☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of ~~January 24,~~July 22, 2022: ~~56,827,132~~56,889,105

Components of accumulated other comprehensive ~~income (loss)~~loss consisted solely of foreign currency translation adjustments.

The acquisition of ScotBilt was a taxable business combination. Therefore, the Company’s tax basis in the assets acquired and the liabilities assumed approximate the respective fair values at the acquisition date.

3. Inventories, net

The components of inventory, net of reserves for obsolete inventory, were as follows:


(Dollars in thousands)	January 1, 2022		April 3, 2021		July 2, 2022		April 2, 2022
Raw materials	$	108,370	$	91,916	$	133,640	$	141,238
Work in process		22,644		21,642		30,531		26,523
Finished goods and other		54,038		52,555		127,987		73,573
Total inventories, net	$	185,052	$	166,113	$	292,158	$	241,334

At ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, reserves for obsolete inventory were $~~4.4~~5.7 million and $~~4.6~~4.8 million, respectively.

7.6. Accrued Warranty Obligations

Changes in the accrued warranty obligations were as follows:


	Three months ended						Nine months ended						Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			January 1, 2022			December 26, 2020			July 2, 2022			July 3, 2021
Balance at beginning of period	$	31,855		$	24,460		$	30,469		$	24,969		$	32,832		$	30,469
Warranty expense		9,146			9,863			30,330			24,616			11,921			10,304
Cash warranty payments		(10,057	)		(8,808	)		(29,855	)		(24,070	)		(11,598	)		(9,694	)
Balance at end of period		30,944			25,515			30,944			25,515			33,155			31,079
Less: noncurrent portion in other long-term liabilities		(6,436	)		(5,790	)		(6,436	)		(5,790	)		(7,026	)		(6,436	)
Total current portion	$	24,508		$	19,725		$	24,508		$	19,725		$	26,129		$	24,643

8.7. Debt and Floor Plan Payable

Long-term debt consisted of the following:


(Dollars in thousands)	January 1, 2022		April 3, 2021		July 2, 2022		April 2, 2022
Revolving credit facility maturing in 2026	$	—	$	26,900	$	0	$	0
Obligations under industrial revenue bonds due 2029		12,430		12,430		12,430		12,430
Total debt		12,430		39,330		12,430		12,430
Less: current portion		—		—		—		—
Total long-term debt	$	12,430	$	39,330	$	12,430	$	12,430

On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement with a syndicate of banks that provides for a revolving credit facility of up to $200.0 million, including a $45.0 million letter of credit sub-facility (“("Amended Credit ~~Agreement”~~Agreement"). The Amended Credit Agreement replaced the ~~Company’s~~Company's previously existing $100.0 million revolving credit facility. Outstanding borrowings of $26.9 million on the ~~Company’s~~Company's previous revolving credit facility were repaid in July 2021. The Amended Credit Agreement allows the Company to draw down, repay and re-draw loans on the available ~~funds~~facility during the term, subject to certain terms and conditions, matures in July 2026, and has no scheduled amortization. The Company capitalized $1.1 million of deferred financing fees associated with the Amended Credit Agreement, which isare included in other noncurrent assets on the accompanying consolidated balance sheets. The Company wrote off $0.3 million of deferred financing fees associated with the previously existing credit facility ~~which is included in interest expense, net for~~during the ~~nine months ended January 1,~~second quarter of fiscal 2022.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

The interest rate on borrowings under the Amended Credit Agreement adjusts based on the consolidated total net leverage of the Company from a high of ~~LIBOR~~the London Inter-Bank Offered Rate ("LIBOR") or the Secured Overnight Financing Rate plus the benchmark replacement adjustment ("Replacement Rate") plus 1.875% and ~~ABR~~Alternative Base Rate ("ABR") plus 0.875%, at the election of the Company, when the consolidated total net leverage ratio is equal to or greater than 2.25:1.00, to a low of LIBOR or the Replacement Rate plus 1.125% and ABR plus 0.125% when the consolidated total net leverage is below 0.50:1.00. In addition, the Company is obligated to pay an unused line fee ranging between 0.15% and 0.3% (depending on the consolidated total net leverage ratio) in respect of unused commitments under the Amended Credit Agreement. ~~At January 1, 2022~~There were 0 outstanding borrowings under the revolving credit facility at July 2, 2022 and April, 2, 2022, respectively. At July 2, 2022 the interest rate under the Amended Credit Agreement was ~~1.23~~2.97%~~. At January 1, 2022,~~ and letters of credit issued under the Amended Credit Agreement totaled $~~30.4~~32.1 ~~million and total available borrowings were~~million. Available borrowing capacity under the Amended Credit Agreement as of July 2, 2022 was $~~169.6~~167.9 million.

~~Skyline Champion Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

Obligations under industrial revenue bonds are supported by letters of credit and bear interest based on a municipal bond index rate. The weighted-average interest rate at ~~January 1,~~July 2, 2022, including related costs and fees, was ~~1.78~~2.61%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029.

The Amended Credit Agreement contains covenants that restrict the amount of additional debt, liens and certain payments, including equity buybacks, investments, dispositions, mergers and consolidations, among other restrictions as defined. The Company was in compliance with all covenants of the Amended Credit Agreement as of ~~January 1,~~July 2, 2022.

Floor Plan Payable

The Company’s retail operations utilize floor plan financing to fund the purchase of manufactured homes for display or resale. At ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, the Company had outstanding borrowings on floor plan financing agreements of $~~34.3~~37.9 million and $~~25.7~~35.5 million, respectively. Total credit line capacity provided under the agreements was $$6~~57.0~~7.0 million as of ~~January 1,~~July 2, 2022. Borrowings are secured by the ~~financed~~ homes and are required to be repaid when the Company sells ~~a financed~~the home to a customer.

~~Skyline Champion Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

9.8. Revenue Recognition

The following tables disaggregate the Company’s revenue by sales category for the three ~~and~~ ~~nine~~months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:




	Three months ended January 1, 2022								Three months ended July 2, 2022
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total		U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	478,838	$	36,910	$	—	$	515,748	$	660,811	$	45,062	$	—	$	705,873
Commercial		5,481		—		—		5,481		270		—		—		270
Transportation		—		—		13,461		13,461		—		—		19,738		19,738
Total	$	484,319	$	36,910	$	13,461	$	534,690	$	661,081	$	45,062	$	19,738	$	725,881


	Nine months ended January 1, 2022								Three months ended July 3, 2021
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total		U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	1,403,856	$	113,242	$	—	$	1,517,098	$	455,891	$	37,831	$	—	$	493,722
Commercial		9,482		—		—		9,482		1,429		—		—		1,429
Transportation		—		—		42,532		42,532		—		—		15,046		15,046
Total	$	1,413,338	$	113,242	$	42,532	$	1,569,112	$	457,320	$	37,831	$	15,046	$	510,197

	Three months ended December 26, 2020
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	332,200	$	26,351	$	—	$	358,551
Commercial		4,158		—		—		4,158
Transportation		—		—		14,872		14,872
Total	$	336,358	$	26,351	$	14,872	$	377,581



	Nine months ended December 26, 2020
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	857,028	$	66,104	$	—	$	923,132
Commercial		11,549		—		—		11,549
Transportation		—		—		38,551		38,551
Total	$	868,577	$	66,104	$	38,551	$	973,232

119

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

~~10.~~9. Income Taxes

For the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020,~~July 3, 2021, the Company recorded $~~23.3~~40.4 million and $~~5.3~~14.0 million of income tax expense and had an effective tax rate of ~~25.6~~25.7% and ~~19.7~~24.6%, respectively. ~~For the nine months ended January 1, 2022 and December 26, 2020, the Company recorded $53.7~~ ~~million and $15.5~~ ~~million of income tax expense and had an effective tax rate of~~ ~~25.0% and~~ ~~23.3%, respectively.~~ During the three months ended December 26, 2020, the Company completed a U.S. research and development ("R&D") tax credit study for the years 2018 and 2019 that resulted in the recognition of a tax benefit of $~~1.7~~ ~~million.~~

The Company’s effective tax rate for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, and results in foreign jurisdictions. The Company’s effective tax rate for the three months ended July 3, 2021 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions and tax benefits ~~related to~~from equity compensation. ~~The Company’s effective tax rate for the three and nine months ended December 26, 2020 differs from the federal statutory rate of~~ ~~21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits (including the $1.7~~ ~~million R&D credit), and results in foreign jurisdictions.~~

At ~~January 1,~~July 2, 2022, the Company had 0 unrecognized tax benefits. The Company does not anticipate any material changes to uncertain tax benefits in the next twelve months. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense.

~~11.~~10. Earnings Per Share

Basic net income per share (“EPS”) attributable to the Company was computed by dividing net income attributable to the Company by the average number of common shares outstanding during the period. Certain of the Company’s time-based restricted share awards were considered participating securities prior to the completion of the vesting period. The vesting for these time-based shares occurred in the second quarter of fiscal 2021. Diluted earnings per ~~common~~ share is ~~computed based on the more dilutive of: (i) the two class method, assuming the participating securities are not exercised or converted; or (ii) the summation of average~~calculated using our weighted-average outstanding common shares ~~outstanding and additional common shares that would have been outstanding if~~including the dilutive ~~potential common shares had been issued. During~~effect of stock awards as determined under the nine months ended December 26, 2020, the two-class method was more dilutive. The two-class method was not applicable to the computation for the three months ended December 26,2020, or any subsequent periods, as the time-vested restricted share awards were fully vested and no longer considered participating securities.treasury stock method.

The following table sets forth the computation of basic and diluted earnings per common share:


	Three months ended				Nine months ended						Three months ended
(Dollars and shares in thousands, except per share data)	January 1, 2022		December 26, 2020			January 1, 2022		December 26, 2020				July 2, 2022		July 3, 2021
Numerator:
Net income	$	67,622	$	21,599		$	161,246	$	51,013
Undistributed earnings allocated to participating securities		—		—			—		(62	)
Net income attributable to the Company's common shareholders	$	67,622	$	21,599		$	161,246	$	50,951			$	117,151	$	42,901
Denominator:
Basic weighted-average shares outstanding		56,847		56,702			56,787		56,630				56,910		56,706
Dilutive securities		491		288			498		253				387		497
Diluted weighted-average shares outstanding		57,338		56,990			57,285		56,883				57,297		57,203

Basic net income per share	$	1.19	$	0.38		$	2.84	$	0.90			$	2.06	$	0.76
Diluted net income per share	$	1.18	$	0.38		$	2.81	$	0.90			$	2.04	$	0.75

~~Skyline Champion Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~12.~~11. Segment Information

Financial results for the Company's reportable segments have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the Chief Executive Officer, evaluates the performance of the Company’s segments primarily based on net sales, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and operating assets.

The Company operates in 2 reportable segments: (i) U.S. Factory-built Housing, which includes manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments and intersegment eliminations. Segments are generally determined by geography. Segment data includes intersegment revenues and corporate office costs that are directly and exclusively incurred for each segment. Total assets for Corporate/Other primarily includes cash and ~~certain~~U.S. deferred tax items not specifically allocated to another segment.

~~Selected financial information by reportable segment was as follows:~~

Three months ended

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

January 1,
2022

December 26,
2020

Net sales:

U.S. Factory-built Housing

$
484,319

$
336,358

$
1,413,338

$
868,577

Canadian Factory-built Housing

36,910

26,351

113,242

66,104

Corporate/Other

13,461

14,872

42,532

38,551

Consolidated net sales

$
534,690

$
377,581

$
1,569,112

$
973,232

Operating income:

U.S. Factory-built Housing EBITDA

$
98,724

$
35,538

$
239,816

$
88,628

Canadian Factory-built Housing EBITDA

7,571

2,933

19,627

13,790

Corporate/Other EBITDA

(9,638
)

(6,407
)

(26,966
)

(20,235
)
Other income

7

(180
)

(36
)

(6,993
)
Depreciation

(3,348
)

(3,025
)

(9,869
)

(8,994
)
Amortization

(1,902
)

(1,361
)

(5,664
)

(4,082
)
Consolidated operating income

$
91,414

$
27,498

$
216,908

$
62,114

Depreciation:

U.S. Factory-built Housing

$
2,706

$
2,378

$
7,935

$
7,167

Canadian Factory-built Housing

279

246

837

609

Corporate/Other

363

401

1,097

1,218

Consolidated depreciation

$
3,348

$
3,025

$
9,869

$
8,994

Amortization of U.S. Factory-built Housing intangible assets:

$
1,902

$
1,361

$
5,664

$
4,082

Capital expenditures:

U.S. Factory-built Housing

$
6,799

$
1,234

$
19,070

$
3,173

Canadian Factory-built Housing

248

312

589

554

Corporate/Other

632

137

3,125

508

Consolidated capital expenditures

$
7,679

$
1,683

$
22,784

$
4,235

(Dollars in thousands)

January 1,
2022

April 3,
2021

Total Assets:

U.S. Factory-built Housing (1)

$
586,047

$
578,897

Canadian Factory-built Housing (1)

94,891

87,224

Corporate/Other (1)

387,213

251,781

Consolidated total assets

$
1,068,151

$
917,902

1310

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

Selected financial information by reportable segment was as follows:


	Three months ended
(Dollars in thousands)	July 2, 2022			July 3, 2021
Net sales:
U.S. Factory-built Housing	$	661,081		$	457,320
Canadian Factory-built Housing		45,062			37,831
Corporate/Other		19,738			15,046
Consolidated net sales	$	725,881		$	510,197
Operating income:
U.S. Factory-built Housing EBITDA	$	161,565		$	63,017
Canadian Factory-built Housing EBITDA		11,327			5,666
Corporate/Other EBITDA		(9,589	)		(5,977	)
Other income		(634	)		(54	)
Depreciation		(3,670	)		(3,257	)
Amortization		(1,946	)		(1,888	)
Consolidated operating income	$	157,053		$	57,507
Depreciation:
U.S. Factory-built Housing	$	3,037		$	2,610
Canadian Factory-built Housing		281			285
Corporate/Other		352			362
Consolidated depreciation	$	3,670		$	3,257
Amortization of U.S. Factory-built Housing intangible assets:	$	1,946		$	1,888
Capital expenditures:
U.S. Factory-built Housing	$	8,933		$	7,258
Canadian Factory-built Housing		361			105
Corporate/Other		141			1,858
Consolidated capital expenditures	$	9,435		$	9,221

(Dollars in thousands)	July 2, 2022			April 2, 2022
Total Assets:
U.S. Factory-built Housing (1)	$	796,260		$	695,500
Canadian Factory-built Housing (1)		114,485			107,459
Corporate/Other (1)		462,587			431,660
Consolidated total assets	$	1,373,332		$	1,234,619

(1)

Deferred tax assets for the Canadian operations are reflected in the Canadian Factory-built Housing segment. U.S. deferred tax assets are presented in Corporate/Other because an allocation between segments is not practicable.

~~13.~~12. Commitments, Contingencies and Legal Proceedings

Repurchase Contingencies and Guarantees

The Company is contingently liable under terms of repurchase agreements with lending institutions that provide wholesale floor plan financing to retailers. These arrangements, which are customary in the manufactured housing industry, provide for the repurchase of products sold to retailers in the event of default by the retailer on its agreement to pay the financial institution. The risk of loss from these agreements is significantly reduced by the potential resale value of any products that are subject to repurchase and is spread over numerous retailers. The repurchase price is generally determined by the original sales price of the product less contractually defined curtailment payments. Based on these repurchase agreements and our historical loss experience, we establish an associated loss reserve which was $2.4 million and $2.3 million at July 2, 2022 and April 2, 2022, respectively. Excluding the resale value of the homes, the contingent repurchase obligation as of ~~January 1,~~July 2, 2022 was estimated to be $~~281.7~~373.6 million. The Company accounts for the guarantees under its repurchase agreements with the retailers’ financing institutions by estimating and deferring a portion of the related product sale that represents the estimated fair value of the repurchase obligation. In addition, the Company has estimated the expected contingent net loss the Company will incur upon resale of any repurchases. These estimates are based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting retailers for which the Company has a contingent repurchase obligation. Based on these repurchase agreements and historical loss experience, as well as current economic conditions and forecasts that affect the potential loss exposure, a loss reserve of $~~1.8~~ ~~million and $1.4~~ ~~million was recorded as of January 1, 2022 and April 3, 2021, respectively.~~ Losses incurred on homes repurchased were not significant during the three ~~or nine~~ months ended ~~January 1,~~July 2, 2022 or ~~December 26, 2020.~~July 3, 2021.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

At ~~January 1,~~July 2, 2022, the Company was contingently obligated for $~~30.4~~32.1 million under letters of credit, primarily consisting of $12.6 million to support long-term debt, $~~17.5~~19.2 million to support the casualty insurance program, and $0.3 million to support bonding agreements. The letters of credit are issued from a sub-facility of the Amended Credit Agreement. The Company was also contingently obligated for $~~35.6~~35.5 million under surety bonds, generally to support performance on long-term construction contracts and license and service bonding requirements.

In the normal course of business, the Company’s former subsidiaries that operated in the United Kingdom historically provided certain guarantees to two customers. Those guarantees provide contractual liability for proven construction defects up to 12 years from the date of delivery of certain products. The guarantees remain a contingent liability of the Company which declines over time through October 2027. As of the date of this report, the Company expects few, if any, claims to be reported under the terms of the guarantees.

Legal Proceedings

The Company has agreed to indemnify counterparties in the ordinary course of its business in agreements to acquire and sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. As of the date of this filing, the Company believes the ultimate liability with respect to these contingent obligations will not have, either individually or in the aggregate, a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

1412

Item 2. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with Skyline Champion Corporation’s condensed consolidated financial statements and the related notes that appear in Item 1 of this Report.

Overview

Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured offsite construction, company-owned retail locations, and transportation logistics services. The Company ~~is the largest independent publicly traded factory-built solutions provider in North America (based on revenue) and~~ markets its homes under several nationally recognized brand names including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 3537 manufacturing facilities throughout the U.S. and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold ~~mainly~~primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 1819 sales centers that sell manufactured homes to consumers primarily in the southern U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

~~Industry and Company Outlook~~

Since July 2020, U.S. and Canadian housing demand has been robust. The limited availability of existing homes for sale and the broader need for newly built affordable, single-family housing has continued to drive demand for new homes in these markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the U.S., including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time home buyers, and the population of households earning less than $60,000 per year. We have also seen a number of market trends pointing to increased sales of accessory dwelling units and urban-to-rural migration as customers accommodate working-from-home patterns, as well as people seeking rent-to-own single-family options.

The robust demand environment has resulted in backlog of $1.5 billion as of January 1, 2022 compared to $488.5 million as of December 26, 2020. Generally higher backlog at our manufacturing facilities creates an opportunity to increase production efficiencies. Although the higher demand brings opportunities, it also has resulted in significant increases in raw material and labor costs. In addition, we are experiencing intermittent supply disruption and higher freight costs. Finding and retaining qualified labor continues to be a challenge for our plants which requires us to review our compensation programs and adjust accordingly. We manage our business to anticipate or quickly react to these supply challenges and cost increases and generally are able to pass along increased costs to our customers. Historically, order cancellation rates have been very low, but the longer lead-time caused by larger backlogs and changing prices could result in higher cancellations in future periods.

~~For the nine months ended January 1, 2022, approximately 78% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the~~ ~~U.S. Department of Housing and Urban Development~~ ~~("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the~~ ~~Manufactured Housing Institute ("~~MHI"), HUD-code industry home shipments were 71,281 and 61,492 units during the eight months ended November 30, 2021 and 2020, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 19.4% and 16.2%, for the eight months ended November 30, 2021 and 2020, respectively. Annual shipments have generally increased each year since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, current manufactured housing shipments are still at lower levels than the long-term historical average of over 200,000 units a year.

Acquisitions and Expansions

Over the last several years, demand for the Company’s products, primarily affordable housing in the U.S., has continued to improve. As a result, the Company has focused on operational improvements to ~~make~~increase capacity utilization and profitability at its existing manufacturing facilities ~~more profitable~~ as well as executing measured expansion of its manufacturing footprint through facility and ~~retail footprints.~~equipment investments and acquisitions. The Company ~~has increased capacity through strategic acquisitions and expansions of its manufacturing operations. The Company is focused~~continues to focus on growing in strong housing markets across the U.S. and Canada, as well as expanding products and services to provide more wholistic solutions to homebuyers.

OnIn May, 2022, the Company acquired Manis Custom Builders, Inc. ("Manis") in order to expand its manufacturing footprint and further streamline its product offering in the Southeast U.S. In June, ~~21,~~ 2021, the Company acquired two idle facilities in Navasota, Texas in order to ~~strengthen~~increase its production capabilities in the Texas market. The Company began production and completed the certification ~~of the manufacturing operations~~process at one of ~~these~~those facilities induring the ~~third~~fourth quarter of fiscal ~~2022, and expects to begin delivering products from that facility in the fourth fiscal quarter.~~2022. On February 28, 2021, the Company acquired ScotBilt, which ~~operates~~operated two manufacturing facilities in Georgia ~~that provide~~providing affordable housing throughout Alabama, Florida, Georgia and the Carolinas. The ~~operations of~~ ScotBilt ~~are included~~acquisition complemented the Company’s prior manufacturing footprint in the ~~financial results of the Company since the date of the acquisition. On January 14, 2021, the Company~~attractive mid-south region.

In January, 2021, the Company acquired two ~~idled~~idle facilities in Pembroke, North Carolina which ~~provides~~provide an opportunity to further expand its manufacturing footprint in the ~~South and~~ Southeast markets. The Company is currently ~~assessing prospects~~renovating one of those facilities for ~~initiating~~expected production in ~~one or both of these facilities.~~late fiscal 2023.

The Company's acquisitions and investments are part of a strategy to grow and diversify revenue with a focus on increasing the Company’s HUD and modular homebuilding presence in the U.S. as well as improving the results of operations. These acquisitions and investments are included in the Company's consolidated results for periods subsequent to their respective acquisition dates.

~~COVID-19 Pandemic~~

Industry and Company Outlook

Since July 2020, the U.S. and Canadian housing industry demand has been robust. The ~~outbreak~~limited availability of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. There remains continued uncertainty regarding the extent and duration of the impact that the COVID-19 pandemic will have on the economy, the housing market,existing homes for sale and the ~~Company,~~broader need for newly built affordable, single-family housing has continued to drive demand for new homes in these markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the United States, including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time homebuyers, and the population of households earning less than $60,000 per year. More recently, we have seen a number of market trends pointing to increased sales of ADUs and urban-to-rural migration as customers accommodate working-from-home patterns, as well as ~~the Company’s employees, customers, and suppliers.~~people seeking rent-to-own single-family options.

The ~~Company~~robust demand environment has ~~prioritized~~resulted in backlog of $1.4 billion as of July 2, 2022 compared to $1.2 billion as of July 3, 2021. Generally higher backlog at our manufacturing facilities creates an opportunity to increase production efficiencies. Although the ~~safety~~higher demand brings opportunities, it also has resulted in significant increases in raw material and ~~well-being~~labor costs. Although we have seen recent improvements, we continue to experience intermittent supply disruption and higher freight costs. Finding and retaining qualified labor continues to be a challenge for our plants which requires us to monitor our compensation programs and adjust accordingly. We manage our business to anticipate or quickly react to these supply challenges and cost increases and generally are able to pass along increased costs to our customers. Generally, order cancellation rates have been very low, but the longer lead-time caused by larger backlogs, rising interest rates and changing prices could result in higher cancellations. During the first quarter, as interest rates increased, independent retailers cancelled a limited number of ~~its employees and customers and has implemented standards~~orders to ~~operate in accordance with social-distancing protocols and public health authority guidelines. Beginning in March 2020,~~decrease their inventory carrying costs.

For the ~~Company took actions to temporarily idle certain facilities in response to government shutdown orders or reduced demand. By late April 2020, most~~three months ended July 2, 2022, approximately 86% of the temporarily idled manufacturing facilities had reopened, but at reduced production levels due to employee absenteeism, difficulty hiring new team members, and social distancing protocols. During fiscal 2021, the Company experienced intermittent closures due to COVID-19 outbreaks at the facilities or surrounding communities causing higher than normal absenteeism. In the second half of fiscal 2021, the Company was able to increase daily production rates over the levels achieved in the prior fiscal year period as direct labor staffing levels increased and production efficiencies improved. Although the Company has generally been able to navigate the production challenges caused by the pandemic in fiscal 2022, availability of labor and certain materials remain subject to disruption and uncertainty. Prices for key raw materials have experienced increased volatility and, overall, manufacturing costs have trended higher than prior periods.

As part of the initial response to the pandemic, the Company offered extended benefits to employees, including increased sick pay and waived premium payments on healthcare benefits for furloughed employees. The Company’s U.S. ~~operations incurred $2.2 million~~manufacturing sales were generated from the manufacture of ~~expense related to~~homes that comply with the extended benefits during the nine months ended December 26, 2020. Various government programs were enacted to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")Federal HUD code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one month lag. According to data reported by MHI, HUD-code industry home shipments were 31,894 and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. CEWS provided a cash subsidy of up to 75% of eligible employees’ remuneration, subject to certain criteria. The Company recognized $6.2 million for payroll subsidies under CEWS and $0.6 million for payroll subsidies under the CARES Act during the nine months ended December 26, 2020. No payroll subsidy was recognized under CEWS or Cares Act27,857 units during the three months ended ~~December 26, 2020. In addition,~~May 31, 2022 and 2021, respectively. Based on industry data, the ~~CARES Act allowed~~Company’s U.S. wholesale market share of HUD code homes sold was 18.0% and 18.9%, for ~~deferring payment~~the three months ended May 31, 2022 and 2021, respectively. Annual HUD-code industry shipments have generally increased each year since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of ~~certain payroll taxes. Through December 2020~~HUD-coded manufactured homes have improved modestly in recent years, manufactured housing’s most recent annual shipment levels still operate at lower levels than the ~~Company deferred $11.8 million~~long-term historical average of ~~payroll taxes . The Company repaid $5.9 million in the current quarter, with the remaining amount expected to be paid in December 2022.~~over 200,000 units annually.

UNAUDITED INCOME STATEMENTS FOR THE ~~THIRD~~FIRST QUARTER OF FISCAL ~~2022~~2023 VS. ~~2021~~2022


	Three months ended
(Dollars in thousands)	July 2, 2022			July 3, 2021

Results of Operations Data:
Net sales	$	725,881		$	510,197
Cost of sales		496,546			398,667
Gross profit		229,335			111,530
Selling, general, and administrative expenses		72,282			54,023
Operating income		157,053			57,507
Interest expense, net		90			649
Other income		(634	)		(54	)
Income before income taxes		157,597			56,912
Income tax expense		40,446			14,011
Net income	$	117,151		$	42,901

Reconciliation of Adjusted EBITDA:
Net income	$	117,151		$	42,901
Income tax expense		40,446			14,011
Interest expense, net		90			649
Depreciation and amortization		5,616			5,145
Transaction costs		338			—
Other		(973	)		—
Adjusted EBITDA	$	162,668		$	62,706
As a percent of net sales:
Gross profit		31.6	%		21.9	%
Selling, general, and administrative expenses		10.0	%		10.6	%
Operating income		21.6	%		11.3	%
Net income		16.1	%		8.4	%
Adjusted EBITDA		22.4	%		12.3	%

Three months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

Results of Operations Data:

Net sales

$
534,690

$
377,581

Cost of sales

377,451

305,797

Gross profit

157,239

71,784

Selling, general, and administrative expenses

65,825

44,286

Operating income

91,414

27,498

Interest expense, net

508

795

Other income (expense)

7

(180
)
Income before income taxes

90,899

26,883

Income tax expense

23,277

5,284

Net income

$
67,622

$
21,599

Reconciliation of Adjusted EBITDA:

Net income

$
67,622

$
21,599

Income tax expense

23,277

5,284

Interest expense, net

508

795

Depreciation and amortization

5,250

4,386

Adjusted EBITDA

$
96,657

$
32,064

As a percent of net sales:

Gross profit

29.4
%

19.0
%
Selling, general, and administrative expenses

12.3
%

11.7
%
Operating income

17.1
%

7.3
%
Net income

12.6
%

5.7
%
Adjusted EBITDA

18.1
%

8.5
%

NET SALES

The following table summarizes net sales for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:

Three months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Net sales

$
534,690

$
377,581

$
157,109

41.6
%
U.S. manufacturing and retail net sales

$
484,319

$
336,358

$
147,961

44.0
%
U.S. homes sold

5,832

5,343

489

9.2
%
U.S. manufacturing and retail average home selling price

$
83.0

$
63.0

$
20.0

31.7
%
Canadian manufacturing net sales

$
36,910

$
26,351

$
10,559

40.1
%
Canadian homes sold

336

318

18

5.7
%
Canadian manufacturing average home selling price

$
109.9

$
82.9

$
27.0

32.6
%
Corporate/Other net sales

$
13,461

$
14,872

$
(1,411
)

(9.5
%)
U.S. manufacturing facilities in operation at end of period

35

33

U.S. retail sales centers in operation at end of period

18

18

Canadian manufacturing facilities in operation at end of period

5

5


	Three months ended
(Dollars in thousands)	July 2, 2022		July 3, 2021		$ Change			% Change
Net sales	$	725,881	$	510,197	$	215,684			42.3	%
U.S. manufacturing and retail net sales	$	661,081	$	457,320	$	203,761			44.6	%
U.S. homes sold		6,813		6,372		441			6.9	%
U.S. manufacturing and retail average home selling price	$	97.0	$	71.8	$	25.2			35.1	%
Canadian manufacturing net sales	$	45,062	$	37,831	$	7,231			19.1	%
Canadian homes sold		352		385		(33	)		(8.6	%)
Canadian manufacturing average home selling price	$	128.0	$	98.3	$	29.7			30.2	%
Corporate/Other net sales	$	19,738	$	15,046	$	4,692			31.2	%
U.S. manufacturing facilities in operation at end of period		37		35
U.S. retail sales centers in operation at end of period		19		18
Canadian manufacturing facilities in operation at end of period		5		5

Net sales for the three months ended ~~January 1,~~July 2, 2022 were ~~$534.7~~$725.9 million, an increase of ~~$157.1~~$215.7 million, or ~~41.6%~~42.3%,over the three months ended ~~December 26, 2020.~~July 2, 2022. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations increased by ~~$148.0~~$203.8 million, or ~~44.0%~~44.6%, for the three months ended ~~January 1,~~July 2, 2022 compared to the three months ended ~~December 26, 2020.~~July 3, 2021. The ~~change~~increase was primarily due to an increase in the number of homes sold during the ~~period~~three months ended July 2, 2022 of ~~9.2%~~6.9%, as well as an increase in the average home selling price of ~~31.7%,~~35.1%. The increase in the number of homes sold was a result of additional capacity from recent expansions, Federal Emergency Management Agency ("FEMA") Disaster Relief housing sales of $82.5 million and ~~the impact of the acquisition of ScotBilt. Demand for~~increased production output from our ~~products has increased significantly in recent periods and we have been able to increase production in response to that demand.~~existing facilities. The average selling price ~~increased during~~increase was due, in part, to the ~~period~~impact of sales to FEMA as well as due to pricing actions enacted on our core products in response to rising material, freight, and labor ~~costs as well as~~costs. FEMA units generally have more specifications than our typical products and therefore drive a ~~shift in product mix to larger homes with more features and amenities.~~higher average selling price per home. Generally, we are able to pass the increase in input costs ~~along~~ to our customers.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales increased by ~~$10.6~~$7.2 million, or ~~40.1%~~19.1% for the three months ended ~~January 1,~~July 2, 2022 compared to the same period in the prior fiscal year, primarily due to a ~~5.7% increase in the number of homes sold and a 32.6%~~30.2% increase in average home selling ~~price. The increase in volume was due to~~price, partially offset by an ~~increase~~8.6% decrease in homes ~~sold driven by strong demand.~~sold. The increase in average selling price was due to pricing actions enacted in response to rising material and labor ~~costs.~~costs and change in product mix. The decrease in homes sold is due to the timing of shipments. On a constant currency basis, net sales for the Canadian segment were ~~also favorably~~unfavorably impacted by approximately ~~$1.8~~$1.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first three months ~~ended January 1, 2022~~of fiscal 2023 as compared to the same period of the prior fiscal year.

Corporate/Other:

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the three months ended ~~January 1,~~July 2, 2022, net sales ~~decreased $1.4~~increased $4.7 million, or ~~9.5%~~31.2%, primarily attributable to ~~lower~~an increase in shipments and an increase in average revenue ~~from the shipment of recreational vehicles.~~per mile shipped.

GROSS PROFIT

The following table summarizes gross profit for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Three months ended											Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			$ Change		% Change			July 2, 2022			July 3, 2021			$ Change		% Change
Gross profit:
U.S. Factory-built Housing	$	143,333		$	62,943		$	80,390		127.7	%	$	209,637		$	99,211		$	110,426		111.3	%
Canadian Factory-built Housing		10,251			5,372			4,879		90.8	%		14,795			8,325			6,470		77.7	%
Corporate/Other		3,655			3,469			186		5.4	%		4,903			3,994			909		22.8	%
Total gross profit	$	157,239		$	71,784		$	85,455		119.0	%	$	229,335		$	111,530		$	117,805		105.6	%
Gross profit as a percent of net sales		29.4	%		19.0	%							31.6	%		21.9	%

Gross profit as a percent of sales during the three months ended ~~January 1,~~July 2, 2022 was ~~29.4%~~31.6% compared to ~~19.0%~~21.9% during the three months ended ~~December 26, 2020.~~July 3, 2021. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Gross profit for the U.S. Factory-built Housing segment increased by ~~$80.4~~$110.4 million, or ~~127.7%~~111.3%, during the three months ended ~~January 1,~~July 2, 2022 compared to the same period in the prior fiscal year. Gross profit was ~~29.6%~~31.7% as a percent of segment net sales for the three months ended ~~January 1,~~July 2, 2022 compared to ~~18.7%~~21.7%% in the same period of the prior fiscal year. ~~Margin improvement~~The increase in gross profit was ~~driven primarily by~~due to price increases implemented in response to rising input ~~costs~~costs. Sales to FEMA during the first quarter of fiscal 2023 also helped improve margins since these sales are generally at higher prices than our core product which help offset the disruption to our operations and ~~the timing of certain price adjustments for raw materials under~~ our buying programs. We have also focused on product simplification and material SKU rationalization to improve operational efficiencies to better leverage increased production and manufacturing fixed costs.customers.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment increased by ~~$4.9~~$6.5 million, or ~~90.8%,~~77.7% during the three months ended ~~January 1,~~July 2, 2022 compared to the same period in the prior fiscal year primarily due to increased sales volume. Gross profit as a percent of net sales was ~~27.8%~~32.8% for the three months ended ~~January 1,~~July 2, 2022, compared to ~~20.4%~~22.0% in the same period of the prior fiscal ~~year. Margin improvement was driven by~~year due to price increases in response to rising material and labor ~~costs, as well as direct labor and manufacturing efficiencies, and increased leverage of manufacturing fixed~~ costs.

Corporate/Other:

Gross profit for the Corporate/Other segment increased ~~$0.2~~$0.9 million, or ~~5.4%~~22.8%, during the three months ended ~~January 1,~~July 2, 2022 compared to the same period of the prior fiscal year, primarily due to increased net sales in the Company’s transportation operations. Gross profit decreased as a percent of segment net sales to 24.8% from 26.5% as a result of changes in revenue mix.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Three months ended											Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			$ Change		% Change			July 2, 2022			July 3, 2021			$ Change		% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	49,208		$	31,324		$	17,884		57.1	%	$	53,054		$	40,755		$	12,299		30.2	%
Canadian Factory-built Housing		2,958			2,682			276		10.3	%		3,749			2,945			804		27.3	%
Corporate/Other		13,659			10,280			3,379		32.9	%		15,479			10,323			5,156		49.9	%
Total selling, general, and administrative expenses	$	65,825		$	44,286		$	21,539		48.6	%	$	72,282		$	54,023		$	18,259		33.8	%
Selling, general, and administrative expense as a percent of net sales		12.3	%		11.7	%							10.0	%		10.6	%

Selling, general, and administrative expenses were ~~$65.8~~$72.3 million for the three months ended ~~January 1,~~July 2, 2022, an increase of ~~$21.5~~$18.3 million, or ~~48.6%~~33.8%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased ~~$17.9~~$12.3 million, or ~~57.1%~~30.2%, during the three months ended ~~January 1,~~July 2, 2022 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales ~~increased~~decreased to ~~10.2%~~8.0% for the three months ended ~~January 1,~~July 2, 2022 compared to ~~9.3%~~8.9% during the comparable period of the prior fiscal ~~year.~~year primarily due to higher revenue and increased leverage of fixed costs. The increase in selling, general, and administrative expenses resulted from ~~the following factors: (i)~~ higher sales commissions and incentive compensation which is generally based on sales volume or a measure of ~~profitability; (ii)~~profitability, and higher wage expense from ~~increased~~ headcount ~~as we staffed to respond~~increases due to the growth in housing ~~demand;~~demand and ~~(iii) the impact of the acquisition of the ScotBilt operations.~~our business expansion.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased ~~$0.3~~$0.8 million, or ~~10.3%~~27.3%, for the three months ended ~~January 1,~~July 2, 2022 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales ~~decreased~~increased to ~~8.0%~~8.3% for the three months ended ~~January 1,~~July 2, 2022 compared to ~~10.2%~~7.8% during the comparable period of the prior fiscal year. The ~~higher expenses are a result of an~~ increase in selling, general, and administrative expenses is due to higher incentive compensation ~~which is generally based on a measure~~related to the increase in sales and gross profit of ~~profitability.~~the segment.

Corporate/Other:

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased ~~$3.4~~$5.2 million, or ~~32.9%~~49.9%, during the three months ended ~~January 1,~~July 2, 2022 as compared to the same period of the prior fiscal year due ~~to an increase in equity compensation, as well as $2.2 million of costs related~~ to investments made to enhance our online customer ~~buying~~ experience and supporting ~~systems.~~

systems, as well as an increase in equity compensation.

INTEREST EXPENSE, NET

The following table summarizes the components of interest expense, net for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Three months ended												Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			$ Change			% Change			July 2, 2022			July 3, 2021			$ Change			% Change
Interest expense	$	701		$	946		$	(245	)		(25.9	%)	$	903		$	808		$	95			11.8	%
Less: Interest income		(193	)		(151	)		(42	)		27.8	%		(813	)		(159	)		(654	)		411.3	%
Interest expense, net	$	508		$	795		$	(287	)		(36.1	%)	$	90		$	649		$	(559	)		(86.1	%)
Average outstanding floor plan payable	$	32,942		$	24,304								$	38,696		$	28,592
Average outstanding long-term debt	$	12,430		$	64,663								$	12,430		$	39,330

Interest expense, net was ~~$0.5~~$0.1 million for the three months ended ~~January 1,~~July 2, 2022, a decrease of ~~$0.3~~$0.6 million, or 86.1%, compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to ~~lower average outstanding borrowings on long-term debt, offset in part by~~ higher ~~average borrowings on floor plan payables. The Company repaid the outstanding balance on its revolving credit facility~~interest income during the ~~second~~first quarter of fiscal ~~2022.~~2023 compared to the first quarter of fiscal 2022 due to a significant increase in interest rates on our invested cash.

OTHER INCOME

The following table summarizes other income for the three months ended July 2, 2022 and July 3, 2021:


	Three months ended
(Dollars in thousands)	July 2, 2022			July 3, 2021			$ Change			% Change
Other income	$	(634	)	$	(54	)	$	(580	)		1,074.1	%

Other income increased $0.6 million during the three months ended July 2, 2022 as compared to the same period of the prior fiscal year. The Company received proceeds during the first quarter of fiscal 2023 from an insurance company that related to Champion Home Builders’ pre-bankruptcy workers compensation claims, which was partially offset by transaction costs for the acquisition of Manis.

INCOME TAX EXPENSE

The following table summarizes income tax expense for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Three months ended											Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			$ Change		% Change			July 2, 2022			July 3, 2021			$ Change		% Change

Income tax expense	$	23,277		$	5,284		$	17,993		340.5	%	$	40,446		$	14,011		$	26,435		188.7	%
Effective tax rate		25.6	%		19.7	%							25.7	%		24.6	%

Income tax expense for the three months ended ~~January 1,~~July 2, 2022 was ~~$23.3~~$40.4 million, representing an effective tax rate of ~~25.6%~~25.7%, compared to income tax expense of ~~$5.3~~$14.0 million, representing an effective tax rate of ~~19.7%~~24.6% for the three months ended ~~December 26, 2020.~~ July 3, 2021.The change in the effective tax rate for the three months ended January 1, 2022 compared with the same period of the prior year, was primarily due to the recognition of a tax benefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax credit study.

The Company’s effective tax rate for the three months ended ~~January 1,~~July 2, 2022 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, and results in foreign jurisdictions. The Company’s effective tax rate for the three months ended July 3, 2021 differed from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits ~~related to~~from equity compensation. The Company’s effective tax rate for the three months ended December 26, 2020 differed from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.

ADJUSTED EBITDA

The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Three months ended
(Dollars in thousands)	July 2, 2022			July 3, 2021		$ Change			% Change
Net income	$	117,151		$	42,901	$	74,250			173.1	%
Income tax expense		40,446			14,011		26,435			188.7	%
Interest expense, net		90			649		(559	)		(86.1	%)
Depreciation and amortization		5,616			5,145		471			9.2	%
Transaction costs		338			—		338		*
Other		(973	)		—		(973	)	*
Adjusted EBITDA	$	162,668		$	62,706	$	99,962			159.4	%

* indicates that the calculated percentage is not meaningful

Three months ended
��

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Net income

$
67,622

$
21,599

$
46,023

213.1
%
Income tax expense

23,277

5,284

17,993

340.5
%
Interest expense, net

508

795

(287
)

(36.1
%)
Depreciation and amortization

5,250

4,386

864

19.7
%
Adjusted EBITDA

$
96,657

$
32,064

$
64,593

201.5
%

Adjusted EBITDA for the three months ended ~~January 1,~~July 2, 2022 was ~~$96.7~~$162.7 million, an increase of ~~$64.6~~$100.0 million from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in ~~net~~ sales volume, average selling prices and gross margins, partially offset by higher SG&A expenses.

~~UNAUDITED INCOME STATEMENTS FOR THE FIRST NINE MONTHS OF FISCAL 2022 VS. 2021~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

Results of Operations Data:

Net sales

$
1,569,112

$
973,232

Cost of sales

1,171,016

784,652

Gross profit

398,096

188,580

Selling, general, and administrative expenses

181,188

126,466

Operating income

216,908

62,114

Interest expense, net

2,002

2,601

Other income

(36
)

(6,993
)
Income before income taxes

214,942

66,506

Income tax expense

53,696

15,493

Net income

$
161,246

$
51,013

Reconciliation of Adjusted EBITDA:

Net income

$
161,246

$
51,013

Income tax expense

53,696

15,493

Interest expense, net

2,002

2,601

Depreciation and amortization

15,533

13,076

Equity-based compensation (for awards granted prior to December 31, 2018)

—

1,358

Adjusted EBITDA

$
232,477

$
83,541

As a percent of net sales:

Gross profit

25.4
%

19.4
%
Selling, general, and administrative expenses

11.5
%

13.0
%
Operating income

13.8
%

6.4
%
Net income

10.3
%

5.2
%
Adjusted EBITDA

14.8
%

8.6
%

~~NET SALES~~

~~The following table summarizes net sales for the nine months ended January 1, 2022 and December 26, 2020:~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Net sales

$
1,569,112

$
973,232

$
595,880

61.2
%
U.S. manufacturing and retail net sales

$
1,413,338

$
868,577

$
544,761

62.7
%
U.S. homes sold

18,106

14,060

4,046

28.8
%
U.S. manufacturing and retail average home selling price

$
78.1

$
61.8

$
16.3

26.4
%
Canadian manufacturing net sales

$
113,242

$
66,104

$
47,138

71.3
%
Canadian homes sold

1,079

812

267

32.9
%
Canadian manufacturing average home selling price

$
105.0

$
81.4

$
23.6

29.0
%
Corporate/Other net sales

$
42,532

$
38,551

$
3,981

10.3
%
U.S. manufacturing facilities in operation at end of period

35

33

U.S. retail sales centers in operation at end of period

18

18

Canadian manufacturing facilities in operation at end of period

5

5

Net sales for the nine months ended January 1, 2022 were $1,569.1 million, an increase of $595.9 million, or 61.2%, over the nine months ended December 26, 2020. The following is a summary of the change by operating segment.

~~U.S. Factory-built Housing:~~

Net sales for the Company’s U.S. manufacturing and retail operations increased by $544.8 million, or 62.7%, for the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020. The increase was primarily due to an increase in the number of homes sold during the period of 4,046 and an increase in the average selling price of 26.4%. The increase in the number of homes sold was a result of increased production levels at many of the Company’s manufacturing locations in response to strong demand for our products, as well as the addition of production volume through the acquisition of ScotBilt. The average selling price increased over the prior year due to pricing actions enacted in response to rising material and labor costs. Generally, we are able to pass increases in input costs along to our customers. The improvement this year is also a result of a negative impact to sales in the prior fiscal year caused by COVID-19 related plant shutdowns and higher than normal absenteeism.

~~Canadian Factory-built Housing:~~

The Canadian Factory-built Housing segment net sales increased by $47.1 million, or 71.3%, for the nine months ended January 1, 2022 compared to the same period in the prior fiscal year, primarily due to an increase in homes sold of 267 and a 29.0% increase in average home selling price. The increase in volume was due to an increase in production rates in response to strong housing demand. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. In addition, on a constant currency basis, net sales for the Canadian segment were favorably impacted by approximately $8.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first nine months of fiscal 2022 as compared to the same period of the prior fiscal year. Net sales during the nine months ended December 26, 2020 were negatively impacted by COVID-19 related plant shutdowns and higher than normal absenteeism.

~~Corporate/Other:~~

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the nine months ended January 1, 2022, net sales increased $4.0 million, or 10.3%, primarily attributable to an increase in shipments of manufactured homes and recreational vehicles.

~~GROSS PROFIT~~

~~The following table summarizes gross profit for the nine months ended January 1, 2022 and December 26, 2020:~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Gross profit:

U.S. Factory-built Housing

$
359,148

$
165,899

$
193,249

116.5
%
Canadian Factory-built Housing

27,444

12,941

14,503

112.1
%
Corporate/Other

11,504

9,740

1,764

18.1
%
Total gross profit

$
398,096

$
188,580

$
209,516

111.1
%
Gross profit as a percent of net sales

25.4
%

19.4
%

Gross profit as a percent of sales during the nine months ended January 1, 2022 was 25.4% compared to 19.4% during the nine months ended December 26, 2020. The following is a summary of the change by operating segment.

~~U.S. Factory-built Housing:~~

Gross profit for the U.S. Factory-built Housing segment increased by $193.2 million, or 116.5%, during the nine months ended January 1, 2022 compared to the same period in the prior fiscal year. Gross profit was 25.4% as a percent of segment net sales for the nine months ended January 1, 2022 compared to 19.1% in the same period of the prior fiscal year. The increase in gross profit is due to operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes and higher average selling prices during fiscal 2022. Higher input costs for materials and labor have generally been offset to date by increasing the prices of our products. The improvement is also a result of less COVID-19 related sick-pay and health benefits which were provided in the prior fiscal year.

~~Canadian Factory-built Housing:~~

Gross profit for the Canadian Factory-built Housing segment increased by $14.5 million, or 112.1% during the nine months ended January 1, 2022 compared to the same period in the prior fiscal year primarily due to increased sales volumes and the price of our products. Gross profit as a percent of net sales was 24.2% for the nine months ended January 1, 2022, compared to 19.6% in the same period of the prior

~~fiscal year. The increase in gross profit as a percent of sales is primarily due to operational leverage from the increase in homes sold, partially offset by higher material costs.~~

~~Corporate/Other:~~

Gross profit for the Corporate/Other segment increased $1.8 million, or 18.1%, during the nine months ended January 1, 2022 compared to the same period of the prior fiscal year, primarily due to increased net sales and the product mix within the Company’s transportation operations.

~~SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES~~

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the nine months ended January 1, 2022 and December 26, 2020:

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Selling, general, and administrative expenses:

U.S. Factory-built Housing

$
132,977

$
89,301

$
43,676

48.9
%
Canadian Factory-built Housing

8,654

5,971

2,683

44.9
%
Corporate/Other

39,557

31,194

8,363

26.8
%
Total selling, general, and administrative expenses

$
181,188

$
126,466

$
54,722

43.3
%
Selling, general, and administrative expense as a percent of net sales

11.5
%

13.0
%

Selling, general, and administrative expenses were $181.2 million for the nine months ended January 1, 2022, an increase of $54.7 million, or 43.3%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

~~U.S. Factory-built Housing:~~

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $43.7 million, or 48.9%, during the nine months ended January 1, 2022 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales decreased to 9.4% for the nine months ended January 1, 2022 compared to 10.3% during the comparable period of the prior fiscal year. The increase in expenses resulted from the following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) higher wage expense from headcount increases to support increased sales; (iii) an increase in travel expenses compared to the same period in the prior fiscal year; and (iv) the impact of the acquisition of the ScotBilt operations.

~~Canadian Factory-built Housing:~~

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $2.7 million, or 44.9%, for the nine months ended January 1, 2022 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 7.6% for the nine months ended January 1, 2022 compared to 9.0% during the comparable period of the prior fiscal year. The increase in selling, general, and administrative expenses resulted from an increase in commissions and incentive compensation as well as wage expense from additional headcount to support the increase in sales.

~~Corporate/Other:~~

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $8.4 million, or 26.8%, during the nine months ended January 1, 2022 as compared to the same period of the prior fiscal year due to $4~~.2 million of costs related to~~ ~~investments made to enhance our customer buying experience and supporting systems and an increase in incentive, equity compensation costs, and wage expense from additional headcount.~~

~~INTEREST EXPENSE, NET~~

~~The following table summarizes the components of interest expense, net for the nine months ended January 1, 2022 and December 26, 2020:~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Interest expense

$
2,502

$
3,007

$
(505
)

(16.8
%)
Less: Interest income

(500
)

(406
)

(94
)

23.2
%
Interest expense, net

$
2,002

$
2,601

$
(599
)

(23.0
%)
Average outstanding floor plan payable

$
30,278

$
27,560

Average outstanding long-term debt

$
12,430

$
73,108

Interest expense, net was $2.0 million for the nine months ended January 1, 2022, a decrease of $0.6 million, or 23.0%, compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to lower average outstanding borrowings on long-term debt, offset in part by higher average borrowings on floor plan payables. The Company repaid the outstanding balance on its revolving credit facility during the second quarter of fiscal 2022.

~~OTHER EXPENSE (INCOME)~~

~~The following table summarizes other income for the nine months ended January 1, 2022 and December 26, 2020:~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Other income

$
(36
)

$
(6,993
)

$
6,957

(99.5
%)

Other income decreased $7.0 million, or 99.5%, during the nine months ended January 1, 2022, compared to the same period of the prior fiscal year. The decrease is due to a reduction in the wage subsidies provided by government sponsored financial assistance programs that were enacted in response to the COVID-19 pandemic during fiscal 2021. The programs included a Canadian wage subsidy benefit of $6.2 million and U.S. federal and state wage subsidy benefits of $0.8 million recognized in the nine months ended December 26, 2020 which did not recur in the current year.

~~INCOME TAX EXPENSE~~

~~The following table summarizes income tax expense for the nine months ended January 1, 2022 and December 26, 2020:~~

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Income tax expense

$
53,696

$
15,493

$
38,203

246.6
%
Effective tax rate

25.0
%

23.3
%

Income tax expense for the nine months ended January 1, 2022 was $53.7 million, representing an effective tax rate of 25.0%, compared to income tax expense of $15.5 million, representing an effective tax rate of 23.3% for the nine months ended December 26, 2020. The change in the effective tax rate for the nine months ended January 1, 2022 compared with the same period of the prior year, was primarily due to the recognition of a tax benefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax credit study.

The Company’s effective tax rate for the nine months ended January 1, 2022 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the nine months ended December 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.

~~ADJUSTED EBITDA~~

The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the nine months ended January 1, 2022 and December 26, 2020:

Nine months ended

(Dollars in thousands)

January 1,
2022

December 26,
2020

$
Change

%
Change

Net income

$
161,246

$
51,013

$
110,233

216.1
%
Income tax expense

53,696

15,493

38,203

246.6
%
Interest expense, net

2,002

2,601

(599
)

(23.0
%)
Depreciation and amortization

15,533

13,076

2,457

18.8
%
Equity-based compensation (for awards granted prior to December 31, 2018)

—

1,358

(1,358
)

(100.0
%)
Adjusted EBITDA

$
232,477

$
83,541

$
148,936

178.3
%

Adjusted EBITDA for the nine months ended January 1, 2022 was $232.5 million, an increase of $148.9 million, from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in net sales volume and gross margins, partially offset by higher SG&A expenses and the reduction in wage subsidies received in the prior year.

The Company defines Adjusted EBITDA as net income or loss ~~plus;~~plus, (a) the provision for income ~~taxes;~~taxes, (b) interest expense, ~~net;~~net, (c) depreciation and ~~amortization;~~amortization, (d) gain or loss from discontinued ~~operations;~~operations, (e) ~~equity based compensation for awards granted prior to December 31, 2018; (f) non-cash~~ restructuring charges and impairment of ~~assets;~~assets, and ~~(g)~~(f) other non-operating income and costs, including those for the acquisition and integration or disposition of ~~businesses and idle facilities.~~businesses. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

In evaluating Adjusted EBITDA, investors should be aware that, in the future, the Company may incur expenses similar to those adjusted for in this presentation. This presentation of Adjusted EBITDA should not be construed as an implication that the Company’s future results will be unaffected by unusual or nonrecurring items.

Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

Adjusted EBITDA:

•

does not reflect the interest expense on our debt;

•

excludes impairments; and

•

does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

~~Also about Adjusted EBITDA:~~

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

•

other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Given these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using non-GAAP financial measures only on a supplemental basis.

BACKLOG

Although orders from customers can be cancelled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at ~~January 1,~~July 2, 2022 totaled ~~$1.5~~$1.4 billion compared to ~~$488.5 million~~$1.2 billion at ~~December 26, 2020.~~July 3, 2021. The increase in backlog was primarily driven by ~~increased demand for single-family homes, which resulted~~an increase in ~~order levels that significantly outpaced production~~average selling price per home in ~~both the U.S. and Canada. Our ability to increase~~backlog. Increasing production rates to keep pace with orders is limited by individual plant capacity, ~~the availability of and time needed~~time to train new employees, employee attendance and availability of materials, including most recently raw material allocations by certain ~~allocations of raw materials by our~~ suppliers. W~~e may experience greater order cancellations in the future as a result of higher prices and the longer time required to manufacture and deliver our products.~~

Liquidity and Capital Resources

Sources and Uses of Cash

The following table presents summary cash flow information for the ~~nine~~three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


	Nine months ended						Three months ended
(Dollars in thousands)	January 1, 2022			December 26, 2020			July 2, 2022			July 3, 2021
Net cash provided by (used in):
Operating activities	$	164,406		$	103,816		$	47,422		$	31,905
Investing activities		(22,921	)		(1,213	)		(18,971	)		(9,219	)
Financing activities		(21,355	)		(47,938	)		2,056			1,798
Effect of exchange rate changes on cash, cash equivalents		(578	)		2,940			(2,142	)		673
Net increase in cash and cash equivalents		119,552			57,605			28,365			25,157
Cash and cash equivalents at beginning of period		262,581			209,455			435,413			262,581
Cash and cash equivalents at end of period	$	382,133		$	267,060		$	463,778		$	287,738

The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements, capital expenditures, and ~~capital expenditures. The Company does not have any scheduled long-term debt maturities in the next twelve months.~~strategic initiatives and investments. On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit ~~sub-facility.~~sub-facility ("Amended Credit Agreement"). At ~~January 1,~~July 2, 2022, ~~$169.6~~$167.9 million was available for borrowing under the Amended Credit Agreement. The Company’s revolving credit facility includes (i) a maximum consolidated total net leverage ratio of 3.25 to 1.00, subject to an upward adjustment upon the consummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to 1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next ~~year.~~year and beyond. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise its operating ~~strategies accordingly.~~strategies.

Cash provided by operating activities was ~~$164.4~~$47.4 million for the ~~nine~~three months ended ~~January 1,~~July 2, 2022 compared to ~~$103.8~~$31.9 million for the ~~nine~~three months ended ~~December 26, 2020.~~July 3, 2021. Cash provided by operating activities increased due to higher net income, ~~in the current year,~~ partially offset by ~~an increase~~changes in working capital, primarily increases in inventory ~~from higher material costs~~ and ~~higher stocking levels~~accounts receivable related to ~~mitigate supply chain challenges, an increase in prepaid and other assets primarily from~~production activities for the ~~capitalization of $15.4 million of cloud computing costs in fiscal 2022, and a $5.9 million payment of payroll taxes which were deferred in the prior fiscal year under the CARES Act regulations.~~FEMA contract.

Cash used in investing activities was ~~$22.9~~$19.0 million for the ~~nine~~three months ended ~~January 1,~~July 2, 2022 compared to ~~$1.2~~$9.2 million for the ~~nine~~three months ended ~~December 26, 2020.~~July 3, 2021. The increase was primarily related to an increase in capital expenditures in the current period. The Company acquired two idle manufacturing facilities in Texas and made investments in plant improvements to facilitate increased production or operational efficiencies. The Company deferred all non-essential spending in the first half of fiscal 2021 due to COVID-19 concerns.

~~Cash used in financing activities was $21.4 million for the nine months ended January 1, 2022 compared to $47.9 million for the nine months ended December 26, 2020. The decrease~~ in cash used for investing activities was related to cash paid for the acquisition of Manis.

Cash provided by financing activities was $2.1 million for the three months ended July 2, 2022 compared to $1.8 million for the three months ended July 3, 2021. Cash provided by financing in each period was primarily ~~related to lower repayments during fiscal 2022~~a result of ~~the Company's previously existing revolving credit facility. The Company also saw an increase in~~increased borrowings under floor plan financing ~~during fiscal 2022, which had decreased in fiscal 2021 in response to lowering financed retail inventories in response to the pandemic.~~agreements.

Critical Accounting Policies

For a discussion of our critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements, see Part II, Item 7 of the Fiscal ~~2021~~2022 Annual Report, under the heading “Critical

Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal ~~2021~~2022 Annual Report.

Recently Issued Accounting Pronouncements

For information on the impact of recently issued accounting pronouncements, see Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements,” to the condensed consolidated financial statements included in this Report.

Forward-Looking Statements

Some of the statements in this Report are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words “will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in our forward-looking statements, including regional, national and international economic, financial, public health and labor conditions, and the following:

•

~~The COVID-19 pandemic, which has had, and could continue to have, significant adverse effects on us;~~

•

~~supply-related~~Supply-related issues, including prices and availability of materials;

•

labor-related issues;

•

inflationary pressures in the North American economy;

•

the cyclicality and seasonality of the housing industry and its sensitivity to changes in general economic or other business conditions;

•

demand fluctuations in the housing ~~industry;~~industry, including as a result of actual or anticipated increases in homeowner borrowing rates;

•

the possible unavailability of additional capital when needed;

•

competition and competitive pressures;

•

changes in consumer preferences for our products or our failure to gauge those preferences;

•

quality problems, including the quality of parts sourced from suppliers and related liability and reputational issues;

•

data security breaches, cybersecurity attacks, and other information technology disruptions;

•

the potential disruption of operations caused by the conversion to new information systems;

•

the extensive regulation affecting the production and sale of factory-built housing and the effects of possible changes in laws with which we must comply;

•

the potential impact of natural disasters on sales and raw material costs;

•

the risks associated with mergers and acquisitions, including integration of operations and information systems;

•

periodic inventory adjustments by, and changes to relationships with, independent retailers;

•

changes in interest and foreign exchange rates;

•

insurance coverage and cost issues;

•

the possibility that all or part of our intangible assets, including goodwill, might become impaired;

•

the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks;

•

the COVID-19 pandemic, which has had, and could continue to have, significant adverse effects on us; and

•

other risks described in Part I — Item 1A, "Risk Factors," included in the Fiscal ~~2021~~2022 Annual Report, as well as the risks and information provided from time to time in our other periodic reports filed with the Securities and Exchange ~~Commission.~~Commission (the “SEC”).

If any of the risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements proves to be incorrect, then differences may arise between our forward-looking statements and our actual results, and such differences may be material. Investors should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. We assume no obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof, except as required by law.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s interest rate and foreign exchange risks, see Part II, Item 7A of the Fiscal ~~2021~~2022 Annual Report, under the heading "Quantitative and Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since April ~~3, 2021.~~2, 2022.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the specified time periods and accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to ~~Rules~~Rule 13a-15(e) of the Exchange Act at ~~January 1,~~July 2, 2022. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of ~~January 1,~~July 2, 2022.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2822

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial or contractual disputes, product liability claims and other matters. For additional information on legal proceedings, see Note 1312 “Commitments, Contingencies and Legal Proceedings – Legal Proceedings,” to the condensed consolidated financial statements included in this Report.

2923

Item 6. EXHIBITS


Exhibit Number		Description

31.1		Certification of Chief Executive Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

31.2		Certification of Chief Financial Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

101 (INS)		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101(SCH)		Inline XBRL Taxonomy Extension Schema Document.
101(CAL)		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101(DEF)		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101(LAB)		Inline XBRL Taxonomy Extension Label Linkbase Document.
101(PRE)		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

† Filed herewith.

3024

SIGNATURES

Pursuant to the requirements 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 Champion Corporation

Registrant


Signature	Title	Date

/s/ Mark Yost	President and Chief Executive Officer	~~February~~August 3, 2022
Mark Yost	(Principal Executive Officer)

/s/ Laurie Hough	Executive Vice President, Chief Financial Officer and Treasurer	~~February~~August 3, 2022
Laurie Hough	(Principal Financial Officer)

3125


Indiana		35-1038277
(State of Incorporation)		(I.R.S. Employer Identification No.)

755 West Big Beaver Road, Suite 1000
Troy, Michigan		48084
(Address of Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SKY	New York Stock Exchange


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of ~~January 1,~~July 2, 2022 (unaudited) and April ~~3, 2021~~2, 2022	1
Condensed Consolidated Income Statements (unaudited) for the three an~~d nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three an~~d nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	3
Condensed Consolidated Statements of Cash Flows (unaudited) for th~~e nine~~ the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three an~~d nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1513

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2821

Item 4. Controls and Procedures	2822

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	2923

Item 6. Exhibits	3024

SIGNATURES	3125


	January 1, 2022			April 3, 2021			July 2, 2022			April 2, 2022
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	382,133		$	262,581		$	463,778		$	435,413
Trade accounts receivable, net		46,184			57,481			128,573			90,536
Inventories, net		185,052			166,113			292,158			241,334
Other current assets		21,340			13,592			22,917			14,977
Total current assets		634,709			499,767			907,426			782,260
Long-term assets:
Property, plant, and equipment, net		127,196			115,140			144,933			132,985
Goodwill		191,970			191,803			192,555			191,970
Amortizable intangible assets, net		53,171			58,835			50,026			51,283
Deferred tax assets		14,304			19,914			16,302			17,750
Other noncurrent assets		46,801			32,443			62,090			58,371
Total assets	$	1,068,151		$	917,902		$	1,373,332		$	1,234,619
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Floor plan payable	$	34,315		$	25,733		$	37,859		$	35,460
Accounts payable		44,200			57,214			76,133			92,159
Other current liabilities		205,094			180,695			256,243			222,493
Total current liabilities		283,609			263,642			370,235			350,112
Long-term liabilities:
Long-term debt		12,430			39,330			12,430			12,430
Deferred tax liabilities		4,615			4,280			5,384			5,124
Other liabilities		34,119			42,039			41,705			41,840
Total long-term liabilities		51,164			85,649			59,519			59,394

Stockholders' Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 56,827 and 56,640 shares issued as of January 1, 2022 and April 3, 2021, respectively		1,572			1,569
Common stock, $0.0277 par value, 115,000 shares authorized, 56,848 and 56,838 shares issued as of July 2, 2022 and April 2, 2022, respectively								1,573			1,573
Additional paid-in capital		498,898			491,668			506,815			502,846
Retained earnings		241,135			82,898			444,702			327,902
Accumulated other comprehensive loss		(8,227	)		(7,524	)		(9,512	)		(7,208	)
Total stockholders’ equity		733,378			568,611			943,578			825,113
Total liabilities and stockholders’ equity	$	1,068,151		$	917,902		$	1,373,332		$	1,234,619


	Nine months ended						Three months ended
	January 1, 2022			December 26, 2020			July 2, 2022			July 3, 2021
Cash flows from operating activities
Net income	$	161,246		$	51,013		$	117,151		$	42,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,869			8,994			3,670			3,257
Amortization of intangible assets		5,664			4,082			1,946			1,888
Amortization of deferred financing fees		599			380			95			127
Equity-based compensation		6,134			4,625			3,960			1,441
Deferred taxes		5,942			3,251			1,685			4,079
Loss (gain) on disposal of property, plant, and equipment		696			(75	)
Loss on disposal of property, plant, and equipment								6			6
Foreign currency transaction loss (gain)		55			(421	)		351			(84	)
Change in assets and liabilities:
Accounts receivable		11,419			4,577			(38,141	)		(3,097	)
Inventories		(19,133	)		(3,388	)		(48,855	)		(25,129	)
Prepaids and other assets		(22,954	)		(2,239	)		(11,084	)		(14,992	)
Accounts payable		(13,076	)		(284	)		(15,931	)		8,741
Accrued expenses and other liabilities		17,945			33,301			32,569			12,767
Net cash provided by operating activities		164,406			103,816			47,422			31,905
Cash flows from investing activities
Additions to property, plant, and equipment		(22,784	)		(4,235	)		(9,435	)		(9,221	)
Cash paid for acquisition		(207	)		—			(9,553	)		0
Proceeds from maturity of Company owned life insurance policy		—			1,186
Proceeds from disposal of property, plant, and equipment		70			1,836			17			2
Net cash used in investing activities		(22,921	)		(1,213	)		(18,971	)		(9,219	)
Cash flows from financing activities
Changes in floor plan financing, net		8,583			(8,318	)		2,398			3,045
Payments on deferred financing fees		(1,130	)		—
Payments on revolving debt facility		(26,900	)		(38,000	)
Stock option exercises		1,099			67			9			79
Tax payments for equity-based compensation		(3,007	)		(1,687	)		(351	)		(1,326	)
Net cash used in financing activities		(21,355	)		(47,938	)
Net cash provided by financing activities								2,056			1,798
Effect of exchange rate changes on cash and cash equivalents		(578	)		2,940			(2,142	)		673
Net increase in cash and cash equivalents		119,552			57,605			28,365			25,157
Cash and cash equivalents at beginning of period		262,581			209,455			435,413			262,581
Cash and cash equivalents at end of period	$	382,133		$	267,060		$	463,778		$	287,738


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐


	Three months ended January 1, 2022
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at October 2, 2021		56,796	$	1,572	$	496,059	$	173,513		$	(8,166	)	$	662,978
Net income		—		—		—		67,622			—			67,622
Equity-based compensation		—		—		1,921		—			—			1,921
Net common stock issued under equity-based compensation plans		31		—		918		—			—			918
Foreign currency translation adjustments		—		—		—		—			(61	)		(61	)
Balance at January 1, 2022		56,827	$	1,572	$	498,898	$	241,135		$	(8,227	)	$	733,378


	Nine months ended January 1, 2022															Three months ended July 2, 2022
	Common Stock															Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total			Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 3, 2021		56,640	$	1,569	$	491,668	$	82,898		$	(7,524	)	$	568,611
Balance at April 2, 2022																	56,838	$	1,573	$	502,846	$	327,902		$	(7,208	)	$	825,113
Net income		—		—		—		161,246			—			161,246			—		—		—		117,151			—			117,151
Equity-based compensation		—		—		6,134		—			—			6,134			—		—		3,960		—			—			3,960
Net common stock issued under equity-based compensation plans		187		3		1,096		(3,009	)		—			(1,910	)		10		—		9		(351	)		—			(342	)
Foreign currency translation adjustments		—		—		—		—			(703	)		(703	)		—		—		—		—			(2,304	)		(2,304	)
Balance at January 1, 2022		56,827	$	1,572	$	498,898	$	241,135		$	(8,227	)	$	733,378
Balance at July 2, 2022																	56,848	$	1,573	$	506,815	$	444,702		$	(9,512	)	$	943,578


(Dollars in thousands)
Cash	$	1,521
Trade accounts receivable		2,256
Inventory		6,752
Property, plant, and equipment		10,466
Other assets		1,164
Accounts payable and accrued liabilities		(7,432	)
Intangibles		21,100
Goodwill		18,449
Total purchase price allocation	$	54,276


(Dollars in thousands)	January 1, 2022									April 3, 2021									July 2, 2022									April 2, 2022
	Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total
Gross carrying amount	$	61,913		$	21,389		$	83,302		$	61,963		$	21,409		$	83,372		$	62,168		$	21,696		$	83,864		$	61,986		$	21,419		$	83,405
Accumulated amortization		(22,336	)		(7,795	)		(30,131	)		(18,158	)		(6,379	)	$	(24,537	)		(25,094	)		(8,744	)		(33,838	)		(23,819	)		(8,303	)	$	(32,122	)
Amortizable intangibles, net	$	39,577		$	13,594		$	53,171		$	43,805		$	15,030		$	58,835		$	37,074		$	12,952		$	50,026		$	38,167		$	13,116		$	51,283


	Three months ended				��
(Dollars in thousands)	January 1, 2022		December 26, 2020			$ Change			% Change
Net income	$	67,622	$	21,599		$	46,023			213.1	%
Income tax expense		23,277		5,284			17,993			340.5	%
Interest expense, net		508		795			(287	)		(36.1	%)
Depreciation and amortization		5,250		4,386			864			19.7	%
Adjusted EBITDA	$	96,657	$	32,064		$	64,593			201.5	%