Skyline Champion Corp - Annual Report: 2009 (Form 10-K)
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended May 31, 2009 | ||
or
|
||
o
|
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 incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
P. O. Box 743, 2520 By-Pass Road Elkhart, Indiana (Address of principal executive offices) |
46515 (Zip Code) |
Registrants telephone number, including area code:
(574) 294-6521
Securities registered pursuant to Section 12 (b) of
the Act:
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
Common Stock, $.0277 Par Value
|
New York Stock Exchange |
Securities registered pursuant to section 12 (g) of
the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). o Yes o No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405
of this chapter) is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this
Form 10-K
or an amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in Rule
12b-2 of the
Act). Yes o No þ
The aggregate market value of the common stock held by
non-affiliates of the registrant (6,852,762 shares) based
on the closing price on the New York Stock Exchange on
November 30, 2008 was $158,093,219.
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.
Shares Outstanding |
||
Title of Class
|
July 23, 2009
|
|
Common Stock
|
8,391,244 |
DOCUMENTS INCORPORATED BY REFERENCE
Title
|
Form 10-K
|
|
Proxy Statement dated August 12, 2009
for Annual Meeting of Shareholders to be held September 21, 2009 |
Part III, Items 10 14 |
FORM 10-K
DOCUMENTS
INCORPORATED BY REFERENCE
Certain information required to be included in Part III of
this
Form 10-K
is also included in the registrants Proxy Statement used
in connection with its 2009 Annual Meeting of Shareholders to be
held on September 21, 2009 (2009 Proxy
Statement).
TABLE OF
CONTENTS
1
Table of Contents
PART I
Item 1. | Business. |
General
Development of Business
Skyline Corporation was originally incorporated in Indiana in
1959, as successor to a business founded in 1951. Skyline
Corporation and its consolidated subsidiaries (the
Corporation) design, produce and distribute
manufactured housing (single section homes, multi-section homes
and modular homes) and towable recreational vehicles (travel
trailers, fifth wheels and park models).
The Corporation, which is one of the largest producers of
manufactured homes in the United States, sold 2,712 manufactured
homes in fiscal year 2009.
The Corporations manufactured homes are marketed under a
number of trademarks. They are available in lengths ranging from
30 to 76 and in singlewide widths from 12 to
16, doublewide widths from 18 to 32,
triplewide widths from 30 to 46, and quadruple
widths from 56 to 60. The area of a singlewide
ranges from approximately 400 to 1,200 square feet, a
doublewide from approximately 700 to 2,400 square feet, a
triplewide from approximately 1,600 to 2,900 square feet,
and a quadruple at approximately 1,600 square feet.
The Corporation also sold 2,832 recreational vehicles in fiscal
2009, which are sold under a number of trademarks for travel
trailers, fifth wheels and park models.
Financial
Information about Segments
Sales, operating results and total assets for the manufactured
housing and recreational vehicle segments are 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
Products and Markets
The Corporation designs, produces and distributes manufactured
housing and towable recreational vehicles. Popular floor plans
and virtual product tours are available at the
Corporations internet website,
http://www.skylinecorp.com.
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.
The Corporation provides the retail purchaser of its
manufactured homes with a full fifteen-month warranty against
defects in design, materials and workmanship. Recreational
vehicles are covered by a one-year warranty. The warranties are
backed by service departments located at the Corporations
manufacturing facilities and an extensive field service system.
The amount and percentage of sales contributed by the
manufactured housing and recreational vehicle segments is noted
in Item 7.
Method
of Distribution
The Corporations manufactured homes are distributed by
approximately 240 independent dealers at 400 locations
throughout the United States, and recreational vehicles are
distributed by approximately 130 independent dealers at 150
locations throughout the United States. These are generally not
exclusive dealerships and it is believed that most dealers also
sell products of other manufacturers.
2
Table of Contents
Item 1. | Business (Continued). |
The Corporations 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 Corporations
products. In accordance with industry practice, certain
financial institutions which finance dealer purchases require
the Corporation to execute repurchase agreements in which the
Corporation agrees, 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. Losses related to repurchases totaled $235,000 and
$6,000 in fiscal years 2009 and 2008, respectively. No losses
were incurred in fiscal 2007. Additional information regarding
these repurchase agreements is included in Note 2,
Commitments and 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.
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 Corporations 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 maintain significant inventories of
either raw materials or finished goods. In addition, there are
no 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
Corporations production is based on a relatively short
manufacturing cycle and dealers orders, which continuously
fluctuate. As such, the existence of backlog is insignificant at
any given date and does not typically provide a reliable
indication of the status of the Corporations business.
Government
Contracts
The Corporation has had no government contracts during the past
three years.
3
Table of Contents
Item 1. | Business (Continued). |
Competitive
Conditions
The manufactured housing and recreational vehicle industries are
highly competitive, with particular emphasis on price and
features offered. The Corporations competitors within its
respective industries are numerous, ranging from multi-billion
dollar corporations to relatively small and specialized
manufacturers. In addition, the manufactured housing segment
also competes with companies that provide other forms of
housing, such as new and existing site-built homes, apartments,
condominiums and townhouses.
The manufactured housing industry shipped approximately 82,000
homes in calendar year 2008. In the same period, the Corporation
shipped 3,581 homes for a 4.4 percent market share. In
calendar year 2007, approximately 96,000 homes were shipped by
the industry. In that period, the Corporation shipped 5,140
homes for a 5.4 percent market share.
In fiscal year 2009 the manufactured housing industry shipped
approximately 65,000 units, while the Corporation shipped
2,712 units for a 4.2 percent market share.
In fiscal 2008, industry shipments totaled approximately
94,000 units, while the Corporation shipped
4,608 units for a 4.9 percent market share.
Regarding the recreational vehicle industry, the following
tables show the Corporations competitive position in the
recreational vehicle product lines it sells.
Units Shipped |
Units Shipped |
|||||||||||||||||||||||
Calendar Year 2008 | Calendar Year 2007 | |||||||||||||||||||||||
Market |
Market |
|||||||||||||||||||||||
Industry | Skyline | Share | Industry | Skyline | Share | |||||||||||||||||||
Travel Trailer
|
128,000 | 4,009 | 3.1 | % | 178,000 | 5,193 | 2.9 | % | ||||||||||||||||
Fifth Wheels
|
57,000 | 333 | 0.6 | % | 81,000 | 222 | 0.3 | % | ||||||||||||||||
Park Models
|
7,000 | 127 | 1.9 | % | 9,000 | 112 | 1.2 | % | ||||||||||||||||
Units Shipped |
Units Shipped |
|||||||||||||||||||||||
Fiscal Year 2009 | Fiscal Year 2008 | |||||||||||||||||||||||
Market |
Market |
|||||||||||||||||||||||
Industry | Skyline | Share | Industry | Skyline | Share | |||||||||||||||||||
Travel Trailer
|
88,000 | 2,564 | 2.9 | % | 172,000 | 5,299 | 3.1 | % | ||||||||||||||||
Fifth Wheels
|
36,000 | 188 | 0.5 | % | 78,000 | 357 | 0.5 | % |
The competitive position for park models is not listed because
industry data based on the Corporations fiscal 2009 is not
available.
Both the manufactured housing and recreational vehicle segments
of the Corporations 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 Corporations 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 Corporations 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.
4
Table of Contents
Item 1. | Business (Continued). |
Environmental
Quality
The Corporation believes that compliance with federal, state and
local requirements with respect to environmental quality will
not require any material capital expenditures for plant or
equipment modifications which would adversely affect earnings.
Other
Regulations
The U.S. Department of Housing and Urban Development (HUD)
has set national manufactured home construction and safety
standards and implemented recall and other regulations since
1976. The National Manufactured Housing 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 HUDs 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
recreational vehicle 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 Corporations 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 Corporations operations are subject to the Federal
Occupational Safety and Health Act, and are routinely inspected
thereunder.
The transportation and placement (in the case of manufactured
homes) of the Corporations 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 communities.
The Corporation is also subject to many state manufacturer
licensing and bonding requirements, and to dealer day in court
requirements in some states.
The Corporation believes that it is currently in compliance with
the above regulations.
Number
of Employees
The Corporation employs approximately 1,300 people at the
present time.
Executive
Officers of the Corporation
Information regarding the Corporations executive officers
is located in this document under Part III, Item 10.
5
Table of Contents
Item 1. | Business (Continued). |
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, Proxy
Statements 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 (SEC). The Corporations internet site is
http://www.skylinecorp.com.
A copy of the Corporations 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.
The public may read and copy any materials the Corporation has
filed with the SEC at the SECs Public Reference Room at
100 F Street, NE, Washington, DC 20549. The public may
also obtain information on the operation of the Public Reference
Room by calling the SEC at
1-800-SEC-0330.
The SEC maintains an internet website
(http://www.sec.gov)
that contains reports, proxy and information statements, and
other information regarding issuers that file electronically
with the SEC.
Item 1A. | Risk Factors. |
Investors or potential investors should carefully consider the
risks described below. Additional risks of which the Corporation
is presently unaware or that the Corporation considers
immaterial may also impair business operations and hinder
financial performance.
Retail
Financing Availability
Customers who purchase the Corporations manufactured homes
and recreational vehicles generally obtain retail financing from
third party lenders. The availability, terms and cost of retail
financing depend on the lending practices of financial
institutions, governmental policies and economic and other
conditions, all of which are beyond the Corporations
control. A customer seeking to purchase a manufactured home
without land will generally pay a higher interest rate and have
a shorter loan maturity versus a customer financing the purchase
of land and a home. This difference is due to most states
classifying home-only manufactured housing loans as personal
property rather than real property for purposes of taxation and
lien perfection.
In recent years many lenders of home-only financing have
tightened credit underwriting standards, with some deciding to
exit the industry. These actions resulted in decreased
availability of retail financing, causing a negative effect on
sales and operating results. If retail financing were to be
further curtailed, sales, operating results and cash flows could
be adversely affected.
Wholesale
Financing Availability
Independent dealers of the Corporations products generally
finance their inventory purchases with wholesale floor plan
financing provided by lending institutions. A dealers
ability to obtain financing is significantly affected by the
number of lending institutions offering floor planning, and by
an institutions lending limits. In recent years the
manufactured housing and recreational vehicle industries
experienced a reduction in both the number of lenders offering
floor planning, and the amount of money available for financing.
These events could have a negative impact on a dealers
ability to purchase manufactured housing and recreational
vehicle products, resulting in lower sales, operating results
and cash flows.
Dependence
on Independent Dealers
The Corporation sells its manufactured homes and recreational
vehicles to independent dealers. These dealers are not obligated
to exclusively sell the Corporations products, and may
choose to sell competitors products. In addition, a dealer
may become financially insolvent and be forced to close its
business. Both scenarios could have an adverse effect on sales,
operating results and cash flows.
6
Table of Contents
Item 1A. | Risk Factors (Continued). |
Dealer
Inventories
As wholesale shipments of manufactured homes and recreational
vehicles within each respective industry exceed retail sales,
dealer inventories increase to a level where dealers decrease
orders from manufacturers. As manufacturers respond to reduced
demand, many either offer discounts to maintain production
volumes or curtail production levels. Both outcomes could have a
negative impact on sales, operating results and cash flows.
Contingent
Repurchase Agreements
As referenced in Note 2 to the Notes to the Consolidated
Financial Statements in Item 8, the Corporation is
contingently liable under repurchase agreements with certain
financial institutions providing inventory financing for
retailers of its products. The Corporation could be required to
fulfill some or all of the repurchase agreements, resulting in
increased expense and reduced cash flows.
Cost and
Availability of Raw Materials
Prices and availability of raw materials used to manufacture the
Corporations products can change significantly due to
fluctuations in supply and demand. In addition, the cost of raw
materials is also influenced by increased transportation costs.
The Corporation has historically been able to have an adequate
supply of raw materials by maintaining good relations with its
vendors. Increased prices have historically been passed on to
dealers by raising the price of manufactured homes and
recreational vehicles. There is no certainty that the
Corporation will be able to pass on future price increases and
maintain an adequate supply of raw materials. The inability to
raise the price of its products and to maintain a proper supply
of materials could have a negative impact on sales, operating
results and cash flows.
Competition
As noted in Item 1, the manufactured housing and
recreational vehicle industries are highly competitive with
particular emphasis on price and features offered. Some of the
Corporations competitors are vertically integrated by
owning retail, consumer finance and insurance operations. This
integration may provide competitors with an advantage. In
addition, the Corporations manufactured homes compete with
other forms of housing, such as new and existing site-built
homes, apartments, condominiums and townhouses. The inability to
effectively compete in this environment could result in lower
sales, operating results and cash flows.
Cyclical
and Seasonal Nature of Business
The industries in which the Corporation operates are highly
cyclical, and are impacted by but not limited to the following
conditions:
| Availability of wholesale and retail financing | |
| Consumer confidence | |
| Interest rates | |
| Demographic and employment trends | |
| Availability of used or repossessed homes or recreational vehicles | |
| Impact of inflation | |
| Increased global tensions. |
The manufactured housing and recreational vehicle industries are
experiencing declining sales primarily as the result of
recessionary economic conditions and lack of retail and
wholesale financing. Ongoing weakness in both industries could
have an adverse effect in demand for the Corporations
products.
7
Table of Contents
Item 1A. | Risk Factors (Continued). |
Sales in both industries are also seasonal in nature with sales
being weakest in the winter months. Seasonal changes, in
addition to continued weakness in demand in one or both of the
Corporations market segments, could materially impact the
Corporations sales, operating results and cash flows.
Changing
Consumer Preferences
Changes in consumer preferences for manufactured housing and
recreational vehicles occur over time, and consequently the
Corporation responds to changing demand by evaluating the market
acceptability of its products. Delays in responding to changing
consumer preferences could have an adverse effect on sales,
operating results and cash flows.
Increased
Fuel Prices
The Corporations recreational vehicle products depend on
the use of vehicles that operate on gasoline or diesel fuel. In
the Corporations history there have been periods where the
price of gasoline and diesel fuel dramatically increased. These
increases resulted in greater cost associated with recreational
vehicle travel. This trend could result in decreased sales,
operating results and cash flows.
Governmental
Regulations
As noted in Item 1, the Corporation is subject to various
governmental regulations. Implementation of new regulations or
amendments to existing regulations could significantly increase
the cost of the Corporations products. In addition,
failure to comply with present or future regulations could
result in fines or potential civil or criminal liability. Both
scenarios could negatively impact sales, operating results and
cash flows.
Dependence
on Executive Officers and Other Key Personnel
The Corporation depends on the efforts of its executive officers
and certain key employees. The loss of the service of one or
more of these individuals could have an adverse effect on the
sales, operating results and cash flows of the Corporation.
Item 1B. | Unresolved Staff Comments. |
None
8
Table of Contents
Item 2. | Properties. |
The Corporation owns its corporate offices and design facility,
which are located in Elkhart, Indiana.
The Corporations 14 manufacturing facilities, all of which
are owned, are as follows:
Location
|
Products
|
|
California, San Jacinto
|
Manufactured Housing | |
California, Hemet
|
Recreational Vehicles | |
California, Woodland
|
Manufactured Housing | |
Florida, Ocala
|
Manufactured Housing | |
Indiana, Bristol
|
Manufactured Housing | |
Indiana, Elkhart
|
Recreational Vehicles | |
Kansas, Arkansas City
|
Manufactured Housing | |
Kansas, Halstead
|
Manufactured Housing | |
Ohio, Sugarcreek
|
Manufactured Housing | |
Oregon, McMinnville
|
Manufactured Housing | |
Pennsylvania, Leola
|
Manufactured Housing | |
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. The Corporation has two idle facilities in Ocala, Florida,
and idle facilities in Hemet, California; Elkhart, Indiana;
Bossier City, Louisiana; Mocksville, North Carolina and Ephrata,
Pennsylvania.
In the third quarter of fiscal 2009, the Corporation sold an
idle recreational vehicle facility in McMinnville, Oregon. The
sale resulted in a pre-tax gain of $3,396,000. In the same
period of fiscal year 2008, the Corporation sold an idle
manufactured housing facility located in Goshen, Indiana. The
sale resulted in a pre-tax gain of $670,000.
It is extremely difficult to determine the unit productive
capacity of the Corporation because of the ever-changing product
mix.
The Corporation believes that its plant facilities, machinery
and equipment are well maintained and are in good operating
condition.
Item 3. | Legal Proceedings. |
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 Corporations results of operations
or financial position.
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, 2009.
9
Table of Contents
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
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 2009 and 2008. At May 31, 2009,
there were 889 shareholders of record of Skyline
Corporation common stock. A quarterly summary of the market
price is listed for the fiscal years ended May 31, 2009 and
2008.
Common Stock |
Dividends |
|||||||||||||||||||||||
Price Range |
Declared Per |
|||||||||||||||||||||||
2009 | 2008 | Share | ||||||||||||||||||||||
High | Low | High | Low | 2009 | 2008 | |||||||||||||||||||
First Quarter
|
$ | 29.22 | $ | 21.42 | $ | 40.58 | $ | 26.93 | $ | .18 | $ | .18 | ||||||||||||
Second Quarter
|
$ | 30.60 | $ | 15.51 | $ | 36.82 | $ | 27.51 | $ | .18 | $ | .18 | ||||||||||||
Third Quarter
|
$ | 27.25 | $ | 15.55 | $ | 35.81 | $ | 25.11 | $ | .18 | $ | .18 | ||||||||||||
Fourth Quarter
|
$ | 23.25 | $ | 14.62 | $ | 34.60 | $ | 25.50 | $ | .18 | $ | .18 |
The name, address and phone number of our stock transfer agent
and registrar is:
Computershare Investor Services
Shareholder Services Division
Two North LaSalle Street
Chicago, Illinois 60602
312-588-4237
Shareholder Services Division
Two North LaSalle Street
Chicago, Illinois 60602
312-588-4237
10
Table of Contents
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (Continued) |
Performance
The graph below compares the cumulative, five-year shareholder
returns on Skyline Common Stock to the cumulative, five-year
shareholder returns on (a) the S&P 500 Stock Index,
and (b) an index of peer companies selected by Skyline. The
Peer Group is composed of four publicly-held companies which
were selected based on similarities in their products and their
competitive position in the industry. The companies comprising
the Peer Group are weighted by their respective market
capitalization and include the following: Cavalier Homes, Inc.,
Champion Enterprises, Inc., Coachmen Industries, Inc. and
Fleetwood Enterprises, Inc. The comparison assumes $100 was
invested on May 31, 2004 in Skyline common stock and in
each of the foregoing indices, including reinvestment of
dividends (although Skyline has no dividend reinvestment plan).
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Skyline Corporation, The S&P 500 Index
And A Peer Group
Among Skyline Corporation, The S&P 500 Index
And A Peer Group
![(PERFORMANCE GRAPH)](https://www.sec.gov/Archives/edgar/data/0000090896/000095012309028438/c52163c5216301.gif)
* | $100 invested on 5/31/04 in stock or index, including reinvestment of dividends. | |
Fiscal year ending May 31. |
5/04 | 5/05 | 5/06 | 5/07 | 5/08 | 5/09 | |||||||||||||||||||||||||
Skyline Corporation
|
100.00 | 101.90 | 98.10 | 94.21 | 77.76 | 59.80 | ||||||||||||||||||||||||
S&P 500
|
100.00 | 108.24 | 117.59 | 144.39 | 134.72 | 90.84 | ||||||||||||||||||||||||
Peer Group
|
100.00 | 85.90 | 96.37 | 92.07 | 53.25 | 4.47 | ||||||||||||||||||||||||
Copyright
©
2009 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
11
Table of Contents
Item 6. | Selected Financial Data. |
Dollars
in thousands except per share data
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
FOR THE YEAR
|
||||||||||||||||||||
Sales
|
$ | 166,676 | $ | 301,765 | $ | 365,473 | $ | 508,543 | $ | 454,324 | ||||||||||
Net (loss) earnings
|
$ | (15,434 | ) | $ | (5,556 | ) | $ | 2,593 | $ | 14,292 | $ | 5,452 | ||||||||
Cash dividends declared
|
$ | 6,042 | $ | 6,041 | $ | 22,824 | $ | 6,041 | $ | 14,433 | ||||||||||
Capital expenditures
|
$ | 1,574 | $ | 2,092 | $ | 4,968 | $ | 2,485 | $ | 2,356 | ||||||||||
Depreciation
|
$ | 2,704 | $ | 3,181 | $ | 3,148 | $ | 3,154 | $ | 3,389 | ||||||||||
Weighted average common shares outstanding
|
8,391,244 | 8,391,244 | 8,391,244 | 8,391,244 | 8,391,244 | |||||||||||||||
AT YEAR END
|
||||||||||||||||||||
Working capital
|
$ | 104,374 | $ | 132,594 | $ | 141,828 | $ | 164,225 | $ | 154,663 | ||||||||||
Current ratio
|
7.8:1 | 7.1:1 | 6.2:1 | 5.1:1 | 5.1:1 | |||||||||||||||
Property, plant and equipment, net
|
$ | 30,598 | $ | 32,535 | $ | 35,806 | $ | 34,069 | $ | 35,838 | ||||||||||
Total assets
|
$ | 168,119 | $ | 196,999 | $ | 214,940 | $ | 248,403 | $ | 237,437 | ||||||||||
Total liabilities
|
$ | 23,377 | $ | 30,781 | $ | 37,125 | $ | 50,649 | $ | 47,934 | ||||||||||
Shareholders equity
|
$ | 144,742 | $ | 166,218 | $ | 177,815 | $ | 197,754 | $ | 189,503 | ||||||||||
PER SHARE
|
||||||||||||||||||||
Basic (loss) earnings
|
$ | (1.84 | ) | $ | (.66 | ) | $ | .31 | $ | 1.70 | $ | .65 | ||||||||
Cash dividends declared
|
$ | .72 | $ | .72 | $ | 2.72 | $ | .72 | $ | 1.72 | ||||||||||
Shareholders equity
|
$ | 17.25 | $ | 19.81 | $ | 21.19 | $ | 23.57 | $ | 22.58 |
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Corporation designs, produces and distributes manufactured
housing (single-section, multi-section and modular homes) and
towable recreational vehicles (travel trailers, fifth wheels and
park models) to independent dealers and manufactured housing
communities located throughout the United States (U.S.). To
better serve the needs of its dealers and communities, the
Corporation has fourteen manufacturing facilities in ten states.
Manufactured housing and recreational vehicles are sold to
dealers and communities 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
Corporations northern plants. Recreational vehicle sales
are generally higher in the spring and summer months than in the
fall and winter months.
Manufactured
Housing and Recreational Vehicle Industry Conditions
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 a
continuing decline in industry sales. In recent years industry
sales, as published by the Manufactured Housing Institute,
decreased as follows:
Calendar Year
|
Unit Sales | |||
2006
|
118,000 | |||
2007
|
96,000 | |||
2008
|
82,000 |
12
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Manufactured
Housing and Recreational Vehicle Industry
Conditions (Continued)
This decline, caused primarily by the current economic
recession, rising unemployment, decreasing consumer confidence
and tightening credit markets for both retail and wholesale
financing resulted in calendar 2008 industry sales of
approximately 82,000 units, the lowest on record.
Furthermore, the Manufactured Housing Institute reported that
the seasonally adjusted annual rate (SAAR) of unit shipments in
May 2009 was approximately 48,000. The SAAR corrects for
seasonal variations in shipments and projects an annual
shipments pace based on the current monthly total.
Tightening credit markets for retail and wholesale financing has
become a significant challenge for the manufactured housing
industry. According to the Manufactured Housing Institute, a
lack of retail financing options and restrictive credit
standards has affected manufactured home buyers for the last
decade. This problem was magnified in 2008 as the credit
crunch forced more manufactured home personal property
lenders out of business, and compelled others to scale back
originations. Many mortgage insurance providers also ceased
offering policies on manufactured home loans. These factors, in
addition to a further restricting of credit standards, resulted
in fewer retail loan approvals and fewer manufactured home
shipments.
Manufactured housing shipments were also hindered by a
significant decline in available inventory financing. According
to the Manufactured Housing Institute, in the fourth quarter of
2008, three national floor plan lenders announced plans to scale
back their support for industry dealers. In addition, a January
2009 survey of HUD-Code dealers revealed that 60 percent of
dealers lost at least one source of floor plan lending. Among
dealers that lost a floor plan lending source, 70 percent
had not secured a replacement.
Manufactured housing shipments are also negatively impacted by a
recession in the site-built housing industry. The site-built
housing industry is currently experiencing declining existing
home sales, housing starts and home prices. In addition, the
industry is also hindered by increasing home foreclosures.
In the recreational vehicle segment, the Corporation sells
travel trailers, fifth wheels and park models. Sales of
recreational vehicles are influenced by changes in consumer
confidence, the availability of retail and wholesale financing
and gasoline prices. In recent years industry sales of travel
trailers and fifth wheels, as published by the Recreational
Vehicle Industry Association, declined as follows:
Calendar Year
|
Unit Sales | |||
2006
|
292,000 | |||
2007
|
259,000 | |||
2008
|
185,000 | |||
2009 (estimated)
|
112,000 |
This decrease is the result of the economic recession,
decreasing consumer confidence and household wealth, tightening
credit markets for retail and wholesale financing, excess
inventory of new recreational vehicles, recreational vehicle
dealers purchasing repossessed units, and rising gasoline prices
throughout most of 2008. Unit sales for 2009 are estimated to
decline further to a total of approximately 112,000.
As a result of declining market conditions, the Corporation took
the following actions during fiscal 2009:
| Consolidated the operations of a manufactured housing facility in Ephrata, Pennsylvania and a manufactured housing facility in Leola, Pennsylvania | |
| Consolidated the operations of the two manufactured housing facilities in Ocala, Florida | |
| Consolidated the operations of the two recreational vehicle facilities in Hemet, California | |
| Consolidated the operations of the two recreational vehicle facilities in Elkhart, Indiana | |
| Sold an idle recreational vehicle facility in McMinnville, Oregon |
13
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Manufactured
Housing and Recreational Vehicle Industry
Conditions (Continued)
| Pursued opportunities to expand manufactured housing, park model and recreational vehicle sales in the United States and Canada | |
| Pursued opportunities to expand park model sales in the United States. |
Outlook
The Corporation encountered a challenging business environment
in fiscal 2009, and it cannot determine with certainty the
business environment for fiscal 2010. This environment includes
the Manufactured Housing Institute reporting a SAAR in May 2009
of approximately 48,000 units. The Recreational Vehicle
Industry Association forecasts travel trailer and fifth wheel
unit sales at approximately 112,000 in calendar 2009.
The Manufactured Housing Institute reports that recent
legislative actions could have a favorable impact on industry
sales. The Housing and Economic Recovery Act of 2008 (HERA)
contains provisions that will facilitate changes to the Federal
Housing Administrations Title I Insurance Program.
This program insures manufactured housing personal property
loans, and in 2009 the loan limits increased from $48,600 to
$69,678. HERA also imposed on Fannie Mae and Freddie Mac a
Duty to Serve the manufactured housing industry,
where both companies will be compelled to become more involved
in funding manufactured housing loans. Beginning in 2010, both
Fannie Mae and Freddie Mac will be evaluated yearly on whether
or not this obligation is met. The American Recovery and
Reinvestment Act of 2009 contains a tax credit up to $8,000 that
applies to any purchase of a primary residence by a first-time
home buyer through the end of 2009. Finally, the Small Business
Administration, (SBA), initiated a pilot program to provide
floor plan lending to manufactured housing and recreational
vehicle dealers. The program commenced July 1, 2009, and is
expected to operate until September 30, 2010, at which time
the SBA will determine whether or not to extend the program.
The Recreational Vehicle Industry Association reports that
although travel trailer and fifth wheel unit sales are estimated
at approximately 112,000 for calendar 2009, population trends
continue to favor recreational vehicle sales. Baby-boomers
continue to enter the age range where recreational vehicle
ownership is the highest. By the end of this decade, the number
of consumers aged 50 to 64 will total 57 million,
38 percent higher than in 2000. Another positive trend is
the credit worthiness of RV consumers. From 1999 to 2007, the
delinquency rate on RV loans was approximately one percent as
compared to two percent for other consumer loans.
The Corporation is actively reviewing ways to decrease expenses
and improve processes, communicating with dealers and
communities to take advantage of sales opportunities, and
positioning its products to be competitive in the marketplace.
With a healthy position in cash and U.S. Treasury Bills, no
bank debt, and experienced employees, the Corporation is
prepared to meet the challenges ahead.
14
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Outlook (Continued)
Results
of Operations Fiscal 2009 Compared to Fiscal
2008
Sales
and Unit Shipments
2009 | Percent | 2008 | Percent | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Sales
|
||||||||||||||||||||
Manufactured Housing
|
$ | 123,930 | 74.4 | $ | 214,794 | 71.2 | $ | 90,864 | ||||||||||||
Recreational Vehicles
|
42,746 | 25.6 | 86,971 | 28.8 | 44,225 | |||||||||||||||
Total Sales
|
$ | 166,676 | 100.0 | $ | 301,765 | 100.0 | $ | 135,089 | ||||||||||||
Unit Shipments
|
||||||||||||||||||||
Manufactured Housing
|
2,712 | 48.9 | 4,608 | 44.3 | 1,896 | |||||||||||||||
Recreational Vehicles
|
2,832 | 51.1 | 5,797 | 55.7 | 2,965 | |||||||||||||||
Total Unit Shipments
|
5,544 | 100.0 | 10,405 | 100.0 | 4,861 | |||||||||||||||
Manufactured housing unit sales decreased approximately
41 percent, while the industry decreased approximately
31 percent. In certain geographic markets, such as Texas
and Oklahoma, unit sales declined at a rate greater than the
overall industry. Adverse conditions that affected the
Corporations unit sales include:
| Competitors owning retail sales centers, giving them an advantage in displaying their product | |
| A competitor owning finance subsidiaries, giving them an advantage regarding wholesale and retail financing | |
| Dealers being unable to obtain wholesale financing | |
| Retail customers being unable to obtain retail financing | |
| Dealers purchasing repossessed units over new units | |
| Decreased sales to manufactured housing communities as a result of the communities managing inventory levels | |
| Changing consumer preference toward product with lower price points where the Corporation has limited models. |
In addressing these conditions, the Corporation is working with
the communities as they manage inventory levels, and developing
product with lower price points that will meet consumer demand.
Recreational vehicle unit sales decreased approximately
51 percent, while the industry unit sales for travel
trailers and fifth wheels decreased approximately
50 percent. Current industry unit sales data for park
models is not available.
Cost
of Sales
Percent of |
Percent of |
|||||||||||||||||||
2009 | Sales* | 2008 | Sales* | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Manufactured Housing
|
$ | 121,813 | 98.3 | $ | 194,822 | 90.7 | $ | 73,009 | ||||||||||||
Recreational Vehicles
|
43,809 | 102.5 | 84,134 | 96.7 | 40,325 | |||||||||||||||
Consolidated
|
$ | 165,622 | 99.4 | $ | 278,956 | 92.4 | $ | 113,334 | ||||||||||||
* | The percentages for manufactured housing and recreational vehicles are based on segment sales. The percentage for consolidated cost of sales is based on total sales. |
15
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Results
of Operations Fiscal 2009 Compared to Fiscal
2008 (Continued)
Manufactured housing and recreational vehicle cost of sales
decreased due to less sales volume and the variable nature of
many direct manufacturing costs. As a percentage of sales, cost
of sales increased as a result of certain manufacturing overhead
costs such as depreciation, property taxes and manufacturing
salaries remaining relatively constant despite lower sales. In
addition, the Corporation incurred during fiscal 2009
approximately $300,000 in manufacturing costs associated with
the consolidation of manufactured housing and recreational
vehicle facilities in Pennsylvania, Florida, California and
Indiana. In fiscal 2008, the Corporation incurred approximately
$800,000 in manufacturing costs associated with the
consolidation or closure of manufactured housing facilities in
Florida and Louisiana, and a recreational vehicle facility in
Oregon.
Selling
and Administrative Expenses
Percent of |
Percent of |
|||||||||||||||||||
2009 | Sales | 2008 | Sales | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Selling and Administrative Expenses
|
$ | 30,735 | 18.4 | $ | 36,770 | 12.2 | $ | 6,035 |
Selling and administrative expenses decreased due primarily to a
decrease in salaries, performance based compensation, and a
continuing effort to control costs. As a percentage of sales,
selling and administrative expenses increased due to certain
costs being fixed. In addition, approximately $800,000 in
severance costs was incurred for personnel at both the
Corporations headquarters and manufacturing facilities.
This reduction in personnel is estimated to yield an annualized
savings of $1,500,000.
Operating
Loss
Percent of |
Percent of |
|||||||||||||||
2009 | Sales* | 2008 | Sales* | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Manufactured Housing
|
$ | (18,304 | ) | (14.8 | ) | $ | (4,200 | ) | (2.0 | ) | ||||||
Recreational Vehicles
|
(9,435 | ) | (22.1 | ) | (7,750 | ) | (8.9 | ) | ||||||||
General Corporate Expenses
|
(1,942 | ) | (1.2 | ) | (2,011 | ) | (0.7 | ) | ||||||||
Income from Life Insurance Proceeds
|
380 | 0.2 | | | ||||||||||||
Gain on Sale of Idle Property, Plant and Equipment
|
3,396 | 2.0 | 670 | 0.2 | ||||||||||||
Total Operating Loss
|
$ | (25,905 | ) | (15.5 | ) | $ | (13,291 | ) | (4.4 | ) | ||||||
* | The percentages for manufactured housing and recreational vehicles are based on segment sales. The percentage for general corporate expenses, income from life insurance proceeds, gain on sale of idle property, plant and equipment and total operating loss are based on total sales. |
The operating loss for manufactured housing was primarily due to
the impact of decreased sales on the components of loss as noted
above. This segment was also negatively affected by
single-section unit sales increasing from 26 percent, as a
percentage of segment sales, in fiscal 2008 to 33 percent
in fiscal 2009. Single-section homes have lower margins as
compared to multi-section homes. The consolidation of the
manufactured housing facilities, the severance of personnel at
other manufactured housing facilities, and the severance of
personnel at the Corporate headquarters also had an adverse
effect on operating results.
The operating loss for recreational vehicles increased primarily
due to the impact of decreased sales on the components of
earnings as noted above. The consolidation of facilities in
California and Indiana also had a negative impact on operating
results.
16
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Results
of Operations Fiscal 2009 Compared to Fiscal
2008 (Continued)
The Corporation purchased life insurance contracts on certain
employees. The Corporation realized non-taxable income from life
insurance proceeds in the amount of $380,000, which is
separately stated in the Consolidated Statement of Operations
and Retained Earnings.
In the third quarter of fiscal 2009, the Corporation sold an
idle recreational vehicle facility located in McMinnville,
Oregon. The sale resulted in a pre-tax gain of $3,396,000. In
the same period of fiscal 2008, the Corporation sold an idle
manufactured housing facility located in Goshen, Indiana. The
sale resulted in a pre-tax gain of $670,000.
Interest
Income
2009 | 2008 | Decrease | ||||||||||
(Dollars in thousands) | ||||||||||||
Interest Income
|
$ | 911 | $ | 4,153 | $ | 3,242 |
Interest income is directly related to the amount available for
investment and the prevailing yields of U.S. Government
Securities. In fiscal 2009, the average amount available for
investment was approximately $96 million with a weighted
average yield of 1.6 percent. In fiscal 2008, the average
amount available for investment was approximately
$101 million with a weighted average yield of
4.1 percent.
Benefit
for Income Taxes
2009 | 2008 | Increase | ||||||||||
(Dollars in thousands) | ||||||||||||
Federal
|
$ | (8,749 | ) | $ | (3,204 | ) | $ | 5,545 | ||||
State
|
(811 | ) | (378 | ) | 433 | |||||||
Total
|
$ | (9,560 | ) | $ | (3,582 | ) | $ | 5,978 | ||||
The benefit for federal income taxes approximates the statutory
rate and for state income taxes reflects current state rates
effective for the period based upon activities within the
taxable entities. The benefit for federal and state income tax
is the result of pretax losses that occurred in fiscal 2009 and
2008. Additional information regarding incomes taxes is located
in Note 1 in Notes to Consolidated Financial Statements
included in this document under Item 8.
Results
of Operations Fiscal 2008 Compared to Fiscal
2007
Sales
and Unit Shipments
2008 | Percent | 2007 | Percent | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Sales
|
||||||||||||||||||||
Manufactured Housing
|
$ | 214,794 | 71.2 | $ | 272,383 | 74.5 | $ | 57,589 | ||||||||||||
Recreational Vehicles
|
86,971 | 28.8 | 93,090 | 25.5 | 6,119 | |||||||||||||||
Total Sales
|
$ | 301,765 | 100.0 | $ | 365,473 | 100.0 | $ | 63,708 | ||||||||||||
Unit Shipments
|
||||||||||||||||||||
Manufactured Housing
|
4,608 | 44.3 | 5,669 | 48.0 | 1,061 | |||||||||||||||
Recreational Vehicles
|
5,797 | 55.7 | 6,152 | 52.0 | 355 | |||||||||||||||
Total Unit Shipments
|
10,405 | 100.0 | 11,821 | 100.0 | 1,416 | |||||||||||||||
17
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Results
of Operations Fiscal 2008 Compared to Fiscal
2007 (Continued)
Manufactured housing sales decreased due to an overall decline
in demand, which is consistent with the experience of the
manufactured housing industry as a whole.
Recreational vehicle sales were negatively impacted in the first
half of fiscal 2008 by an increase in demand for product with
fiberglass bonded wall construction, and by metal-sided models
being priced higher relative to products of other recreational
vehicle manufacturers. As a result, sales for this period were
$42,881,000 as compared to $53,491,000 for the first half of
fiscal 2007.
The Corporation worked throughout fiscal 2008 to address these
issues. An existing recreational vehicle facility in Hemet,
California was renovated to exclusively produce models with
fiberglass bonded wall construction. Production of these units
commenced in the fourth quarter of fiscal 2008. This facility is
in addition to the Elkhart, Indiana facility that opened in the
third quarter of fiscal 2007 to solely produce fiberglass bonded
models. Regarding metal-sided product, changes were made to make
it more competitively priced, and to better meet consumer
tastes. These combined actions resulted in sales of $44,090,000
in the last half of fiscal 2008 as compared to $39,599,000 in
the last half of fiscal 2007. In addition, the market share for
travel trailers and fifth wheels increased from 2 percent
in the last half of fiscal 2007 to 2.3 percent in last half
of fiscal 2008.
Cost
of Sales
Percent |
Percent |
|||||||||||||||||||
of |
of |
|||||||||||||||||||
2008 | Sales* | 2007 | Sales* | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Manufactured Housing
|
$ | 194,822 | 90.7 | $ | 240,689 | 88.4 | $ | 45,867 | ||||||||||||
Recreational Vehicles
|
84,134 | 96.7 | 86,825 | 93.3 | 2,691 | |||||||||||||||
Consolidated
|
$ | 278,956 | 92.4 | $ | 327,514 | 89.6 | $ | 48,558 | ||||||||||||
* | The percentages for manufactured housing and recreational vehicles are based on segment sales. The percentage for consolidated cost of sales is based on total sales. |
Manufactured housing cost of sales decreased due to less sales
volume and the variable nature of many direct manufacturing
costs. As a percentage of sales, cost of sales increased as a
result of certain manufacturing overhead costs remaining
relatively constant despite lower sales. In addition, this
segment incurred a one-time cost of approximately $400,000
associated with the consolidation of the Ocala, Florida facility
and the closure of the Bossier City, Louisiana facility.
Recreational vehicle cost of sales decreased due to less sales
volume and the variable nature of many direct manufacturing
costs. As a percentage of sales, cost of sales increased due to
the introduction of various option packages. These packages,
designed to meet competition in the marketplace, are
aggressively priced relative to option packages sold in the
previous year. Certain manufacturing overhead costs also
remained relatively constant despite lower sales. This segment
includes a one-time cost of approximately $400,000 associated
with the closure of the McMinnville, Oregon facility. In
addition, non-recurring costs of approximately $170,000 were
incurred in the conversion of the Hemet, California facility. In
fiscal year 2007, the Corporation incurred approximately
$300,000 in one-time costs associated with the opening of the
Elkhart, Indiana facility dedicated to producing fiberglass
bonded product.
Selling
and Administrative Expenses
Percent |
Percent |
|||||||||||||||||||
of |
of |
|||||||||||||||||||
2008 | Sales | 2007 | Sales | Decrease | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Selling and Administrative Expenses
|
$ | 36,770 | 12.2 | $ | 40,372 | 11.0 | $ | 3,602 |
18
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Results
of Operations Fiscal 2008 Compared to Fiscal
2007 (Continued)
Selling and administrative expenses decreased due to a decrease
in salaries, performance based compensation, a continuing effort
to control costs and a change in the valuation of the
Corporations liability for retirement and death benefits
offered to certain employees. Additional information regarding
the change in valuation is included in Note 4 in Notes to
Consolidated Financial Statements included in this document
under Item 8. As a percentage of sales, selling and
administrative expenses increased due to certain costs being
fixed.
Operating
(Loss) Earnings
Percent of |
Percent of |
|||||||||||||||
2008 | Sales* | 2007 | Sales* | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Manufactured Housing
|
$ | (4,200 | ) | (2.0 | ) | $ | 4,276 | 1.6 | ||||||||
Recreational Vehicles
|
(7,750 | ) | (8.9 | ) | (4,154 | ) | (4.5 | ) | ||||||||
General Corporate Expenses
|
(2,011 | ) | (0.7 | ) | (2,535 | ) | (0.7 | ) | ||||||||
Gain on Sale of Idle Property, Plant and Equipment
|
670 | 0.2 | | | ||||||||||||
Total Operating Loss
|
$ | (13,291 | ) | (4.4 | ) | $ | (2,413 | ) | (0.7 | ) | ||||||
* | The percentages for manufactured housing and recreational vehicles are based on segment sales. The percentage for general corporate expenses, gain on sale of idle property, plant and equipment and total operating (loss) earnings are based on total sales. |
The operating loss for manufactured housing was primarily due to
the impact of decreased sales on the components of earnings as
noted above. This segment was also negatively affected by the
cost of consolidating and closing two facilities, and
single-section unit sales increasing from 23 percent in
fiscal 2007 to 26 percent in fiscal 2008. Single-section
homes have lower margins as compared to multi-section homes.
The operating loss for recreational vehicles increased primarily
due to the impact of decreased sales on the components of
earnings as noted above. In addition, the operating loss was
negatively impacted by this segment receiving a larger
proportion of certain operating expenses allocated to industry
segments based on a percentage of sales. Recreational vehicle
sales were approximately 29 percent in fiscal 2008 as
compared to 25 percent in fiscal 2007. The cost of closing
one facility and the renovation of another also had a negative
effect on operating results. Although the operating loss
increased from fiscal 2007 to 2008, the operating loss for the
last half of the current year was $3,641,000, which included
non-recurring costs of approximately $570,000, as compared to
$4,109,000 in the first half.
The decrease in general corporate expenses occurred primarily
due to a change in valuation of the Corporations liability
for retirement and death benefits offered to certain employees
as noted above.
In the third quarter of fiscal 2008, the Corporation sold an
idle manufactured housing facility located in Goshen, Indiana.
The sale resulted in a pre-tax gain of $670,000.
Interest
Income
2008 | 2007 | Decrease | ||||||||||
(Dollars in thousands) | ||||||||||||
Interest Income
|
$ | 4,153 | $ | 5,812 | $ | 1,659 |
Interest income is directly related to the amount available for
investment and the prevailing yields of U.S. Government
Securities. In fiscal 2008, the average amount available for
investment was approximately $101 million with a weighted
average yield of 4.1 percent. In fiscal 2007, the average
amount available for investment was approximately
$120 million with a weighted average yield of
4.9 percent.
19
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Results
of Operations Fiscal 2008 Compared to Fiscal
2007 (Continued)
(Benefit)
Provision for Income Taxes
2008 | 2007 | Increase | ||||||||||
(Dollars in thousands) | ||||||||||||
Federal
|
$ | (3,204 | ) | $ | 1,135 | $ | 4,339 | |||||
State
|
(378 | ) | (329 | ) | 49 | |||||||
Total
|
$ | (3,582 | ) | $ | 806 | $ | 4,388 | |||||
The (benefit) provision for federal income taxes approximates
the statutory rate and for state income taxes reflects current
state rates effective for the period based upon activities
within the taxable entities. The benefit for federal income
taxes increased due to the pretax loss that occurred in fiscal
2008. Additional information regarding incomes taxes is located
in Note 1 in Notes to Consolidated Financial Statements
included in this document under Item 8.
Liquidity
and Capital Resources
May 31, | ||||||||||||
2009 | 2008 | Decrease | ||||||||||
(Dollars in thousands) | ||||||||||||
Cash and U.S. Treasury Bills
|
$ | 94,786 | $ | 111,579 | $ | 16,793 | ||||||
Current Assets, Exclusive of Cash and U.S. Treasury Bills
|
$ | 24,973 | $ | 42,628 | $ | 17,655 | ||||||
Current Liabilities
|
$ | 15,385 | $ | 21,613 | $ | 6,228 | ||||||
Working Capital
|
$ | 104,374 | $ | 132,594 | $ | 28,220 |
The Corporations policy is to invest its excess cash,
which exceeds its operating needs, in U.S. Government
Securities. Cash and U.S. Treasury Bills decreased due to a
net loss of $15,434,000. Current assets, exclusive of cash and
U.S. Treasury Bills, declined primarily due to a decrease
in accounts receivable of $11,801,000. This decrease is
attributed to lower sales in May 2009 as compared to May 2008,
and cash sales constituting approximately 50 percent of
sales in May 2009 as compared to approximately 35 percent
in May 2008. In addition, inventories decreased $3,648,000 due
to declining sales and the consolidation of manufacturing
facilities. Finally, other current assets decreased $2,206,000
due primarily to refundable federal income taxes at May 31,
2008 that were received during fiscal 2009.
Current liabilities decreased primarily due to a decline in
accounts payable of $2,114,000, accrued salaries and wages of
$1,189,000, accrued marketing programs of $1,374,000 and accrued
warranty of $1,518,000. Accounts payable and accrued marketing
programs declined due to decreased sales activity. Accrued
salaries and wages decreased due to a reduced employee
headcount, and the timing of payroll payments at May 31,
2009 as compared to May 31, 2008. Accrued warranty
decreased reflecting lower sales volume, and improvement in
warranty claims experience.
Capital expenditures totaled $1,574,000 for fiscal 2009 as
compared to $2,092,000 in the comparable period of the previous
year. Capital expenditures were made primarily to replace or
refurbish machinery and equipment in addition to improving
manufacturing efficiencies. The Corporation began in the third
quarter of fiscal 2009 a project to implement an enterprise
resource planning (ERP) system. The project is expected to last
until mid-fiscal 2012, and the cost is to be paid out of the
Corporations normal budget for capital expenditures. The
amount of capital expended for this project through May 31,
2009 is approximately $500,000. The goal of the ERP system is to
obtain better decision-making information, better react to
market conditions, and lower the Corporations technology
costs.
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 Corporations
financing needs have been met through funds generated internally.
20
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Contractual
Obligations and Commitments
The following table summarizes the Corporations
contractual obligation for operating lease agreements as of
May 31, 2009:
Payments Due by Period | ||||||||||||||||||||
Less Than |
More Than |
|||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Operating Leases
|
$ | 951 | $ | 454 | $ | 403 | $ | 65 | $ | 29 |
The following table summarizes the Corporations
commitments for repurchase agreements as of May 31, 2009:
Payments Due by Period | ||||||||||||||||||||
Less Than |
More Than |
|||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Repurchase Agreements
|
$ | 36,000 | $ | 36,000 | $ | | $ | | $ | |
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
year 2009 and 2008, the Corporation experienced a $235,000 and
$6,000 loss on the sale of repurchased units, respectively. No
losses on the sales of repurchased units were incurred in fiscal
2007.
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 a
significant estimate:
Revenue
Recognition
The Corporations accounting for revenue recognition is
referenced in Note 1 of the Notes to Consolidated Financial
Statements.
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
one-year warranty. Estimated warranty costs are accrued at the
time of sale based upon sales, historical claims experience and
managements 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 partially insured for expenses associated
with workers compensation. Costs are accrued based on
managements 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.
21
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Critical
Accounting Policies (Continued)
Health
Insurance
The Corporation utilizes a combination of insurance companies
and self-insurance 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.
Depreciation
The Corporations accounting for depreciation is referenced
in the Property, plant and equipment
disclosure in Note 1 of the Notes to Consolidated
Financial Statements.
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 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. On a long-term basis, the Corporation has
demonstrated an ability to adjust selling prices in reaction to
changing costs due to inflation. During the first quarter of
fiscal 2009, however, the Corporation was unable to increase its
selling prices on its manufactured housing product to cover an
increase in material costs during that period. Increased selling
prices were realized during the remaining three quarters.
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:
| Availability of wholesale and retail financing | |
| The health of the U.S. housing market as a whole | |
| Cyclical nature of the manufactured housing and recreational vehicle industries | |
| General or seasonal weather conditions affecting sales | |
| Potential impact of hurricanes and other natural disasters on sales and raw material costs | |
| Potential periodic inventory adjustments by independent retailers | |
| Interest rate levels | |
| Impact of inflation | |
| Impact of rising fuel costs | |
| 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 |
22
Table of Contents
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Forward
Looking Information (Continued)
| Market demographics | |
| Managements 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 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.
23
Table of Contents
Item 8. | Financial Statements and Supplementary Data. |
Index to
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
|
25 | |||
Consolidated Balance Sheets
|
26 | |||
Consolidated Statements of Operations and Retained Earnings
|
27 | |||
Consolidated Statements of Cash Flows
|
28 | |||
Notes to Consolidated Financial Statements
|
29 |
All other supplementary data is omitted because it is not
applicable or the required information is shown in the financial
statements or notes thereto.
24
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Skyline
Corporation:
We have audited the accompanying consolidated balance sheets of
Skyline Corporation and subsidiary companies (the
Corporation) as of May 31, 2009 and 2008, and
the related consolidated statements of earnings and retained
earnings, and cash flows for each of the three years in the
period ended May 31, 2009. We also have audited the
Corporations internal control over financial reporting as
of May 31, 2009, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
The Corporations management is responsible for these
financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in this
Form 10-K
Item 9A as Managements Report on Internal Control
over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and an opinion on the
Corporations internal control over financial reporting
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of financial statements included 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. Our
audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
A companys 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 companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) 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 (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys 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.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Corporation as of May 31, 2009 and 2008, and the
results of its operations and its cash flows for each of the
three years in the period ended May 31, 2009 in conformity
with accounting principles generally accepted in the United
States of America. Also in our opinion, the Corporation
maintained, in all material respects, effective internal control
over financial reporting as of May 31, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
Crowe Horwath LLP
South Bend, Indiana
July 15, 2009
25
Table of Contents
Skyline
Corporation and Subsidiary Companies
Consolidated
Balance Sheets
May 31,
2009 and 2008
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$ | 9,836 | $ | 10,557 | ||||
U.S. Treasury Bills, at cost plus accrued interest
|
84,950 | 101,022 | ||||||
Accounts receivable, net
|
6,443 | 18,244 | ||||||
Inventories
|
6,502 | 10,150 | ||||||
Other current assets
|
12,028 | 14,234 | ||||||
Total Current Assets
|
119,759 | 154,207 | ||||||
Property, Plant and Equipment, at Cost:
|
||||||||
Land
|
5,297 | 5,300 | ||||||
Buildings and improvements
|
61,773 | 63,410 | ||||||
Machinery and equipment
|
27,915 | 30,561 | ||||||
94,985 | 99,271 | |||||||
Less accumulated depreciation
|
64,387 | 66,736 | ||||||
Net Property, Plant and Equipment
|
30,598 | 32,535 | ||||||
Noncurrent Deferred Tax Assets
|
11,851 | 4,044 | ||||||
Other Assets
|
5,911 | 6,213 | ||||||
Total Assets
|
$ | 168,119 | $ | 196,999 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable, trade
|
$ | 1,853 | $ | 3,967 | ||||
Accrued salaries and wages
|
3,132 | 4,321 | ||||||
Accrued marketing programs
|
1,383 | 2,757 | ||||||
Accrued warranty and related expenses
|
4,619 | 6,137 | ||||||
Accrued workers compensation
|
1,851 | 1,222 | ||||||
Other accrued liabilities
|
2,547 | 3,209 | ||||||
Total Current Liabilities
|
15,385 | 21,613 | ||||||
Other Deferred Liabilities
|
7,992 | 9,168 | ||||||
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
|
205,246 | 226,722 | ||||||
Treasury stock, at cost, 2,825,900 shares
|
(65,744 | ) | (65,744 | ) | ||||
Total Shareholders Equity
|
144,742 | 166,218 | ||||||
Total Liabilities and Shareholders Equity
|
$ | 168,119 | $ | 196,999 | ||||
The accompanying notes are an integral part of the consolidated
financial statements.
26
Table of Contents
Skyline
Corporation and Subsidiary Companies
For the
Years Ended May 31, 2009, 2008 and 2007
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands, except share |
||||||||||||
and per share amounts) | ||||||||||||
OPERATIONS
|
||||||||||||
Sales
|
$ | 166,676 | $ | 301,765 | $ | 365,473 | ||||||
Cost of sales
|
165,622 | 278,956 | 327,514 | |||||||||
Gross profit
|
1,054 | 22,809 | 37,959 | |||||||||
Selling and administrative expenses
|
30,735 | 36,770 | 40,372 | |||||||||
Income from life insurance proceeds
|
380 | | | |||||||||
Gain on sale of idle property, plant and equipment
|
3,396 | 670 | | |||||||||
Operating loss
|
(25,905 | ) | (13,291 | ) | (2,413 | ) | ||||||
Interest income
|
911 | 4,153 | 5,812 | |||||||||
(Loss) earnings before income taxes
|
(24,994 | ) | (9,138 | ) | 3,399 | |||||||
(Benefit) provision for income taxes:
|
||||||||||||
Federal
|
(8,749 | ) | (3,204 | ) | 1,135 | |||||||
State
|
(811 | ) | (378 | ) | (329 | ) | ||||||
(9,560 | ) | (3,582 | ) | 806 | ||||||||
Net (loss) earnings
|
$ | (15,434 | ) | $ | (5,556 | ) | $ | 2,593 | ||||
Basic (loss) earnings per share
|
$ | (1.84 | ) | $ | (.66 | ) | $ | .31 | ||||
Cash dividends per share
|
$ | .72 | $ | .72 | $ | 2.72 | ||||||
Weighted average number of common shares outstanding
|
8,391,244 | 8,391,244 | 8,391,244 | |||||||||
RETAINED EARNINGS
|
||||||||||||
Balance at beginning of year
|
$ | 226,722 | $ | 238,319 | $ | 258,258 | ||||||
Cumulative effect of adjustments resulting from the adoption of
SAB No. 108, net of tax (See Note 6)
|
| | 292 | |||||||||
Adjusted balance at beginning of year
|
226,722 | 238,319 | 258,550 | |||||||||
Net (loss) earnings
|
(15,434 | ) | (5,556 | ) | 2,593 | |||||||
Cash dividends paid
|
(6,042 | ) | (6,041 | ) | (22,824 | ) | ||||||
Balance at end of year
|
$ | 205,246 | $ | 226,722 | $ | 238,319 | ||||||
The accompanying notes are an integral part of the consolidated
financial statements.
27
Table of Contents
Skyline
Corporation and Subsidiary Companies
For the
Years Ended May 31, 2009, 2008 and 2007
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net (loss) earnings
|
$ | (15,434 | ) | $ | (5,556 | ) | $ | 2,593 | ||||
Adjustments to reconcile net (loss) earnings to net cash used in
operating activities:
|
||||||||||||
Depreciation
|
2,704 | 3,181 | 3,148 | |||||||||
Gain on sale of idle property, plant and equipment
|
(3,396 | ) | (670 | ) | | |||||||
Change in assets and liabilities:
|
||||||||||||
Accrued interest receivable
|
81 | 649 | (211 | ) | ||||||||
Accounts receivable
|
11,801 | 4,516 | 8,999 | |||||||||
Inventories
|
3,648 | 411 | 747 | |||||||||
Other current assets
|
2,206 | (2,853 | ) | (2,844 | ) | |||||||
Accounts payable, trade
|
(2,114 | ) | (1,195 | ) | (3,622 | ) | ||||||
Accrued liabilities
|
(4,114 | ) | (4,306 | ) | (9,414 | ) | ||||||
Other, net
|
(8,998 | ) | (705 | ) | (188 | ) | ||||||
Net cash used in operating activities
|
(13,616 | ) | (6,528 | ) | (792 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Proceeds from principal payments of U.S. Treasury Bills
|
$ | 238,945 | $ | 412,136 | $ | 275,874 | ||||||
Purchase of U.S. Treasury Bills
|
(222,954 | ) | (397,942 | ) | (338,815 | ) | ||||||
Proceeds from maturity of U.S. Treasury Notes
|
| | 90,000 | |||||||||
Proceeds from sale of idle property, plant and equipment
|
4,115 | 2,676 | | |||||||||
Purchase of property, plant and equipment
|
(1,574 | ) | (2,092 | ) | (4,968 | ) | ||||||
Other, net
|
405 | (28 | ) | (158 | ) | |||||||
Net cash provided by investing activities
|
18,937 | 14,750 | 21,933 | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Cash dividends paid
|
(6,042 | ) | (6,041 | ) | (22,824 | ) | ||||||
Net cash used in financing activities
|
(6,042 | ) | (6,041 | ) | (22,824 | ) | ||||||
Net (decrease) increase in cash
|
(721 | ) | 2,181 | (1,683 | ) | |||||||
Cash at beginning of year
|
10,557 | 8,376 | 10,059 | |||||||||
Cash at end of year
|
$ | 9,836 | $ | 10,557 | $ | 8,376 | ||||||
The accompanying notes are an integral part of the consolidated
financial statements.
28
Table of Contents
Skyline
Corporation and Subsidiary Companies
NOTE 1 | Nature of Operations, Accounting Policies of Consolidated Financial Statements |
Nature of operations Skyline Corporation
designs, manufactures and distributes manufactured housing
(single section homes, multi-section homes and modular homes)
and towable recreational vehicles (travel trailers, fifth wheels
and park models) to independent dealers and manufactured housing
communities throughout the United States. These dealers and
communities 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 its wholly-owned subsidiaries (the Corporation).
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
Corporations products are made to order. Revenue is
recognized upon completion of the following: an order for a unit
is received from a dealer or community (customer); written or
verbal approval for payment is received from a customers
financing institution or payment is received; a common carrier
signs documentation accepting responsibility for the unit as
agent for the customer; and the unit is removed from the
Corporations premises for delivery to a customer. 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 consolidated statements of cash flows,
investments in U.S. Treasury Bills and Notes are included
as investing activities. The Corporations cash flows from
operating activities were increased by income taxes received of
$4,219,000 in fiscal 2009 and $1,443,000 in fiscal 2008. Cash
flows from operating activities were reduced by income taxes
paid of $3,466,000 in fiscal 2007.
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 fair market value, totaled $84,950,000 and
$101,022,000 at May 31, 2009 and 2008, respectively. The
fair market value is determined by a secondary market for
U.S. Treasury Securities. The Corporation does not have any
other financial instruments which have market values differing
from recorded values.
Accounts receivable Trade receivables are
based on the amounts billed to customers. The Corporation does
not accrue interest on any of its trade receivables. The
allowance for doubtful accounts was $0 and May 31, 2009,
and $100,000 at May 31, 2008.
Inventories Inventories are stated at the
lower of cost or market. Cost is determined under the
first-in,
first-out method. Physical inventory counts are taken at the end
of each reporting quarter.
29
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
Total inventories consist of the following:
May 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Raw Materials
|
$ | 3,886 | $ | 4,897 | ||||
Work In Process
|
2,616 | 5,051 | ||||||
Finished Goods
|
| 202 | ||||||
$ | 6,502 | $ | 10,150 | |||||
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 8 years.
Warranty The Corporation provides the retail
purchaser of its manufactured homes with a full fifteen-month
warranty against defects in design, materials and workmanship.
Recreational vehicles are covered by a one-year warranty. The
warranties are backed by service departments located at the
Corporations manufacturing facilities and an extensive
field service system.
Estimated warranty costs are accrued at the time of sale based
upon current sales, historical experience and managements
judgment regarding anticipated rates of warranty claims. The
adequacy of the recorded warranty liability is periodically
assessed and the amount is adjusted as necessary.
A reconciliation of accrued warranty and related expenses is as
follows:
Year Ended May 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Balance at the beginning of the period
|
$ | 9,037 | $ | 10,600 | $ | 12,111 | ||||||
Accruals for warranties
|
5,598 | 9,654 | 13,060 | |||||||||
Settlements made during the period
|
(7,616 | ) | (11,217 | ) | (14,571 | ) | ||||||
Balance at the end of the period
|
7,019 | 9,037 | 10,600 | |||||||||
Non-current balance included in other deferred liabilities
|
2,400 | 2,900 | 3,300 | |||||||||
Accrued warranty and related expenses
|
$ | 4,619 | $ | 6,137 | $ | 7,300 | ||||||
Other deferred liabilities Other
deferred liabilities consist of the following:
May 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Deferred compensation expense
|
$ | 5,592 | $ | 6,079 | ||||
Accrued warranty and related expenses
|
2,400 | 2,900 | ||||||
Other deferred expense
|
| 189 | ||||||
$ | 7,992 | $ | 9,168 | |||||
30
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
Income taxes The federal and state
income (benefit) tax provision is summarized as follows:
Year Ended May 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Current
|
||||||||||||
Federal
|
$ | (1,996 | ) | $ | (3,771 | ) | $ | 49 | ||||
State
|
75 | 113 | (371 | ) | ||||||||
(1,921 | ) | (3,658 | ) | (322 | ) | |||||||
Deferred
|
||||||||||||
Federal
|
(6,753 | ) | 568 | 1,086 | ||||||||
State
|
(886 | ) | (492 | ) | 42 | |||||||
(7,639 | ) | 76 | 1,128 | |||||||||
$ | (9,560 | ) | $ | (3,582 | ) | $ | 806 | |||||
The difference between the Corporations statutory federal
income tax rate (35 percent in 2009 and 2008, and
34 percent in 2007) and the effective income tax rate
is due primarily to state income taxes as follows:
Year Ended May 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Income taxes at statutory federal rate
|
$ | (8,748 | ) | $ | (3,198 | ) | $ | 1,156 | ||||
State income taxes, net of federal tax effect
|
(527 | ) | (246 | ) | (217 | ) | ||||||
New Energy Efficient Home Credit
|
(324 | ) | (125 | ) | (176 | ) | ||||||
Alternative Fuel Credit
|
(32 | ) | (37 | ) | | |||||||
Other, net
|
71 | 24 | 43 | |||||||||
Income (benefit) tax provision
|
$ | (9,560 | ) | $ | (3,582 | ) | $ | 806 | ||||
Effective tax rate
|
38.3 | % | 39.2 | % | 23.7 | % | ||||||
In fiscal 2007 the Corporation received favorable rulings on
certain state tax positions which resulted in state refunds net
of federal taxes of $144,000.
31
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
The components of the net deferred tax assets are as follows:
May 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Current deferred tax assets
|
||||||||
Accrued marketing programs
|
$ | 223 | $ | 466 | ||||
Accrued warranty expense
|
1,619 | 2,455 | ||||||
Accrued workers compensation
|
1,522 | 1,376 | ||||||
Accrued vacation
|
432 | 494 | ||||||
State net operating loss carryforward
|
2,656 | 1,092 | ||||||
Other
|
(239 | ) | 102 | |||||
Gross current deferred tax assets
|
6,213 | 5,985 | ||||||
Noncurrent deferred tax assets
|
||||||||
Liability for certain post-retirement benefits
|
1,970 | 2,171 | ||||||
Accrued warranty expense
|
1,140 | 1,160 | ||||||
Federal net operating loss carryforward
|
7,459 | | ||||||
Federal tax credit carryforward
|
498 | | ||||||
Depreciation
|
568 | 475 | ||||||
Other
|
216 | 237 | ||||||
Gross noncurrent deferred tax assets
|
11,851 | 4,043 | ||||||
Total gross deferred tax asset
|
18,064 | 10,028 | ||||||
Valuation allowance
|
(1,131 | ) | (734 | ) | ||||
Net deferred tax asset
|
$ | 16,933 | $ | 9,294 | ||||
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. In fiscal 2009, the valuation allowance
increased approximately $397,000 due mainly to uncertainty of
realizing state net operating loss carryforwards.
No federal valuation allowance was recorded in fiscal 2009
against the federal net deferred tax assets; including the
federal net operating loss carryforward asset of $7,459,000 and
federal tax credits of $498,000 expiring in fiscal 2029. The
Corporation believes that based on its historical performance,
it will more likely than not realize the benefits of its federal
net deferred tax assets.
In the first quarter of fiscal 2008, the Corporation adopted
Financial Accounting Standards Board, (FASB), Interpretation
No. 48, Accounting for Uncertainty in Income
Taxes, (FIN No. 48). This Interpretation
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes.
The Corporation adopted FIN No. 48 with no material
impact on its consolidated financial statements.
The amount of unrecognized tax benefits at May 31, 2009 and
2008 totaled approximately $100,000. This amount would increase
operating income thus impacting the Corporations effective
tax rate, if ultimately recognized in income.
32
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
For the majority of taxing jurisdictions the Corporation is no
longer subject to examination by taxing authorities for years
before 2005. State income tax expense reflects minimum amounts
required by certain taxing jurisdictions in which the
Corporation operates.
The Corporation does not expect the amount of unrecognized tax
benefits to significantly increase in the next twelve months.
Interest and penalties related to income tax matters are
recognized in income tax expense. Accruals for interest and
penalties at May 31, 2009 were insignificant.
Recently issued accounting pronouncements
The Corporation has also determined that
the adoption of any other recently issued accounting standard is
not expected to have a material impact on its future financial
condition or results of operation.
Certain prior period amounts have been reclassified to conform
to the current period presentation.
NOTE 2 | Commitments and Contingencies |
The Corporation was contingently liable at May 31, 2009,
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 units in the event of default
by the retailer at declining prices over the term of the
agreement, generally 12 months.
The maximum repurchase liability is the total amount that would
be paid upon the default of the Corporations independent
dealers. The maximum potential repurchase liability, without
reduction for the resale value of the repurchased units, was
approximately $36 million at May 31, 2009 and
$70 million at May 31, 2008.
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 Corporation believes that any potential loss under the
agreements in effect at May 31, 2009 will not be material
to its financial position or results of operations.
The amounts of obligations from repurchased units and incurred
net losses for the periods presented are as follows:
Year Ended May 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Number of units repurchased
|
88 | 104 | 78 | |||||||||
Obligations from units repurchased
|
$ | 1,784 | $ | 1,865 | $ | 1,244 | ||||||
Net loss on repurchased units
|
$ | 235 | $ | 6 | $ | |
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 Corporations results of operations
or financial position.
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 year 2009 was approximately $800,000,
fiscal year 2008 was approximately $1,000,000 while lease
expense
33
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
for the fiscal year 2007 was approximately $1,100,000. Future
minimum lease commitments under operating leases are as follows:
Year Ending May 31,
|
Amount | |||
(Dollars in |
||||
thousands) | ||||
2010
|
$ | 454 | ||
2011
|
268 | |||
2012
|
135 | |||
2013
|
57 | |||
2014
|
8 | |||
Thereafter
|
29 | |||
$ | 951 | |||
The Corporation utilizes a combination of insurance coverage and
self-insurance for certain items, including workers
compensation and group health benefits. Liabilities for
workers compensation are recognized for estimated future
medical costs and indemnity costs. Liabilities for group health
benefits are recognized for claims incurred but not paid.
Insurance reserves are estimated based upon a combination of
historical data and actuarial information. Actual results could
differ from these estimates.
NOTE 3 | Purchase of Treasury Stock |
The Corporations board of directors from time to time has
authorized the repurchase of shares of the Corporations
common stock, in the open market or through negotiated
transactions, at such times and at such prices as management may
decide. In fiscal 2009, 2008 and 2007, the Corporation did not
acquire any shares of its common stock. At May 31, 2009,
the Corporation had authorization to repurchase an additional
391,300 shares of its common stock.
NOTE 4 | Employee Benefits |
A) | 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 primarily in
United States Government Securities. No contributions were made
for the fiscal years ended May 31, 2009 and 2008. For year
ended May 31, 2007 contributions to the Plans were
$1,717,000.
The Corporation has an employee savings plan (the 401(k)
Plan) that is intended to provide participating employees
with an additional method of saving for retirement. The 401(k)
Plan covers all employees who meet certain minimum participation
requirements. The Corporation does not currently provide a
matching contribution to the 401(k) Plan.
B) | RETIREMENT AND DEATH BENEFIT PLANS |
The Corporation has entered into arrangements with certain
employees which provide for benefits to be paid to the
employees estates in the event of death during active
employment or retirement benefits to be paid over 10 years
beginning at the date of retirement. The Corporation also
purchased life insurance 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 7.0 percent in
fiscal 2009, 6.5 percent in fiscal 2008 and
6.0 percent in fiscal 2007. The amount accrued for such
arrangements totaled $5,592,000, $6,079,000 and $6,522,000 at
May 31, 2009, 2008 and 2007, respectively. The amount
(credited) charged to operations under these
34
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
arrangements was $(304,000), $(215,000) and $406,000 for the
years ended May 31, 2009, 2008 and 2007 respectively. The
amount credited or charged to operations is directly related to
changes in the discount rate, and the number of participants
with arrangements with the Corporation.
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, fifth
wheels and park models). The percentage allocation of
manufactured housing and recreational vehicle sales is:
May 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Manufactured Housing
|
74 | % | 71 | % | 75 | % | ||||||
Recreational Vehicles
|
26 | % | 29 | % | 25 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Total operating loss represents operating losses before interest
income and benefit for income taxes with non-traceable operating
expenses being allocated to industry segments based on
percentages of sales. General corporate expenses are not
allocated to the industry segments.
35
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
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.
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
SALES
|
||||||||||||
Manufactured housing
|
$ | 123,930 | $ | 214,794 | $ | 272,383 | ||||||
Recreational vehicles
|
42,746 | 86,971 | 93,090 | |||||||||
Total sales
|
$ | 166,676 | $ | 301,765 | $ | 365,473 | ||||||
(LOSS) EARNINGS BEFORE INCOME TAXES
|
||||||||||||
Operating (Loss) Earnings
|
||||||||||||
Manufactured housing
|
$ | (18,304 | ) | $ | (4,200 | ) | $ | 4,276 | ||||
Recreational vehicles
|
(9,435 | ) | (7,750 | ) | (4,154 | ) | ||||||
General corporate expenses
|
(1,942 | ) | (2,011 | ) | (2,535 | ) | ||||||
Income from life insurance proceeds
|
380 | | | |||||||||
Gain on sale of idle property, plant and equipment
|
3,396 | 670 | | |||||||||
Total operating loss
|
(25,905 | ) | (13,291 | ) | (2,413 | ) | ||||||
Interest income
|
911 | 4,153 | 5,812 | |||||||||
(Loss) earnings before income taxes
|
$ | (24,994 | ) | $ | (9,138 | ) | $ | 3,399 | ||||
IDENTIFIABLE ASSETS
|
||||||||||||
Operating assets
|
||||||||||||
Manufactured housing
|
$ | 65,359 | $ | 71,043 | $ | 77,330 | ||||||
Recreational vehicles
|
17,810 | 24,934 | 21,746 | |||||||||
Total operating assets
|
83,169 | 95,977 | 99,076 | |||||||||
U.S. Treasury bills
|
84,950 | 101,022 | 115,864 | |||||||||
Total assets
|
$ | 168,119 | $ | 196,999 | $ | 214,940 | ||||||
DEPRECIATION
|
||||||||||||
Manufactured housing
|
$ | 2,206 | $ | 2,521 | $ | 2,525 | ||||||
Recreational vehicles
|
498 | 660 | 623 | |||||||||
Total depreciation
|
$ | 2,704 | $ | 3,181 | $ | 3,148 | ||||||
CAPITAL EXPENDITURES
|
||||||||||||
Manufactured housing
|
$ | 1,322 | $ | 1,483 | $ | 4,409 | ||||||
Recreational vehicles
|
252 | 609 | 559 | |||||||||
Total capital expenditures
|
$ | 1,574 | $ | 2,092 | $ | 4,968 | ||||||
NOTE 6 | Staff Accounting Bulletin No. 108 |
In September 2006, the Securities Exchange Commission,
SEC, issued Staff Accounting
Bulletin No. 108 (SAB No. 108)
Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements. This bulletin provides guidance on quantifying
the impact of the carryover or reversal of prior year
misstatements on the current year financial statements. Two
widely recognized approaches are used for quantifying the
effects of financial statement misstatements: the
rollover approach and the iron curtain
36
Table of Contents
Skyline
Corporation and Subsidiary Companies
Notes to
Consolidated Financial
Statements (Continued)
approach. The rollover approach quantifies a misstatement based
on the amount of the error originating in the current year
income statement. The iron curtain approach quantifies a
misstatement based on the effects of correcting the misstatement
existing in the balance sheet at the end of the current year,
irrespective of the misstatements year of origination.
The SEC staff believes that registrants should quantify errors
using both the rollover approach and the iron curtain approach,
and evaluate whether either method results in a misstatement
that, when considering all relevant quantitative and qualitative
factors, is material. In initially applying SAB No. 108,
registrants are permitted to report the cumulative effect of
misstatements in the opening balance of retained earnings for
the current year.
The Corporation has historically used the rollover approach when
quantifying and evaluating uncorrected misstatements. In
accordance with SAB No. 108, the Corporation recorded an
increase in deferred tax assets and an increase in retained
earnings in the amount of $292,000, net of tax, as of
June 1, 2006. This adjustment resulted from the Corporation
not recording certain deferred tax assets, which was deemed
immaterial to the financial statements in each respective
period. This misstatement decreased net income in the years
reported, and originated prior to the fiscal year ended in 2005.
NOTE 7 | Financial Summary by Quarter Unaudited |
Financial
Summary by Quarter
2009
|
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Sales
|
$ | 62,597 | $ | 47,210 | $ | 24,386 | $ | 32,483 | $ | 166,676 | ||||||||||
Gross profit (loss)
|
2,203 | 829 | (3,382 | ) | 1,404 | 1,054 | ||||||||||||||
Net (loss)
|
(4,146 | ) | (4,098 | ) | (4,825 | ) | (2,365 | ) | (15,434 | ) | ||||||||||
Basic (loss) per share
|
(.49 | ) | (.49 | ) | (.58 | ) | (.28 | ) | (1.84 | ) |
2008
|
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Sales
|
$ | 96,394 | $ | 77,198 | $ | 57,314 | $ | 70,859 | $ | 301,765 | ||||||||||
Gross profit
|
10,319 | 5,823 | 294 | 6,373 | 22,809 | |||||||||||||||
Net earnings (loss)
|
709 | (1,886 | ) | (4,570 | ) | 191 | (5,556 | ) | ||||||||||||
Basic earnings (loss) per share
|
.08 | (.22 | ) | (.54 | ) | .02 | (.66 | ) |
As previously noted in Note 4, Employee Benefits, no
contributions were made to the Corporations profit sharing
plans in fiscal 2008. This resulted in an approximately
$2,200,000 favorable impact on operating results in the fourth
quarter.
37
Table of Contents
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None
Item 9A. | Controls and Procedures. |
Managements
Conclusions Regarding Effectiveness of Disclosure Controls and
Procedures
As of May 31, 2009, 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
Corporations 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 Corporations
disclosure controls and procedures are effective as of
May 31, 2009.
Managements
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 Corporations 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
Corporations 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 Corporations 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
Corporations 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.
Management of the Corporation has assessed the effectiveness of
the Corporations 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.
Managements assessment included an evaluation of the
design of the Corporations internal control over financial
reporting, and testing of the operational effectiveness of the
Corporations internal control over financing reporting.
Based on this assessment, management has concluded that the
Corporations internal control over financial reporting was
effective as of May 31, 2009.
Crowe Horwath LLP, the independent registered public accounting
firm that audited the Corporations fiscal 2009 financial
statements included in this Annual Report on
Form 10-K,
has also audited managements assessment of the
effectiveness of the Corporations internal control over
financial reporting and the effectiveness of the
Corporations internal control over financial reporting as
of May 31, 2009, and their report thereon is included in
Item 8.
Changes
in Internal Control over Financial Reporting
No change in the Corporations 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, 2009 that
materially affected, or is reasonably likely to materially
affect, the Corporations internal control over financial
reporting.
38
Table of Contents
Item 9A. | Controls and Procedures. (Continued) |
Chief
Executive Officer and Chief Financial Officer
Certifications
The Corporations Chief Executive Officer and Chief
Financial Officer have filed with the Securities and Exchange
Commission the certifications required by Section 302 of
the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 to
the Corporations Annual Report on
Form 10-K
for the fiscal year ended May 31, 2009. In addition, on
September 18, 2008 the Corporations Chief Executive
Officer certified to the New York Stock Exchange (NYSE) that he
was not aware of any violation by the Corporation of the NYSE
corporate governance listing standards as in effect on
September 18, 2008. The foregoing certification was
unqualified.
Item 9B. | Other Information. |
None
PART III
Item 10. | Directors, Executive Officers and Corporate Governance (Officers are elected annually.) |
Name
|
Age
|
Position
|
||||
Thomas G. Deranek
|
73 | Chairman and Chief Executive Officer | ||||
Charles W. Chambliss
|
59 | Vice President-Product Development and Engineering | ||||
Terrence M. Decio
|
57 | Vice President-Marketing and Sales | ||||
Martin R. Fransted
|
57 | Corporate Controller and Secretary | ||||
Christopher R. Leader
|
50 | Vice President-Operations | ||||
Bruce G. Page
|
59 | Vice President-Operations | ||||
Jon S. Pilarski
|
46 | Vice President-Finance, Treasurer, Chief Financial Officer |
Thomas G. Deranek, Chairman and Chief Executive Officer,
joined the Corporation in 1964. He served as Chief of Staff from
1991 to 2001, and Vice Chairman from 2001 to 2007. He was
elected Chief Executive Officer in 2001 and Chairman in 2007.
Charles W. Chambliss, Vice President-Product Development
and Engineering, joined the Corporation in 1973 and was elected
Vice President in 1996.
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.
Martin R. Fransted, Corporate Controller and Secretary,
joined the Corporation in 1981 and was elected Corporate
Controller and Secretary in 2007. He previously served as the
Director of Taxation and Assistant Treasurer.
Christopher R. Leader, Vice President-Operations, joined
the Corporation in 1997 and was elected Vice President in 1997.
Mr. Leaders employment was terminated on June 1,
2009, resulting from the Corporations decision to
eliminate his position.
Bruce G. Page, Vice President-Operations, joined the
Corporation in 1969 and was elected Vice President in 2006. He
previously served as Director of Operations from 2005 to 2006.
Prior to 2005 he was the General Manager of the
Corporations manufactured housing facility in McMinnville,
Oregon.
Jon S. Pilarski, Vice President-Finance, Treasurer and
Chief Financial Officer, joined the Corporation in 1994. He
served as Corporate Controller from 1997 to 2007 and was elected
Vice President in 2007.
Information regarding the Corporations directors, and
other information required by this Item 10 is available in
the following sections of the Corporations Proxy
Statement: Election of Directors Code of
Business Conduct
39
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance (Officers are elected annually.) (Continued) |
and Ethics and Section 16(a) Beneficial
Ownership Reporting Compliance. The Proxy Statement for
the Annual Meeting of Shareholders to be held on
September 21, 2009 is incorporated herein by reference.
Item 11. | Executive Compensation. |
Information regarding executive compensation is available in the
following sections of the Corporations Proxy Statement:
Compensation, Discussion and Analysis
Compensation Committee Interlocks and Insider
Participation and Report of the Compensation
Committee on Executive Compensation.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Information regarding certain beneficial owners is available in
the Certain Other Beneficial Owners section of the
Corporations Proxy Statement.
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Information regarding related party transactions and director
independence is available in the following sections of the
Corporations Proxy Statement: Transactions with
Management and Director Independence and Executive
Sessions.
Item 14. | Principal Accounting Fees and Services. |
Information regarding accounting fees and services is located in
the Audit Fees, Audit Related Fees,
Tax Fees and All Other Fees sections of
the Corporations Proxy Statement.
PART IV
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 Business Conduct and 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 |
40
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SKYLINE CORPORATION
Registrant
Registrant
BY: |
/s/ Thomas
G. Deranek
|
Thomas G. Deranek, Chairman,
Chief Executive Officer and Director
DATE: July 23, 2009
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.
BY:
/s/ Jon
S. Pilarski Jon S. Pilarski |
Vice President-Finance, Treasurer, Chief Financial Officer | July 23, 2009 | ||||
BY:
/s/ Martin
R. Fransted Martin R. Fransted |
Corporate Controller and Secretary | July 23, 2009 | ||||
BY:
/s/ Arthur
J. Decio Arthur J. Decio |
Director | July 23, 2009 | ||||
BY:
/s/ John
C. Firth John C. Firth |
Director | July 23, 2009 | ||||
BY:
/s/ Jerry
Hammes Jerry Hammes |
Director | July 23, 2009 | ||||
BY:
/s/ William
H. Lawson William H. Lawson |
Director | July 23, 2009 | ||||
BY:
/s/ David
T. Link David T. Link |
Director | July 23, 2009 | ||||
BY:
/s/ Andrew
J. McKenna Andrew J. McKenna |
Director | July 23, 2009 |
41