus 2004. As a percentage of sales, however, cost of sales increased resulting from higher material, warranty and workers’ compensation costs. This segment was further impacted by costs associated with an idled recreational vehicle facility.
Selling and Administrative Expenses
(Dollars in thousands)
                                         
                                    Change
               Percent of                 Percent of      Increase
    2005   Sales   2004   Sales   (Decrease)
Selling and Administrative Expenses
  $ 43,408       9.6     $ 41,523       9.6     $ 1,885  
Expenses rose primarily due to increases in employee compensation and benefits. In addition, the Corporation incurred significant expenses related to compliance with the Sarbanes-Oxley Act of 2002.

14


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


Results of Operations — Fiscal 2005 Compared to Fiscal 2004, continued
Operating Earnings
(Dollars in thousands)
                                         
                                    Change in
                                    Operating
                                    Earnings
            Percent of           Percent of   Increase
    2005   Segment Sales   2004   Segment Sales   (Decrease)
Manufactured Housing
  $ 12,296       3.7     $ 13,035       4.2     $ (739 )
Recreational Vehicles
  $ (2,547 )     (2.1 )   $ 150       0.1     $ (2,697 )
 
            Percent of           Percent of        
            Total Sales           Total Sales        
General Corporate Expenses
  $ (3,561 )     0.8     $ (4,326 )     1.0     $ 765  
 
                                       
 
                                       
Total Operating Earnings
  $ 6,188       1.4     $ 8,859       2.0     $ (2,671 )
 
                                       
As noted above, increased costs of material, workers’ compensation and warranty negatively affected operating earnings for both segments. The recreational vehicle segment was further impacted by $816,000 in costs for a facility that was idled in the Corporation’s third quarter of fiscal 2005. General corporate expenses decreased primarily due to a one-time charge that occurred in fiscal 2004 which was related to a change in valuation of the Corporation’s liability for post-retirement benefits offered to certain employees.
Interest Income
(Dollars in thousands)
                                         
                            Change        
                            Increase        
            2005   2004   (Decrease)        
Interest Income
          $ 2,474     $ 1,247     $ 1,227          
Interest income is directly related to the amount available for investment and the prevailing yields of U.S. Government Securities.

15


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


Results of Operations — Fiscal 2004 Compared to Fiscal 2003
Sales and Unit Shipments
(Dollars in thousands)
                                         
                                    Change
                                    Increase
    2004   Percent   2003   Percent   (Decrease)
Sales
                                       
Manufactured Housing
  $ 311,354       71.8     $ 294,349       69.9     $ 17,005  
Recreational Vehicles
    122,546       28.2       126,966       30.1       (4,420 )
 
                                       
Total Sales
  $ 433,900       100.0     $ 421,315       100.0     $ 12,585  
 
                                       
 
                                       
Unit Shipments
                                       
Manufactured Housing
    7,723       48.0       7,922       47.6       (199 )
Recreational Vehicles
    8,375       52.0       8,720       52.4       (345 )
 
                                       
Total Unit Shipments
    16,098       100.0       16,642       100.0       (544 )
 
                                       
Manufactured housing unit sales continue to be affected by difficult market conditions, restrictive retail financing and economic uncertainty. Average sales per unit increased due to a product mix shift toward multi-section homes, representing 80.2 percent of total unit sales in fiscal 2004 versus 76.6 percent in fiscal 2003.
Two factors caused the decline in recreational vehicle sales. Demand for towable metal-sided recreational vehicles shifted toward product with price points lower than those historically offered by the Corporation. This shift in demand began in the third quarter of fiscal year 2003. Sales were also affected by a timing issue in introducing the new 2004 product line. The following table shows the Corporation’s competitive position in the recreational vehicle product lines it sells relative to the recreational vehicle industry.
                                                 
    Units Shipped   Units Shipped
    Calendar Year 2003   Calendar Year 2002
                    Market                   Market
    Industry   Skyline   Share   Industry   Skyline   Share
Travel Trailers
    137,000       5,943       4.3 %     119,700       6,886       5.8 %
Fifth Wheels
    67,400       1,609       2.4 %     66,100       1,884       2.9 %
Park Models
    7,100       471       6.6 %     7,700       391       5.1 %

16


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


Results of Operations — Fiscal 2004 Compared to Fiscal 2003, continued
Cost of Sales
(Dollars in thousands)
                                         
                                    Change
            Percent of           Percent of   Increase
    2004   Segment Sales   2003   Segment Sales   (Decrease)
Manufactured Housing
  $ 272,768       87.6     $ 258,045       87.7       $ 14,723  
Recreational Vehicles
    110,750       90.4       113,991       89.8         (3,241 )
 
                                       
                                         
            Percent of           Percent of        
            Total Sales           Total Sales        
Consolidated
  $ 383,518       88.4     $ 372,036       88.3     $ 11,482  
 
                                       
 
The percentage increase in cost of sales for recreational vehicles is the result of a product mix shift toward lower margin models. Cost of sales for both segments was negatively affected in the fourth quarter of fiscal 2004 by an unprecedented increase in the cost of lumber, lumber-related materials and steel.
 
Selling and Administrative Expenses
(Dollars in thousands)
                                   
                                         
                                    Change
            Percent of           Percent of   Increase
    2004   Sales   2003   Sales   (Decrease)
Selling and Administrative Expenses
  $ 41,523       9.6     $ 40,938       9.7     $ 585  
                                         
Operating Earnings
(Dollars in thousands)
                                   
                                    Change in
                                    Operating
                                    Earnings
            Percent of           Percent of   Increase
    2004   Segment Sales   2003   Segment Sales   (Decrease)
Manufactured Housing
  $ 13,035       4.2     $ 11,116       3.8     $ 1,919  
Recreational Vehicles
  $ 150       0.1     $ 439       0.3     $ (289 )
                                         
            Percent of           Percent of        
            Total Sales           Total Sales        
General Corporate Expenses
  $ (4,326 )     1.0     $ (3,214 )     0.8     $ (1,112 )
 
                                       
Total Operating Earnings
  $ 8,859       2.0     $ 8,341       2.0     $ 518  
 
                                       

17


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


Results of Operations — Fiscal 2004 Compared to Fiscal 2003, continued
Operating Earnings, continued
Operating earnings for manufactured housing increased due to increased sales of higher margin multi-section homes. Operating earnings for recreational vehicles declined primarily due to an overall decrease in sales, and sales of lower margin products. General corporate expenses increased primarily due to a change in valuation of the Corporation’s liability for post-retirement benefits offered to certain employees.
Interest Income
(Dollars in thousands)
                         
                    Change
                    Increase
    2004   2003   (Decrease)
Interest Income
  $ 1,247     $ 1,995     $ (748 )
Interest income is directly related to the amount available for investment and the prevailing yields of U.S. Government Securities.
Liquidity and Capital Resources (Dollars in thousands)
                         
                    Change
    May 31,   Increase
    2005   2004   (Decrease)
Cash and U.S. Treasury Bills and Notes
  $ 149,525     $ 150,449     $ (924 )
 
                       
Current Assets Exclusive of Cash and U.S. Treasury Bills and Notes
    42,537       45,031       (2,494 )
 
                       
Current Liabilities
    37,399       32,042       5,357  
 
                       
Working Capital
  $ 154,663     $ 163,438     $ (8,775 )
The Corporation’s policy is to invest in U.S. Government Securities when cash exceeds immediate operating requirements. Current assets exclusive of cash and U.S. Treasury Bills declined as a result of a $2,813,000 decrease in other current assets. This category decreased primarily due to an amortization of a prepayment for the Corporation’s future estimated cost of workers’ compensation benefits which was paid at the end of fiscal 2004.
Various factors contributed to the increase in current liabilities. Accounts payable increased $1,745,000 due to a greater amount of sales and related raw materials purchases for May 2005 versus May 2004. Income taxes payable increased $563,000 due to the timing of tax payments at May 31, 2005 versus May 31, 2004.

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


Liquidity and Capital Resources, continued
Accrued marketing programs increased $1,009,000 as a result of a recreational vehicle marketing program introduced in fiscal 2005. In addition, higher sales impacted an ongoing marketing program for the manufactured housing segment. Other accrued liabilities increased $1,494,000 primarily due to the timing of payments to a workers’ compensation insurance carrier, and an increase in the reserve for health insurance.
A special dividend of $8,391,000 ($1.00 per share) was paid on November 1, 2004 to shareholders of the Corporation’s common stock at the close of business October 14, 2004.
Capital expenditures totaled $2,356,000 for fiscal 2005 compared to $1,928,000 in the previous year.
Capital expenditures during this period were made primarily to replace or refurbish machinery, equipment and facilities in addition to improving manufacturing efficiencies.
The cash provided by operating activities, along with current cash and other 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.
Contractual Obligations and Commitments
The following table summarizes the Corporation’s contractual obligation for operating lease agreements as of May 31, 2005 (dollars in thousands):
                                         
            Payments Due by Period
            Less Than                   After
    Total   1 Year   1-3 Years   3-5 Years   5 Years
Operating Leases
  $ 1,725     $ 713     $ 783     $ 180     $ 49  
The following table summarizes the Corporation’s commitments for repurchase agreements as of May 31, 2005 (dollars in thousands):
                                         
            Payments Due by Period
            Less Than                   After
    Total   1 Year   1-3 Years   3-5 Years   5 Years
Repurchase Agreements
  $ 106,000     $ 106,000     $     $     $  
Additional information regarding the nature of the repurchase agreements and the operating leases is in Note 2 to the Notes to the Consolidated Financial Statements. During fiscal years 2005 and 2004, the Corporation did not experience any losses on the sale of repurchased units, while incurring losses of $50,000 during fiscal year 2003.

19


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


Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles requires the Corporation to make certain estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Estimates are periodically evaluated using historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. The following accounting policies are considered to require significant estimates:
Product Warranties
As referenced in Note 1 of the Notes to Consolidated Financial Statements, manufactured homes are sold with a fifteen-month warranty and recreational vehicles are sold with a two-year or less warranty. Estimated warranty costs are accrued at the time of sale based upon sales, historical claims experience and management’s judgment regarding anticipated rates of warranty claims. Significant changes in these factors could have a material impact on future results of operations.
Workers’ Compensation Insurance
The Corporation is insured for expenses associated with workers’ compensation. Costs are accrued based on management’s estimates of future medical claims developed by consulting actuaries at the carrier that insures the Corporation. Accruals are made up to a specified limit per individual injured and for an aggregate limit determined by the carrier.
Health Insurance
As referenced in Note 4 of the Notes to Consolidated Financial Statements, the Corporation utilizes a combination of insurance companies in offering health insurance coverage to its employees. Costs of claims incurred but not paid are accrued based on past claims experience and relevant trend factors provided by the insurance companies.
Newly Issued Accounting Standards
The effect of newly issued accounting standards on the Corporation is addressed in Note 1 of the Notes to Consolidated Financial Statements.
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. The Corporation, however, experienced in fiscal 2005 significant increases in the cost of lumber, lumber-related materials and steel. Although the Corporation was unable to recover all of the increases in the first half of fiscal 2005, on a long-term basis it has demonstrated an ability to adjust selling prices in reaction to changing costs due to inflation. The Corporation believes that except as noted above, inflation has not had a material effect on its operations during the fiscal 2005.

20


Table of Contents

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


Other Matters, continued
The Sarbanes-Oxley Act of 2002 has introduced many new requirements applicable to the company regarding corporate governance and reporting. Section 404 of the Act requires management to report on the Corporation’s internal controls over financial reporting. The Corporation has devoted substantial time and cost during fiscal year 2005 to ensure compliance.
As addressed in Items 1 and 3, the Corporation has not had nor anticipates to have material expenditures related to environmental quality or product liability.
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
    The availability of insurance coverage for various risks to the Corporation
    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 or other attack and any armed conflict involving the United States.

Item 7A.
Quantitative and Qualitative Disclosures about Market Risk


The Corporation invests in United States Government Securities. These securities are typically held until maturity and are therefore classified as held-to-maturity and carried at amortized cost. Changes in interest rates do not have a significant effect on the fair value of these investments.

21


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Item 8.
Financial Statements and Supplementary Data
                         
Index to Consolidated Financial Statements
                       
    23                  
    25                  
    27                  
    28                  
    30                  
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.


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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Skyline Corporation:
We have completed an integrated audit of Skyline Corporation’s 2005 consolidated financial statements and of its internal control over financial reporting as of May 31, 2005 and audits of its 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Skyline Corporation and its subsidiaries at May 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements 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.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of May 31, 2005 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances.

23


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Report of Independent Registered Public Accounting Firm, continued
We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Chicago, Illinois
July 28, 2005

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Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets
May 31, 2005 and 2004
(Dollars in thousands)
ASSETS
                 
    2005     2004  
Current Assets
               
Cash
  $ 12,406     $ 8,838  
U.S. Treasury Bills, at cost plus accrued interest
    92,465       141,611  
U.S. Treasury Notes, at cost plus accrued interest
    44,654        
Accounts receivable, trade, less allowance for doubtful accounts of $100 in 2005 and $150 in 2004
    26,466       26,090  
Inventories
    9,838       9,895  
Other current assets
    6,233       9,046  
 
           
 
               
Total Current Assets
    192,062       195,480  
 
           
 
               
Property, Plant and Equipment, at Cost
               
Land
    6,572       6,572  
Buildings and improvements
    64,036       63,241  
Machinery and equipment
    27,619       27,206  
 
           
 
    98,227       97,019  
Less accumulated depreciation
    62,389       60,089  
 
           
 
               
Net Property, Plant and Equipment
    35,838       36,930  
 
           
 
               
Other Assets
    9,537       8,758  
 
           
 
               
 
  $ 237,437     $ 241,168  
 
           
The accompanying notes are a part of the consolidated financial statements.

25


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Skyline Corporation and Subsidiary Companies
Consolidated Balance Sheets, continued
May 31, 2005 and 2004
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
                 
    2005     2004  
 
               
Current Liabilities
               
Accounts payable, trade
  $ 9,521     $ 7,776  
Accrued salaries and wages
    6,409       6,222  
Accrued profit sharing
    2,434       2,454  
Accrued marketing programs
    6,377       5,368  
Accrued warranty and related expenses
    7,700       7,321  
Other accrued liabilities
    4,229       2,735  
Income taxes payable
    729       166  
 
           
 
               
Total Current Liabilities
    37,399       32,042  
 
           
 
               
Other Deferred Liabilities
    10,535       10,642  
 
           
 
               
Commitments and Contingencies — See Note 2
               
 
               
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
    250,007       258,988  
Treasury stock, at cost, 2,825,900 shares in 2005 and 2004
    (65,744 )     (65,744 )
 
           
Total Shareholders’ Equity
    189,503       198,484  
 
           
 
               
 
  $ 237,437     $ 241,168  
 
           
The accompanying notes are a part of the consolidated financial statements.

26


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Skyline Corporation and Subsidiary Companies
Consolidated Statements of Earnings and Retained Earnings
For the Years Ended May 31, 2005, 2004 and 2003
(Dollars in thousands, except per share data)
                         
    2005     2004     2003  
EARNINGS
                       
 
                       
Sales
  $ 454,324     $ 433,900     $ 421,315  
 
                       
Cost of sales
    404,728       383,518       372,036  
 
                 
 
                       
Gross profit
    49,596       50,382       49,279  
 
                       
Selling and administrative expenses
    43,408       41,523       40,938  
 
                 
 
                       
Operating earnings
    6,188       8,859       8,341  
 
                       
Interest income
    2,474       1,247       1,995  
 
                 
 
                       
Earnings before income taxes
    8,662       10,106       10,336  
 
                       
Provision for income taxes
                       
Federal
    2,790       3,330       3,545  
State
    420       635       598  
 
                 
 
    3,210       3,965       4,143  
 
                 
 
                       
Net earnings
  $ 5,452     $ 6,141     $ 6,193  
 
                 
 
                       
Basic earnings per share
  $ .65     $ .73     $ .74  
 
                 
 
                       
Weighted average common shares outstanding
    8,391,244       8,391,244       8,391,244  
 
                 
 
                       
RETAINED EARNINGS
                       
 
                       
Balance at beginning of year
  $ 258,988     $ 258,889     $ 258,737  
 
                       
Add net earnings
    5,452       6,141       6,193  
 
                       
Less cash dividends paid ($1.72 in 2005 and $.72 per share in 2004 and 2003)
    14,433       6,042       6,041  
 
                 
 
                       
Balance at end of year
  $ 250,007     $ 258,988     $ 258,889  
 
                 
The accompanying notes are a part of the consolidated financial statements.

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Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Years Ended May 31, 2005, 2004 and 2003
Increase (Decrease) in Cash
(Dollars in thousands)
                         
    2005     2004     2003  
CASH FLOWS FROM OPERATING ACTIVITIES
                       
Net earnings
  $ 5,452     $ 6,141     $ 6,193  
 
                 
 
                       
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
Depreciation
    3,389       3,450       3,785  
Working capital items:
                       
Accrued interest receivable
    (517 )     159       (14 )
Accounts receivable
    (376 )     (3,798 )     5,736  
Inventories
    57       (481 )     218  
Other current assets
    2,813       (2,983 )     (186 )
Accounts payable, trade
    1,745       1,786       131  
Accrued liabilities
    3,049       400       (1,648 )
Income taxes payable
    563       (1,620 )     630  
Other deferred liabilities
    (107 )     1,362       1,124  
Other, net
    (607 )     (831 )     (929 )
 
                 
 
                       
Total Adjustments
    10,009       (2,556 )     8,847  
 
                 
 
                       
Net cash provided by operating activities
    15,461       3,585       15,040  
 
                 
The accompanying notes are a part of the consolidated financial statements.

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Table of Contents

Skyline Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows, continued
For the Years Ended May 31, 2005, 2004 and 2003
Increase (Decrease) in Cash
(Dollars in thousands)
                         
    2005     2004     2003  
 
                       
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Proceeds from principal payments of U.S. Treasury Bills
  $ 312,530     $ 380,028     $ 364,417  
Purchase of U.S. Treasury Bills
    (263,062 )     (376,077 )     (371,797 )
Maturity of U.S. Treasury Notes
    45,000              
Purchase of U.S. Treasury Notes
    (89,459 )            
Net proceeds from sale of idle property, plant and equipment
          644        
Purchase of property, plant and equipment
    (2,356 )     (1,928 )     (1,523 )
Other, net
    (113 )     (108 )     (59 )
 
                 
Net cash provided by (used in) investing activities
    2,540       2,559       (8,962 )
 
                 
 
                       
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Cash dividends paid
    (14,433 )     (6,042 )     (6,041 )
 
                 
 
                       
Net cash used in financing activities
    (14,433 )     (6,042 )     (6,041 )
 
                 
 
                       
Net increase in cash
    3,568       102       37  
 
                       
Cash at beginning of year
    8,838       8,736       8,699  
 
                 
 
                       
Cash at end of year
  $ 12,406     $ 8,838     $ 8,736  
 
                 
The accompanying notes are a part of the consolidated financial statements.

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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 manufactured housing (single section homes, multi-section homes and modular homes) and a large selection of towable 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 (the “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 completion of the following: an order for a unit is received from a dealer; written or verbal approval for payment is received from a dealer’s financing institution or payment is received from the dealer; a common carrier signs documentation accepting responsibility for the unit as agent for the dealer; and the unit is removed from the Corporation’s premises for delivery to a dealer.
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 of sales revenue. Sales of parts are classified as revenue.
Consolidated statements of cash flows—For purposes of the statements of cash flows, investments in U. S. Treasury Bills and Notes are included as investing activities. The Corporation’s cash flows from operating activities were reduced by income taxes paid of $3,121,000, $5,884,000 and $4,079,000 in 2005, 2004 and 2003, 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.

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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,  
    2005     2004  
 
               
Raw Materials
  $ 4,174     $ 4,158  
 
               
Work In Process
    5,642       5,650  
 
               
Finished Goods
    22       87  
 
           
 
  $ 9,838     $ 9,895  
 
           
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. Estimated useful lives for significant classes of property, plant and equipment are as follows: Building and improvements 10 to 30 years; machinery and equipment 5 to 15 years.
Investments—The Corporation invests in United States Government Securities. These securities are typically held until maturity and are therefore classified as held-to-maturity and carried at amortized cost.
The cost and accrued interest of U.S. Treasury Bills, which approximates their fair market value, totaled $92,465,000 and $141,611,000 at May 31, 2005 and 2004, respectively. The investment in U.S. Treasury Notes has a gross unamortized cost of $44,529,000 and matures in less than one year at May 31, 2005. The fair market value of the U.S. Treasury Notes totals $44,523,000, resulting in a gross unrealized loss of $6,000. 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 fifteen-month warranty against defects in design, materials and workmanship. Recreational vehicles are covered by a two-year or less 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.

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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 as follows (dollars in thousands):
                         
    Year ended May 31,  
    2005     2004     2003  
Balance at the beginning of the period
  $ 11,121     $ 10,609     $ 10,100  
Accruals for warranties
    12,519       11,478       11,425  
Settlements made during the period
    (11,940 )     (10,966 )     (10,916 )
 
                 
Balance at the end of the period
    11,700       11,121       10,609  
Non-current balance included in other deferred liabilities
    4,000       3,800       3,700  
 
                 
Accrued warranty and related expenses
  $ 7,700     $ 7,321     $ 6,909  
 
                 
Other deferred liabilities—Other deferred liabilities consist of the following (dollars in thousands):
                         
    May 31,          
    2005     2004          
Deferred compensation expense
  $ 6,235     $ 5,742          
Accrued warranty and related expenses
    4,000       3,800          
Other deferred expense
    300       1,100          
 
                   
 
  $ 10,535     $ 10,642          
 
                   
Income taxes—The federal and state income tax provision (benefit) is summarized as follows (dollars in thousands):
                         
    Year ended May 31,  
    2005     2004     2003  
 
                       
Current
                       
Federal
  $ 3,124     $ 3,629     $ 4,111  
State
    560       686       583  
 
                 
 
  $ 3,684     $ 4,315     $ 4,694  
 
                 
Deferred
                       
Federal
  $ (334 )   $ (299 )   $ (566 )
State
    (140 )     (51 )     15  
 
                 
 
  $ (474 )   $ (350 )   $ (551 )
 
                 
 
  $ 3,210     $ 3,965     $ 4,143  
 
                 

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Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 1 Nature of Operations and Accounting Policies, continued
The difference between the Corporation’s statutory federal income tax rate and the effective income tax rate is due primarily to state income taxes as follows (dollars in thousands):
                         
    Year ended May 31,  
    2005     2004     2003  
Income taxes at statutory federal rate
  $ 2,945     $ 3,437     $ 3,518  
State income taxes, net of federal tax effect
    277       419       394  
Other, net
    (12 )     109       231  
 
                 
 
                       
Income tax expense
  $ 3,210     $ 3,965     $ 4,143  
 
                 
 
                       
Effective tax rate
    37.1 %     39.2 %     40.1 %
 
                 
The components of the net deferred tax assets are as follows:
                         
    May 31,          
    2005     2004          
 
                       
Current deferred tax assets
                       
Accrued marketing programs
  $ 750     $ 827          
Accrued warranty expense
    2,988       2,871          
Accrued workers’ compensation
    1,609       1,326          
Accrued vacation
    516       514          
Other
    206       709          
 
                   
Net current deferred tax asset
  $ 6,069     $ 6,247          
 
                   
 
                       
Noncurrent deferred tax assets
                       
Deferred compensation expense
  $ 2,222     $ 1,759          
Accrued warranty expense
    1,592       1,330          
Other
    286       358          
 
                   
Net noncurrent deferred tax assets
  $ 4,100     $ 3,447          
 
                   
 
                       
Total gross deferred tax asset
  $ 10,169     $ 9,694          
 
                       
Valuation allowance
    (844 )     (843 )        
 
                   
 
                       
Net deferred tax asset
  $ 9,325     $ 8,851          
 
                   

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Table of Contents

Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 1 Nature of Operations and Accounting Policies, continued
A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The valuation allowance relates to certain state tax assets that the Corporation considers more likely than not to not be realized due to a lack of projected taxable income in certain states. There have been no changes in the judgments regarding the realizability of deferred tax assets during the periods presented.
Recently issued accounting pronouncements—In November 2004 the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (SFAS 151). SFAS 151 requires that allocation of fixed production overheads to the cost of conversion be based on normal capacity of the production facilities. In addition, idle facility expense, excessive spoilage, double freight and rehandling costs should be recognized as period costs.
In May 2005 the Financial Accounting Standards Board issued SFAS No. 154, “Accounting Changes and Error Corrections”. SFAS 154 changes the requirements for the accounting for and reporting of voluntary changes in accounting principle, and for changes required by an accounting pronouncement that does not have a specific transition provision. When recognizing a change in accounting principle, retrospective application of the principle to prior period’s financial statements is generally specified.
These pronouncements are effective for the Corporation beginning June 1, 2006, and adoption is not expected to have a material impact on its future financial condition or results of operation. The Corporation has also determined that the effects on the consolidated financial statements from any recently issued accounting standards are not applicable.
NOTE 2 Commitments and Contingencies
The Corporation was contingently liable at May 31, 2005, 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.

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Table of Contents

Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 2 Commitments and Contingencies, continued
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 $106 million at May 31, 2005 and $100 million at May 31, 2004.
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,  
    2005     2004     2003  
 
                       
Obligations from units repurchased
  $     $ 23     $ 1,001  
 
                       
Net loss on repurchased units
  $     $     $ 50  
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. Lease expense for fiscal years ended May 31, 2005 and 2004 was approximately $1,100,000 while lease expense for the fiscal year ended May 31, 2003 was approximately $1,200,000. Future minimum lease commitments under operating leases are as follows (dollars in thousands):
         
Year Ending      
May 31,   Amount  
2006
  $ 713  
2007
    470  
2008
    313  
2009
    146  
2010
    34  
Thereafter
    49  
 
     
 
  $ 1,725  
 
     
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.

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Table of Contents

Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
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 2005, 2004 and 2003, the Corporation did not acquire any shares of its common stock. At May 31, 2005 the Corporation had authorization to repurchase an additional 391,300 shares of its common stock.
NOTE 4 Employee Benefits
A) HEALTH INSURANCE
The Corporation offers health insurance to eligible employees and dependents. This benefit is administered by utilizing a combination of insurance companies. The Corporation has individual reinsurance coverage limiting its liability for any catastrophic claims.
Claims incurred but not reported are accrued based on estimates that incorporate the Corporation’s past experience and other considerations such as the nature of each claim and other relevant trend factors provided by the insurance companies. Expenses associated with the health insurance benefit were $4,273,000, $3,860,000 and $3,737,000 for fiscal years ended May 31, 2005, 2004 and 2003, respectively.
B) PROFIT SHARING PLANS AND 401 (K) PLANS
The Corporation has two deferred profit sharing plans (“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. Assets of the Plans are invested in United States Government Securities. For the years ended May 31, 2005, 2004 and 2003, contributions to the Plans were $2,454,000, $2,447,000 and $2,356,000, 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.

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Table of Contents

Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 4 Employee Benefits, continued
C) 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 5.5 percent in fiscal 2005, 6.5 percent in fiscal 2004 and 6.0 percent in fiscal 2003. The amount accrued for such arrangements totaled $6,235,000 at May 31, 2005, $5,742,000 at May 31, 2004 and $4,580,000 at May 31, 2003. The amount charged to operations under these arrangements was $498,000 in fiscal year 2005, $1,145,000 in fiscal 2004 and $252,000 in fiscal year 2003.
NOTE 5 Industry Segment Information
The corporation designs, produces and distributes manufactured housing (single section homes, multi-section homes and modular homes) and towable recreational vehicles (travel trailers, including park models and fifth wheels). In fiscal year 2005, manufactured housing represented 74 percent of total sales, while recreational vehicles accounted for the remaining 26 percent. In fiscal year 2004, manufactured housing represented 72 percent of total sales, while recreational vehicles accounted for the remaining 28 percent. In fiscal 2003, 70 percent of total sales were represented by manufactured housing, while the remaining 30 percent was recreational vehicles.

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Table of Contents

Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 5 Industry Segment Information, continued
                         
(Dollars in thousands)   2005     2004     2003  
SALES
                       
Manufactured housing
  $ 335,394     $ 311,354     $ 294,349  
Recreational vehicles
    118,930       122,546       126,966  
 
                 
Total sales
  $ 454,324     $ 433,900     $ 421,315  
 
                 
EARNINGS BEFORE INCOME TAXES
                       
OPERATING EARNINGS (LOSS)
                       
Manufactured housing
  $ 12,296     $ 13,035     $ 11,116  
Recreational vehicles
    (2,547 )     150       439  
General corporate expenses
    (3,561 )     (4,326 )     (3,214 )
 
                 
Total operating earnings
    6,188       8,859       8,341  
Interest income
    2,474       1,247       1,995  
 
                 
Earnings before income taxes
  $ 8,662     $ 10,106     $ 10,336  
 
                 
IDENTIFIABLE ASSETS
                       
OPERATING ASSETS
                       
Manufactured housing
  $ 77,096     $ 75,079     $ 71,225  
Recreational vehicles
    23,222       24,478       22,195  
 
                 
Total operating assets
    100,318       99,557       93,420  
U.S. TREASURY BILLS AND NOTES
    137,119       141,611       145,721  
 
                 
Total assets
  $ 237,437     $ 241,168     $ 239,141  
 
                 
DEPRECIATION
                       
Manufactured housing
  $ 2,724     $ 2,777     $ 3,103  
Recreational vehicles
    665       673       682  
 
                 
Total depreciation
  $ 3,389     $ 3,450     $ 3,785  
 
                 
CAPITAL EXPENDITURES
                       
Manufactured housing
  $ 1,354     $ 1,158     $ 1,230  
Recreational vehicles
    1,002       770       293  
 
                 
Total capital expenditures
  $ 2,356     $ 1,928     $ 1,523  
 
                 

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Skyline Corporation and Subsidiary Companies
Notes to Consolidated Financial Statements
NOTE 5 Industry Segment Information, continued
Operating earnings represent earnings before interest income 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.
NOTE 6 Financial Summary by Quarter
Financial Summary by Quarter
Unaudited
(Dollars in thousands, except per share data)
                                         
    1st     2nd     3rd     4th        
2005   Quarter     Quarter     Quarter     Quarter     Year  
Sales
  $ 117,567     $ 121,031     $ 96,219     $ 119,507     $ 454,324  
Gross profit
    11,888       13,873       9,430       14,405       49,596  
Net earnings (loss)
    806       1,882       (351 )     3,115       5,452  
Basic earnings (loss) per share
    .10       .22       (.04 )     .37       .65  
                                         
    1st     2nd     3rd     4th        
2004   Quarter     Quarter     Quarter     Quarter     Year  
Sales
  $ 110,149     $ 114,996     $ 91,255     $ 117,500     $ 433,900  
Gross profit
    14,054       13,982       8,345       14,001       50,382  
Net earnings (loss)
    2,037       2,068       (718 )     2,754       6,141  
Basic earnings (loss) per share
    .24       .25       (.09 )     .33       .73  

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Table of Contents

     
Item 9.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
   
 
  None
 
   
Item 9A.
  Controls and Procedures
 
   
 
  Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures
 
   
 
  As of May 31, 2005, the Corporation conducted an evaluation, under the supervision and participation of management including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective as of May 31, 2005.
 
   
 
  Management’s Report on Internal Control over Financial Reporting
 
   
 
  Management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
 
   
 
  The Corporation’s internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Corporation’s assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Corporation’s receipts and expenditures are being made only in accordance with authorizations of management and directors; provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.
 
   
 
  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

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Item 9A.
  Controls and Procedures, continued
 
   
 
  Management’s Report of Internal Control over Financial Reporting, continued
 
   
 
  Management of the Corporation has assessed the effectiveness of the Corporation’s internal control over financial reporting based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
   
 
  Management’s assessment included an evaluation of the design of the Corporation’s internal control over financial reporting, and testing of the operational effectiveness of the Corporation’s internal control over financing reporting.
 
   
 
  Based on this assessment, management has concluded that the Corporation’s internal control over financial reporting was effective as of May 31, 2005.
 
   
 
  PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the Corporation’s financial statements included in this Annual Report on Form 10-K, has also audited management’s assessment of the effectiveness of the Corporation’s internal control over financial reporting and the effectiveness of the Corporation’s internal control over financial reporting as of May 31, 2005, and their report thereon is included in Item 8.
 
   
 
  Changes in Internal Control over Financial Reporting
 
   
 
  No change in the Corporation’s internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended May 31, 2005 that materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
 
   
     
Item 9B.
  Other Information
 
   
 
  None

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PART III
Item 10. Executive Officers and Significant Employees of the Registrant (Officers are elected annually.)
     
Item 10.
  Executive Officers and Significant Employees of the Registrant (Officers are elected annually.)
                 
    Name   Age   Position
 
  Thomas G. Deranek     69     Vice Chairman and Chief Executive Officer
 
               
 
  William H. Murschel     60     President and Chief Operations Officer
 
               
 
  Terrence M. Decio     53     Vice President-Marketing and Sales
 
               
 
  James R. Weigand     50     Chief Financial Officer and Secretary
 
               
 
  Christopher R. Leader     46     Vice President-Operations
 
               
 
  Charles W. Chambliss     55     Vice President-Product Development and Engineering
 
               
 
  Jon S. Pilarski     42     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 and 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, Vice President-Marketing and Sales, joined the Corporation in 1973. He was elected Vice President in 1985, Senior Vice President in 1991, Senior Executive Vice President in 1993 and Vice President-Marketing and Sales in 2004.
 
   
 
  James R. Weigand, Chief Financial Officer and Secretary, joined the Corporation in 1991 as Controller. He was elected an officer in 1994, Vice President-Finance & Treasurer and Chief Financial Officer in 1997 and Secretary in 2004.
 
   
 
  Christopher R. Leader, Vice President-Operations, joined the Corporation in January 1997 and was elected Vice President in September 1997.
 
   
 
  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.
 
   
 
  The Corporation has a Code of Ethics that applies to all employees, including the Chief Executive Officer, Chief Financial Officer and Corporate Controller. The ethics policy is posted on the Corporation’s website, http://www.skylinecorp.com.

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Item 15. Exhibits, Financial Statement Schedules
     
Item 15.
  Exhibits, Financial Statement Schedules
             
 
    (a)(1 )   Financial Statements
 
           
 
          Financial statements for the Corporation are listed in the index under Item 8 of this document.
 
           
             
 
    (a)(2 )   Financial Statement Schedules
 
           
 
          All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
 
           
             
 
    (a)(3 )   Index to Exhibits
 
           
 
          Exhibits (Numbered according to Item 601 of Regulation S-K, Exhibit Table)
 
           
 
    (3)(i )   Articles of Incorporation
 
           
 
    (3)(ii )   By-Laws
 
           
 
    (14 )   Code of Ethics
 
           
 
    (21 )   Subsidiaries of the Registrant
 
           
 
    (31.1 )   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002-Rule 13a-14(a)/15d –14(a)
 
           
 
    (31.2 )   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002-Rule 13a-14(a)/15d –14(a)
 
           
 
    (32.1 )   Certification of Periodic Financial Reports Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
           
 
    (32.2 )   Certification of Periodic Financial Reports Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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 25, 2005
 
  BY:   /s/ Thomas G. Deranek
 
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 25, 2005
 
  BY:   /s/ James R. Weigand
 
James R. Weigand, Chief Financial Officer and Secretary
   
 
               
DATE:
  July 25, 2005
 
  BY:   /s/ Jon S. Pilarski
 
Jon S. Pilarski, Corporate Controller
   
 
               
DATE:
  July 25 2005
 
  BY:   /s/ Arthur J. Decio
 
Arthur J. Decio, Director, Chairman of the Board, serving in a non-executive officer capacity
   
 
               
DATE:
  July 25, 2005
 
  BY:   /s/ Jerry Hammes
 
   
 
          Jerry Hammes, Director    
 
               
DATE:
  July 25, 2005
 
  BY:   /s/ Ronald F. Kloska
 
Ronald F. Kloska, Director
   
 
               
DATE:
  July 25, 2005   BY:        
 
 
 
     
 
William H. Lawson, Director
   
 
               
DATE: 
  July 25, 2005
 
  BY:   /s/ David T. Link
 
David T. Link, Director
   
 
               
DATE:
  July 25, 2005   BY:        
 
 
 
     
 
Andrew J. McKenna, Director
   

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