Skyline Corporation Business Information, Profile, and History

Company Perspectives:

Skyline is committed to producing the best products at the best prices. It has earned a reputation for uncompromising integrity in all of its relationships with communities, suppliers, retailers and with the hundreds of thousands of Americans who live in Skyline-built homes and enjoy Skyline-built RVs.

History of Skyline Corporation

Skyline Corporation designs and produces manufactured housing and recreational vehicles (RVs). Approximately 80 percent of the company's total sales are derived from manufactured homes, which are sold under several different trade names. Skyline makes two basic types of manufactured housing: single-section mobile homes and multi-section homes. Single-section homes, which range from 36 to 80 feet in length and 12 to 18 feet in width, are often located in designated mobile home parks. Because their size makes them easy to move from place to place, they are considered "mobile homes." Skyline's multi-section homes, however, are larger and more closely resemble site-built homes. Buyers typically place these homes on traditional lots, and rarely, if ever, move them. Almost 70 percent of the homes produced by Skyline are multi-sections. The company's recreational vehicle segment manufactures three types of towable RVs--conventional travel trailers, fifth-wheel trailers, and park models&mdash well as a line of slide-in truck campers. They are sold under the "Nomad," "Layton," "Aljo," and "WeekEnder" trademarks. Skyline operates 25 manufacturing plants in 12 states and distributes its products through a national network of manufactured housing and RV dealers.

1950s: A New Spoke in an Industry Hub

Skyline Coach, the predecessor to Skyline Corporation, was established in 1951 in Elkhart, Indiana. Its founder, Julius Decio, started the business to produce mobile homes, which were commonly called "house trailers" at the time. The business Decio chose was by no means an uncommon one for Elkhart and its surrounding communities. For 20 years, the city--located in northern central Indiana, just a few miles from the Michigan border--had been a major hub for the mobile home industry. The area's mobile home business had begun in 1933, when a local merchant decided to try replicating a contraption he had seen at the Chicago World's Fair that looked like a tent on wheels. Setting up shop in Elkhart, he began building "house trailers," which resembled rudimentary recreational travel trailers. The trailers' affordability and mobility made them a good option during the Great Depression, when many families traveled across country looking for jobs and a better life.

The success of this first mobile home manufacturer led others to start similar businesses, and gradually the region became a major source of house trailers. During the Dust Bowl of 1937 and 1938, people began using house trailers not just to travel in, but as actual homes. In response, manufacturers modified their products to make them more closely correspond to traditional homes, increasing the size of the units and adding more amenities. By the end of World War II, mobile homes had evolved into something much different from their travel-trailer predecessors. Larger and more elaborate in design, they were no longer meant to be towed, camper-style, across the country by families on the move. Rather, they had become an alternative and more affordable type of house, typically stationed in one place. There were, however, a number of manufacturers still producing the early smaller trailers, primarily for use as recreational vehicles. After the war, these manufacturers essentially split off from the mobile home industry to form the RV industry.

It was into this newly bifurcated industry that Julius Decio entered when he began building house trailers in a friend's "welding garage." His early efforts met with success, and the business was profitable from its first year in operation. In 1952, Decio's 22-year-old son, Art, returned to Elkhart from Chicago, where he had just graduated college. Art quickly took an active role in his father's business, working as a division manager in the plant and helping to build the fledgling company. In 1956, he became Skyline's CEO.

The company expanded geographically under Art Decio's capable leadership, targeting emerging mobile housing markets in retiree states, such as Florida. Another important facet of the new CEO's administration was a movement toward near-total reliance on third-party suppliers for materials. Whereas many mobile home manufacturers at that time produced some of their own cabinets and building supplies, Art Decio preferred to order virtually everything from outside sources. By having suppliers deliver inventory on a "just in time" basis, Skyline was able to minimize the need for warehouse space, reduce waste, and better control inventory.

1960s: Diversification and Acquisition

Decio kicked off the 1960s by taking Skyline public. At the time of its initial public offering, the company boasted an impressive string of profitable years and no corporate debt. Skyline's second milestone of 1960 was to diversify its business by opening a travel trailer and RV plant in Elkhart. This reunion of the mobile home and RV industries made sense on several levels for the company. Since the industry split in the early 1950s, both the RV and housing segments had remained well represented in northern Indiana. Dozens of RV manufacturers--and the second- and third-tier suppliers supporting them--had production facilities in the region. In addition, many of the materials required to produce mobile homes corresponded with the materials needed to produce RVs. Therefore, Skyline's addition of an RV division allowed for certain inventory and cost efficiencies.

Skyline also used the proceeds from its 1960 IPO to expand its mobile home business via acquisition. In 1962, the company acquired Homette Corporation and Layton Homes Corporation. The following year, Skyline bought Buddy Mobile Homes, and in 1966, added Academy Mobile Homes to its growing portfolio. The company also changed its name from Skyline Coach to Skyline Corporation.

Mid-1970s: Market Downturn

During the 1960s and early 1970s, low interest rates and a generally stable economy had combined to keep the manufactured housing business in high gear. According to the Manufactured Housing Institute, the industry hit an all-time high in 1972, reporting shipments of more than half a million units. In 1973 and 1974, however, interest rates began to climb, and housing sales began to plunge. Shipments of manufactured homes declined by 42 percent in 1974 and another 35 percent in 1975. The RV industry, likewise, fell on hard times in the 1970s. The OPEC oil embargo of 1973 and the resulting hike in gas prices put the brakes on recreational driving. This, combined with the rising interest rates, caused RV sales to fall off.

Already contending with bleak market conditions, Skyline and other producers of manufactured housing were confronted with still another hurdle in 1976. Concerned about mobile homes' safety, Congress enacted legislation that set stricter standards for their construction. Officially changing the product's name to "manufactured housing," the government required all mobile homes to meet stringent manufacturing, fire, electricity, and safety codes. The tougher requirements--and the costs associated with compliance--spurred a wave of closings and consolidations in the manufactured housing industry. Despite the odds against it, Skyline managed to remain solvent and successful throughout the industry slump, never once posting an annual loss. In 1978, the company expanded again, purchasing Country Vans Conversion.

1980--98: Market Swings

The market for RVs improved in the early years of the new decade; between 1980 and 1984, the number of vehicles shipped increased by more than 80 percent. The market for manufactured housing was slower to rebound, however, with sales remaining at levels much lower than they were in the early 1970s. Skyline continued to show improved earnings and remained debt-free--but to do so, it had to trim costs and streamline operations. In 1983, the company had 28 operational and six idle manufactured housing plants. Just four years later, cost-cutting measures had reduced that number to 23 operational and two idle plants. Skyline also hedged against further economic downturns by amassing cash reserves. In 1987, one-fourth of the company's pretax income came from interest.

The 1990s ushered in better interest rates than consumers had seen in more than a decade, and sales of manufactured housing picked up immediately. Although Skyline's sales also improved, the company was unable to keep pace with its competitors and consequently surrendered part of its market share. Management attributed the market share loss to a lack of capacity in areas where the manufactured housing markets were expanding fastest. In an April 1996 interview with Investor's Business Daily, Decio cited Georgia and Texas as two such rapid-growth markets, pointing out that Skyline did not have a strong manufacturing presence in either state. "Even though we're a national company, at certain times we can't keep up," he said.

To bolster output and remedy the situation, Skyline initiated an aggressive expansion plan. In 1994, the company upgraded its manufactured housing plant in Sugarcreek, Ohio, and its RV plant in McMinnville, Oregon. The following year, Skyline laid out another $10 million to renovate four more facilities--in Indiana, Pennsylvania, Florida, and Louisiana. In addition to boosting production, the upgrades were designed to allow all facilities to manufacture a wider range of products. The expansion program paid off; between 1992 and 1995, net income improved by more than 50 percent.

In 1997, Skyline's sales of manufactured housing fell slightly, and the resulting dip in total sales broke the company's five-year record of modest but steady annual increases. A major reason for the decline was an exceptionally harsh winter, which slowed housing sales in some parts of the United States. Another factor was a general softening in the demand for manufactured housing nationwide, which led many of Skyline's dealers to reduce their inventories. The company's RV division had a better year, however. RV sales increased by more than 14 percent over 1996 sales, reversing the previous year's RV industry slump.

The year 1998 saw a flip-flop in the fortunes of Skyline's two business segments. The market for manufactured housing improved in the second half of the year, driving up Skyline's housing sales. In addition to the overall market improvement, the housing segment benefited from a stronger demand for multi-section homes, which commanded higher prices than single-section homes. On the other hand, Skyline's recreational vehicle sales decreased in 1998, despite the fact that, industrywide, demand for the vehicles increased.

1999 and the New Century

Skyline appeared to have both its business segments on track in 1999. The market for manufactured housing remained relatively steady through the first half of the year. More significantly, consumer demand for multi-section homes continued to grow, pushing the company's housing dollars up despite a slight decrease in actual units sold. As its quality continued to improve, manufactured housing was expected to become an attractive option for a wider range of homeowners.

Skyline's RV business also appeared to be on the upswing as 1999 progressed, showing gains both in units sold and in sales income. This increase was due in large part to overall favorable economic conditions and increased discretionary income, which allowed consumers to spend more for recreational products and activities.

Since its inception in the 1950s, Skyline had been more of a tortoise than a hare, taking few risks and growing slowly and sure-footedly. As the company prepared to leave the 20th century behind, it showed no signs of altering that approach. Because demand in both of Skyline's major markets was so closely tied to economic cycles, it was impossible to predict how the company might fare in the future. So long as the general economy remained strong, however, it seemed likely that Skyline would thrive.

Principal Subsidiaries: Skyline Homes, Inc.; Homette Corporation; Layton Homes Corporation.