UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM10-Q

(Mark One)

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

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

For the quarterly period ended ~~December 3, 2017~~October 2, 2021

☐ TRANSITION 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~~

For the transition period from to

Commission file number:~~1-4714~~001-04714

~~SKYLINE CORPORATION~~Skyline Champion Corporation

(Exact name of registrant as specified in its charter)


Indiana		35-1038277
(State ~~or other jurisdiction~~ of ~~incorporation or organization)~~ Incorporation)		(I.R.S. Employer Identification No.)

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

~~P. O. Box 743, 2520By-Pass~~ ~~Road~~(248) 614-8211

~~Elkhart, Indiana~~

~~46515~~

~~(Address of principal executive offices)~~

~~(Zip Code)~~

(Registrant’s telephone number, including area ~~code:~~code)

~~(574)294-6521~~

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


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

Indicate by check mark whether the ~~registrant~~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~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☒ No ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ☑ Yes ☒ No ☐ No

Indicate by check mark whether the ~~registrant~~Registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated ~~filer,~~filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange ~~Act.~~Act:):


Large accelerated filer	☒	☐	Accelerated filer	☐	☑ Non-accelerated filer	☐

~~Non-accelerated filer~~		~~☐ (Do not check if a smaller reporting company)~~	Smaller reporting company	☐	☐

			Emerging growth company	☐	☐

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~~Registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ ~~Yes ☑~~ No☒

~~Indicate the number~~Number of shares ~~outstanding of each of the registrant’s classes~~ of common stock outstanding as of ~~the latest practicable date.~~October 21, 2021: 56,799,419

SKYLINE CHAMPION CORPORATION

FORM 10-Q

TABLE OF CONTENTS


~~Title of Class~~PART I – FINANCIAL INFORMATION	~~Shares Outstanding~~ ~~January 11, 2018~~
~~Common Stock, $.0277 Par Value~~		~~8,391,244~~

~~FORM10-Q~~

~~INDEX~~

~~PART I~~— ~~FINANCIAL INFORMATION~~


				~~Page No.~~
Item 1.		Financial Statements

		Condensed Consolidated Balance Sheets as of ~~December~~October 2, 2021 (unaudited) and April 3, ~~2017 and May 31, 2017~~2021			1
Condensed Consolidated Income Statements (unaudited) for the three and six months ended October 2, 2021 and September 26, 2020		2
		Condensed Consolidated Statements of ~~Operations~~Comprehensive Income (unaudited) for the ~~three-month~~three and~~six-month~~ ~~periods~~ six months ended ~~December 3, 2017~~October 2, 2021 and ~~November 30, 2016~~September 26, 2020			3

		Condensed Consolidated Statements of Cash Flows (unaudited) for the~~six-month~~ ~~periods~~ six months ended ~~December 3, 2017~~October 2, 2021 and ~~November 30, 2016~~September 26, 2020			4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended October 2, 2021 and September 26, 2020		5
		Notes to ~~the~~Condensed Consolidated Financial Statements			5
			6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			15


Item 3.		Quantitative and Qualitative Disclosures About Market Risk			29

~~Item 4.~~		~~Controls and Procedures~~			29

		~~PART II~~—~~OTHER INFORMATION~~

~~Item 1.~~		~~Legal Proceedings~~			30

~~Item 1A.~~		~~Risk Factors~~			30

~~Item 6.~~		~~Exhibits~~			30

~~Signatures~~Item 4. Controls and Procedures	29

PART II – OTHER INFORMATION	31

~~PART I~~— ~~FINANCIAL INFORMATION~~

Item 1. Legal Proceedings	*~~Financial Statements.~~* 30

Item 6. Exhibits	31

SIGNATURES	32

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

Skyline Champion Corporation ~~and Subsidiary Companies~~

Condensed Consolidated Balance Sheets

(Dollars and shares in thousands, except ~~share and~~ per share amounts)

   December 3, 2017    May 31, 2017
   (Unaudited)
ASSETS

Current Assets:

Cash
   $ 12,287    $ 11,384
Accounts receivable
   14,802    12,751
Inventories
   12,929    12,233
Workers’ compensation security deposit
   371    371
Other current assets
   995    563




Total Current Assets
   41,384    37,302




Property, Plant and Equipment, at Cost:

Land
   2,016    2,965
Buildings and improvements
   35,615    35,368
Machinery and equipment
   16,872    16,364




   54,503    54,697
Less accumulated depreciation
   44,092    43,721




   10,411    10,976
Other Assets
   7,242    7,366




Total Assets
   $ 59,037    $ 55,644


	October 2, 2021			April 3, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	310,258		$	262,581
Trade accounts receivable, net		72,886			57,481
Inventories, net		179,976			166,113
Other current assets		20,315			13,592
Total current assets		583,435			499,767
Long-term assets:
Property, plant, and equipment, net		122,905			115,140
Goodwill		191,970			191,803
Amortizable intangible assets, net		55,073			58,835
Deferred tax assets		13,832			19,914
Other noncurrent assets		43,115			32,443
Total assets	$	1,010,330		$	917,902
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Floor plan payable	$	30,840		$	25,733
Accounts payable		57,694			57,214
Other current liabilities		200,747			180,695
Total current liabilities		289,281			263,642
Long-term liabilities:
Long-term debt		12,430			39,330
Deferred tax liabilities		4,620			4,280
Other		41,021			42,039
Total long-term liabilities		58,071			85,649

Stockholders' Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 56,796 and 56,640 shares issued as of October 2, 2021 and April 3, 2021, respectively		1,572			1,569
Additional paid-in capital		496,059			491,668
Retained earnings		173,513			82,898
Accumulated other comprehensive loss		(8,166	)		(7,524	)
Total stockholders’ equity		662,978			568,611
Total liabilities and stockholders’ equity	$	1,010,330		$	917,902

~~The~~

See accompanying ~~notes are an integral part of the consolidated financial statements.~~

Notes to Condensed Consolidated Financial Statements.

~~Item 1.~~ ~~Financial Statements — (Continued).~~
1

Skyline Champion Corporation ~~and Subsidiary Companies~~

Condensed Consolidated ~~Balance Sheets — (Continued)~~Income Statements

(~~Dollars~~Unaudited, dollars in thousands, except ~~share and~~ per share amounts)

   December 3, 2017 May 31, 2017
   (Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable, trade
   $ 4,056 $ 3,861
Accrued salaries and wages
   2,942 3,530
Accrued volume rebates
   3,220 1,986
Accrued warranty
   3,916 4,757
Customer deposits
   1,977 1,880
Other accrued liabilities
   2,596 2,371


Total Current Liabilities
   18,707 18,385


Long-Term Liabilities:

Deferred compensation expense
   4,808 4,848
Accrued warranty
   2,800 2,800
Life insurance loans
   2,707 4,312


Total Long-Term Liabilities
   10,315 11,960


Commitments and Contingencies – See Note 7

Shareholders’ Equity:

Common stock, $.0277 par value, 15,000,000 shares authorized; issued 11,217,144 shares
   312 312
Additionalpaid-in capital
   5,316 5,171
Retained earnings
   90,131 85,560
Treasury stock, at cost, 2,825,900 shares
   (65,744 ) (65,744 )


Total Shareholders’ Equity
   30,015 25,299


Total Liabilities and Shareholders’ Equity
   $ 59,037 $ 55,644


	Three months ended					Six months ended
	October 2, 2021		September 26, 2020			October 2, 2021			September 26, 2020
Net sales	$	524,225	$	322,366		$	1,034,422		$	595,651
Cost of sales		394,898		259,573			793,565			478,855
Gross profit		129,327		62,793			240,857			116,796
Selling, general, and administrative expenses		61,340		41,373			115,363			82,180
Operating income		67,987		21,420			125,494			34,616
Interest expense, net		845		864			1,494			1,806
Other expense (income)		11		(2,599	)		(43	)		(6,813	)
Income before income taxes		67,131		23,155			124,043			39,623
Income tax expense		16,408		5,644			30,419			10,209
Net income	$	50,723	$	17,511		$	93,624		$	29,414
Net income per share:
Basic	$	0.89	$	0.31		$	1.65		$	0.52
Diluted	$	0.89	$	0.31		$	1.64		$	0.52

~~The~~

See accompanying ~~notes are an integral part~~Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of ~~the consolidated financial statements.~~Comprehensive Income

~~Item 1.~~ ~~Financial Statements — (Continued).~~
(Unaudited, dollars in thousands)


	Three months ended					Six months ended
	October 2, 2021			September 26, 2020		October 2, 2021			September 26, 2020
Net income	$	50,723		$	17,511	$	93,624		$	29,414
Other comprehensive income (loss):
Foreign currency translation adjustments		(1,520	)		861		(642	)		1,956
Total comprehensive income	$	49,203		$	18,372	$	92,982		$	31,370

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation ~~and Subsidiary Companies~~

~~Consolidated Income Statements~~

~~For the Three-Months andSix-Months~~ ~~Ended December 3, 2017 and November 30, 2016~~

~~(Dollars in thousands, except share and per share amounts)~~

   Three-Months Ended Six-Months Ended
   2017 2016 2017 2016
   (Unaudited) (Unaudited)
OPERATIONS

Net sales
   $ 57,765 $ 64,226 $ 116,227 $ 125,402
Cost of sales
   49,394 58,996 99,930 113,592


Gross profit
   8,371 5,230 16,297 11,810
Selling and administrative expenses
   6,132 5,739 12,244 11,489
Net gain on sale of property, plant and equipment
   762 —   702 —


Operating income (loss)
   3,001 (509 ) 4,755 321
Interest expense
   (37 ) (86 ) (184 ) (172 )
Income tax expense
   —   —   —   —


Net income (loss)
   $ 2,964 $ (595 ) $ 4,571 $ 149


Basic and diluted income (loss) per share
   $ .35 $ (.07 ) $ .54 $ .02


Weighted average number of common shares outstanding:

Basic
   8,391,244 8,391,244 8,391,244 8,391,244


Diluted
   8,562,899 8,391,244 8,531,191 8,512,903

~~The accompanying notes are an integral part of the consolidated financial statements.~~

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

Condensed Consolidated Statements of Cash Flows

~~For theSix-Months~~ ~~Ended December 3, 2017 and November 30, 2016~~

(~~Dollars~~Unaudited, dollars in thousands)

   2017    2016
   (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income
   $ 4,571    $ 149
Adjustments to reconcile net income to net cash from operating activities:

Depreciation
   417    511
Amortization of debt financing costs
   93    51
Share-based compensation
   145    62
Net gain on sale of property, plant and equipment
   (702 )    —
Change in assets and liabilities:

Accounts receivable
   (2,051 )    (670 )
Inventories
   (696 )    (575 )
Workers’ compensation security deposit
   —      604
Other current assets
   (432 )    (717 )
Accounts payable, trade
   195    92
Accrued liabilities
   127    2,502
Other, net
   27    46




Net cash from operating activities
   1,694    2,055




CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of property, plant and equipment
   1,651    —
Purchase of property, plant and equipment
   (800 )    (787 )
Other, net
   (37 )    (25 )




Net cash from investing activities
   814    (812 )




CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of life insurance loans
   (1,605 )    —




Net cash from financing activities
   (1,605 )    —




Net increase in cash
   903    1,243




Cash at beginning of period
   11,384    7,659




Cash at end of period
   $ 12,287    $ 8,902


	Six months ended
	October 2, 2021			September 26, 2020
Cash flows from operating activities
Net income	$	93,624		$	29,414
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,521			5,969
Amortization of intangible assets		3,762			2,721
Amortization of deferred financing fees		509			253
Equity-based compensation		4,213			3,624
Deferred taxes		6,421			2,655
Loss on disposal of property, plant, and equipment		686			15
Foreign currency transaction loss (gain)		35			(219	)
Change in assets and liabilities:
Accounts receivable		(15,351	)		(984	)
Inventories		(14,138	)		(990	)
Prepaids and other assets		(17,934	)		(2,063	)
Accounts payable		407			5,406
Accrued expenses and other liabilities		20,132			18,041
Net cash provided by operating activities		88,887			63,842
Cash flows from investing activities
Additions to property, plant, and equipment		(15,105	)		(2,552	)
Cash paid for acquisition		(207	)		—
Proceeds from maturity of Company owned life insurance policy		—			1,186
Proceeds from disposal of property, plant, and equipment		66			32
Net cash used in investing activities		(15,246	)		(1,334	)
Cash flows from financing activities
Changes in floor plan financing, net		5,107			(7,316	)
Payments on deferred financing fees		(1,130	)		—
Payments on revolving debt facility		(26,900	)		—
Stock option exercises		377			67
Tax payments for equity-based compensation		(3,007	)		(1,687	)
Net cash used in financing activities		(25,553	)		(8,936	)
Effect of exchange rate changes on cash and cash equivalents		(411	)		1,259
Net increase in cash and cash equivalents		47,677			54,831
Cash and cash equivalents at beginning of period		262,581			209,455
Cash and cash equivalents at end of period	$	310,258		$	264,286

~~The~~

See accompanying ~~notes are an integral part of the consolidated financial statements.~~

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, dollars and shares in thousands)

Three months ended October 2, 2021

Common Stock

Shares

Amount

Additional
Paid in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total

Balance at July 3, 2021

56,699

$
1,571

$
493,191

$
124,467

$
(6,646
)

$
612,583

Net income

—

—

—

50,723

—

50,723

Equity-based compensation

—

—

2,772

—

—

2,772

Net common stock issued under equity-based compensation plans

97

1

96

(1,677
)

—

(1,580
)
Foreign currency translation adjustments

—

—

—

—

(1,520
)

(1,520
)
Balance at October 2, 2021

56,796

$
1,572

$
496,059

$
173,513

$
(8,166
)

$
662,978

Six months ended October 2, 2021

Common Stock

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

Net income

—

—

—

93,624

—

93,624

Equity-based compensation

—

—

4,213

—

—

4,213

Net common stock issued under equity-based compensation plans

156

3

178

(3,009
)

—

(2,828
)
Foreign currency translation adjustments

—

—

—

—

(642
)

(642
)
Balance at October 2, 2021

56,796

$
1,572

$
496,059

$
173,513

$
(8,166
)

$
662,978

Three months ended September 26, 2020

Common Stock

Shares

Amount

Additional
Paid in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total

Balance at June 27, 2020

56,665

$
1,570

$
487,781

$
11,610

$
(11,664
)

$
489,297

Net income

—

—

—

17,511

—

17,511

Equity-based compensation

—

—

1,398

—

—

1,398

Net common stock issued under equity-based compensation plans

(27
)

(1
)

(1,622
)

—

—

(1,623
)
Foreign currency translation adjustments

—

—

—

—

861

861

Balance at September 26, 2020

56,638

$
1,569

$
487,557

$
29,121

$
(10,803
)

$
507,444

Six months ended September 26, 2020

Common Stock

Shares

Amount

Additional
Paid in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total

Balance at March 28, 2020

56,665

$
1,570

$
485,552

$
(48
)

$
(12,759
)

$
474,315

Net income

—

—

—

29,414

—

29,414

Equity-based compensation

—

—

3,624

—

—

3,624

Cumulative adjustment for adoption of ASU 2016-13

—

—

—

(245
)

—

(245
)
Net common stock issued under equity-based compensation plans

(27
)

(1
)

(1,619
)

—

—

(1,620
)
Foreign currency translation adjustments

—

—

—

—

1,956

1,956

Balance at September 26, 2020

56,638

$
1,569

$
487,557

$
29,121

$
(10,803
)

$
507,444

Components of accumulated other comprehensive income (loss) consisted solely of foreign currency translation adjustments.
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~

~~NOTE 1~~

1.Basis of Presentation and Business

Nature of Operations: Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the United States (“U.S.”) and Canada. The Company’s operations consist of manufacturing, retail, and transportation activities. The Company operates 35 manufacturing facilities throughout the U.S. and 5 manufacturing facilities in western Canada. These facilities primarily construct factory-built, timber-framed manufactured, and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 18 sales centers that sell manufactured houses 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.

COVID-19 Government Financial Assistance: The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. Various government programs were announced to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and state level programs in the United States and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. The Company recognized $0.6 million for wage subsidies under the CARES Act and other state level programs in the United States during the first quarter of fiscal 2021. The Company recognized $2.6 million and $6.2 million of payroll subsidies under CEWS during the three and six months ended September 26, 2020, respectively. The Company’s policy is to account for these subsidies as Other Income in the period in which the related costs are incurred and the Company is reasonably assured to receive payment. In addition, the CARES Act allows for deferring payment of certain payroll taxes. Through October 2, 2021, the Company has deferred $11.8 million of payroll taxes that will be paid beginning in December 2021.

Basis of Presentation: The accompanying unaudited ~~interim~~condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position as of December 3, 2017, in addition to the consolidated results of operations and cash flows for the three-month and~~six-month~~ ~~periods ended December 3, 2017 and November 30, 2016. Due to the seasonal nature~~ of the ~~Corporation’s business, interim results are not necessarily indicative of results for the entire year. Effective June 1, 2017, the Corporation adopted a52-53~~ week fiscal year ending on the Sunday which is nearest to the last day of May in each year. Consequently, there were 91 days in the three-month periods ended December 3, 2017 and November 30, 2016, respectively. In addition, there were 186 and 183 days in the~~six-month~~ ~~periods ended December 3, 2017 and November 30, 2016, respectively.~~

~~The unaudited interim consolidated financial statements included herein~~Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for ~~reporting~~Quarterly Reports on Form~~10-Q.~~ 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally ~~accompanying the annual~~included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The condensed consolidated financial statements ~~have been omitted.~~include the accounts of the Company and its majority-owned subsidiaries after elimination of intercompany balances and transactions. In the opinion of management, these statements include all normal recurring adjustments necessary to fairly state the Company’s consolidated results of operations, cash flows, and financial position. The ~~audited consolidated~~Company has evaluated subsequent events after the balance sheet asdate through the date of ~~May 31, 2017, and~~ the ~~unaudited interim~~filing of this report with the SEC. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes ~~thereto~~to the audited consolidated financial statements included in the ~~Corporation’s latest annual report~~Company’s Annual Report on Form~~10-K.~~ 10-K, which was filed with the SEC on May 26, 2021 (the “Fiscal 2021 Annual Report”).

~~Recently issued accounting pronouncements~~— ~~In May 2014,~~The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)No. 2014-09,~~~~Revenue~~amounts reported in the condensed consolidated financial statements and the accompanying notes thereto. Actual results could differ from ~~Contracts with Customers (Topic 606)~~~~. Subsequent~~those estimates. The condensed consolidated income statements, condensed consolidated statements of comprehensive income, and condensed consolidated statements of cash flows for the interim periods are not necessarily indicative of the results of operations or cash flows for the full year.

The Company’s allowance for credit losses on financial assets measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current economic conditions and forecasts that affect the collectability of the reported amount. Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings. Accounts receivable are reflected net of reserves of $0.5 million and $0.4 million at October 2, 2021 and April 3, 2021, respectively. At both October 2, 2021 and April 3, 2021, other notes receivable are reflected net of reserves of $0.4 million.

The Company’s fiscal year is a 52- or 53-week period that ends on the Saturday nearest to March 31. The Company’s current fiscal year, “fiscal 2022,” will end on April 2, 2022 and will include 52 weeks. References to “fiscal 2021” refer to the ~~issuance of ASUNo. 2014-09,~~ ~~FASB~~Company’s fiscal year ended April 3, 2021. The three and six months ended October 2, 2021 and September 26, 2020 each included 13 and 26 weeks, respectively.

There were no accounting standards recently issued ~~ASUNo. 2015-14,~~ ~~which deferred the effective date of ASU2014-09~~ ~~by one year. In addition, FASB subsequently issued several ASU’s~~ that update or clarify the new rules. For a public entity, this guidance is effective for annual reporting periods after December 15, 2017, including interim periods within that reporting period. Early application is permitted.

~~The core principal of ASU2014-09~~ ~~is that an entity should recognize revenue~~are expected to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach:

~~Identify the contract(s) with a customer;~~

~~Identify each performance obligation in the contract;~~

~~Determine the transaction price;~~

~~Allocate the transaction price to each performance obligation; and~~

~~Recognize revenue when or as each performance obligation is satisfied.~~

~~The Corporation’s revenue comes substantially from the sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.~~

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 1 Basis of Presentation~~—~~(Continued).~~

~~Recently issued accounting pronouncements~~—~~(continued)~~ ~~The Corporation is currently evaluating how the adoption of ASU2014-09~~ will impact its financial position and result of operations by applying the five-step approach to each revenue stream. At this time, material changes resulting from this adoption are not anticipated with the modified retrospective method being utilized.

~~The Corporation, however, does expect to greatly increase the amount of required disclosures, including but not limited to:~~

~~Disaggregation of revenue in to categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;~~

~~The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed;~~

~~Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;~~

~~Information about performance obligations in contracts with customers; and~~

Judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers, including the timing of satisfaction of performance obligation, and the transaction price and the amounts allocation to performance obligations.

~~NOTE 2 Inventories~~

~~Total inventories consist of the following:~~

   December 3, 2017    May 31, 2017
   (Unaudited)
   (Dollars in thousands)
Raw materials
   $ 8,206    $ 7,734
Work in process
   3,807    4,030
Finished goods
   916    469




   $ 12,929    $ 12,233

~~NOTE 3 Other Assets~~

Other assets consist primarily of the cash surrender value of life insurance policies which totaled $7,129,000 and $7,093,000 at December 3, 2017 and May 31, 2017, respectively. Subsequent to December 3, 2017, life insurance policies with cash surrender value of approximately $2,546,000 were cancelled. Proceeds from the cash surrender value were used to repay all outstanding life insurance loans.

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 4 Warranty~~

~~A reconciliation of accrued warranty is as follows:~~

   Six-Months Ended
   December 3, 2017    November 30, 2016
   (Unaudited)
   (Dollars in thousands)
Balance at the beginning of the period
   $ 7,557    $ 7,317
Accruals for warranties
   3,030    3,842
Settlements made during the period
   (3,871 )    (3,280 )




Balance at the end of the period
   6,716    7,879
Non-current balance
   2,800    2,500




Accrued warranty
   $ 3,916    $ 5,379

~~NOTE 5 Life Insurance Loans~~

Life insurance loans have no fixed repayment schedule, and have interest rates ranging from 4.2 percent to 4.8 percent. The weighted average interest rate is 4.5 percent. In the second quarter of fiscal 2018, $1,605,000 in life insurance loans with a weighted average interest rate of 6.3 percent were repaid in order to reduce debt and corresponding interest expense. Subsequent to December 3, 2017, all remaining loan balances were repaid as referenced in Note 3.

~~NOTE 6 Income Taxes~~

At December 3, 2017, the Corporation’s gross deferred tax assets of approximately $46.7 million consist of approximately $32.4 million in federal net operating loss and tax credit carryforwards, $7.2 million in state net operating loss carryforwards and $7.1 million resulting from temporary differences between financial and tax reporting. The federal net operating loss and tax credit carryforwards have a ~~life expectancy of between eleven and eighteen years. The state net operating loss carryforwards have a life expectancy, depending~~material impact on the state where a loss was incurred, between one and twenty years. The Corporation has recorded a full valuation allowance against this asset. If the Corporation, after considering future negative and positive evidence regarding the realization of deferred tax assets, determines that a lesser valuation allowance is warranted, it would record a reduction to income tax expense and the valuation allowance in the period of determination. The Corporation is currently evaluating the new tax law that was enacted on December 22, 2017 and its impact on future estimates of the valuation of the Corporation’s deferred income taxes.

The Corporation had no federal and state income tax benefit or expense for the quarters ended December 3, 2017 and November 30, 2016. For the first half of fiscal 2018, the Corporation reported the utilization of previously fully-reserved federal net operating loss carryforwards of $1,582,000 and state operating loss carryforwards of $326,000 and released corresponding amounts of the valuation allowance to offset federal and state income tax expense.

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 7 Commitments and Contingencies~~

The Corporation was contingently liable at December 3, 2017 and May 31, 2017, under repurchase agreements with certain financial institutions providing inventory financing for dealers of its products. Under these arrangements, which are customary in the manufactured housing and park model industries, the Corporation agrees to repurchase units in the event of default by the dealer at declining prices over the term of the agreement. The period to potentially repurchase units is between 12 to 24 months. The maximum repurchase liability is the total amount that would be paid upon the default of the Corporation’s independent dealers.

The maximum potential repurchase liability, without reduction for the resale value of the repurchased units, was approximately $26 million at December 3, 2017 and $30 million at May 31, 2017. As a result of the Corporation’s favorable experience regarding repurchased units, which is largely due to the strength of dealers selling the Corporation’s products, the Corporation maintained at December 3, 2017 and May 31, 2017, a $100,000 loss reserve that is a component of other accrued liabilities. The risk of loss under these agreements is spread over many dealers and financial institutions. The loss, if any, under these agreements is the difference between the repurchase cost and the resale value of the units. The Corporation estimates the fair value of this commitment considering both the contingent losses and the value of the guarantee. This amount has historically been insignificant. The Corporation believes that any potential loss under the agreements in effect at December 3, 2017 will not be material to itsCompany’s financial position or results of operations. ~~There were no obligations or incurred net losses from repurchased units for thesix-month~~ ~~periods ended December 3, 2017 and November 30, 2016.~~

~~The~~6

Skyline Champion Corporation is a party to various pending legal proceedings in the normal course of business. Management believes that any losses resulting from such proceedings would not have a material adverse effect on the Corporation’s results of operations or financial position.

The Corporation utilizes a combination of insurance coverage and self-insurance for certain items, including workers’ compensation and group health benefits. Liabilities for workers’ compensation are recognized for estimated future medical costs and indemnity costs. Liabilities for group health benefits are recognized for claims incurred but not paid. Insurance reserves are estimated based upon a combination of historical data and actuarial information. Actual results could differ from these estimates.

~~NOTE 8 Secured Revolving Credit Facility~~

On March 20, 2015, the Corporation (“Borrower(s)”) entered into a Loan and Security Agreement (the “Loan Agreement”) with First Business Capital Corp. (“First Business Capital”). Under the Loan Agreement, First Business Capital provided a secured revolving credit facility to the Borrowers for a term of three years, renewable on an annual basis thereafter with each renewal for a successive~~one-year~~ term. The Corporation was able to obtain loan advances up to a maximum of $10,000,000 subject to certain collateral-obligation ratios. On July 21, 2017, the Corporation terminated the Loan Agreement in connection with its entry into a new Credit Agreement with JPMorgan Chase Bank, N.A. (“Chase”) having terms more favorable to the Corporation.

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~ —~~(Continued)~~

- Continued

2.Business Acquisition

~~NOTE 8 Secured Revolving Credit Facility~~—~~(Continued)~~

ScotBilt Acquisition

On February 28, 2021, the Company acquired 100% of the ~~date~~membership interests of ~~termination,~~ScotBilt Homes, LLC and related companies (“ScotBilt”), a builder of manufactured homes with annual revenues of approximately $79.0 million, for a purchase price of $53.0 million. Under the ~~Corporation did not have any borrowings outstanding under the Loan Agreement. In addition, the Corporation did not incur any early termination penalties in connection with the termination~~terms of the ~~Loan Agreement.~~

~~As previously referenced,~~purchase agreement, the Corporation (the “Loan Parties,” and Skyline Corporation and Skyline Homes, Inc., the “Borrowers” and each a “Borrower”) entered into a Credit Agreement (the “Agreement”) with Chase and other ancillary agreements and documents, including a Security Agreement and Patent and Trademark Security Agreement (collectively referred to along with the Agreement as the “Loan Documents”). Under the Agreement, Chase will provide a three-year revolving credit facility with loan advances to the Borrowers of up to a maximum of $10,000,000, subject to a borrowing base set forth in the Agreement (the “New Facility”). Loan advances bear interest at either 50 basis points above Chase’s floating prime rate (“CBFR”) or 150 basis points in excess of the LIBOR ratepreliminary purchase price was adjusted for ~~the applicable period (the “Adjusted LIBO Rate”). Loans are secured~~cash held by the Loan Parties’ assets, now owned or hereafter acquired, except for real property and any life insurance policies owned by any Borrower on the effective date of the Agreement. Interest is payable in arrears on a monthly basis in the case of the CBFR orScotBilt at the ~~end~~closing date and working capital adjustments resulting in an initial total purchase consideration of the applicable interest rate in the case of the Adjusted LIBO Rate, and all principal and accrued but unpaid interest is due and payable at the maturity of the New Facility. Borrowers may at any time prepay in whole or in part any loan amounts, subject to minimum amounts and breakage costs.

~~Also under the Agreement, Chase agreed to issue letters of credit for the account of the Borrowers not to exceed $500,000. No advances have yet been made in connection with such letters of credit.~~

As part of the closing of the financing, the Company paid Chase a closing fee of $25,000 plus legal and due diligence costs. The Loan Parties also agreed to pay the following fees to Chase during the term of the New Facility: (i) a commitment fee payable in arrears at a rate of .25% per annum on the average daily amount of the available revolving commitment under the New Facility during the prior calendar month; and (ii) monthly letter of credit fees payable in arrears at the applicable Adjusted LIBO Rate on the outstanding amount of letters of credit issued and outstanding during the prior month.

The Loan Documents contain covenants that limit the ability of the Loan Parties to, among other things: (i) incur other indebtedness; (ii) create or incur liens on their assets; (iii) consummate asset sales, acquisitions, or mergers; (iv) pay dividends; (v) make certain investments; (vi) enter into certain transactions with affiliates; and (vii) amend a Loan Party’s articles of incorporation or bylaws.

The Agreement also requires compliance with a financial covenant involving a fixed charge coverage ratio as set forth in the Agreement, which becomes effective when borrowing on the revolving credit facility is outstanding.

~~If the Borrowers default in their obligations under the Agreement, then the unpaid balances will bear interest at 2.0% per annum in excess of the rate that would apply in the absence of a default.~~

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 8 Secured Revolving Credit Facility~~—~~(Continued)~~

Other remedies available to Chase upon an event of default include the right to accelerate the maturity of all obligations, the right to foreclose on and otherwise repossess the collateral securing the obligations, and all other rights set forth in the Loan Documents.

The events of default under the Agreement include, but are not limited to, the following: (i) certain events of bankruptcy and insolvency; (ii) failure to make required payments; (iii) misrepresentations to Chase; (iv) failure to comply with certain covenants and agreements; (v) changes in control; and (vi) a material adverse change occurs.

~~The Corporation was in compliance as of December 3, 2017 with covenants associated with the Agreement.~~

~~NOTE 9 Stock-Based Compensation~~

In fiscal 2016, the Corporation’s Board of Directors and shareholders approved the 2015 Stock Incentive Plan (“Plan”), which allows the granting of stock options and other equity awards to directors, officers, employees, and eligible independent contractors of the Corporation and is intended to retain and reward key employees’ performance and efforts as they relate to the Corporation’s long-term objectives and strategic plan. A total of 700,000 shares of Common Stock have been reserved for issuance under the Plan. Stock option awards are granted with an exercise price equal to, or greater than, the market price of the Corporation’s stock at the date of grant and vest over a period of time as determined by the Corporation at the date of grant up to the contractual~~ten-year~~ life at which time the options expire. Restricted stock awards are priced no less than 100 percent of market price of the Corporation’s stock at the date of grant, and the awards made to date fully vest after five years. Stock options and restricted stock awards immediately vest upon the closing of change in control events (See Note 12).

~~Stock Options – The following unaudited tables summarize option activity for thesix-months~~ ~~ended December 3, 2017.~~

   Number
of
Shares    Weighted
Average
Exercise
Price    Weighted
Average
Remaining
Contractual
Term
(years)    Aggregate
Intrinsic
Value
(in
thousands)
Options outstanding at May 31, 2017
   274,000    $ 4.79    8.40    $ 128




Granted
   57,000    6.15





Options outstanding at December 3, 2017
   331,000    $ 5.03    8.19    $ 2,470








Vested and exercisable options at December 3, 2017
   90,000    $ 3.54    7.66    $ 805

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 9 Stock-Based Compensation — (Continued).~~

   Number of
Shares    Weighted
Average
Grant-Date
Fair Value
Non-vested options at May 31, 2017
   229,000    $ 3.34
Granted
   57,000    3.86
Vested
   (45,000 )    2.55




Non-vested options at December 3, 2017
   241,000    $ 3.61

Stock-based compensation expense for the second quarter of fiscal 2018 and 2017 was approximately $55,000 and $31,000, respectively. Stock-based compensation for the first half of fiscal 2018 and 2017 was approximately $105,000 and $62,000, respectively. Total unrecognized compensation expense related to stock options outstanding at December 3, 2017 was approximately $753,000 and is to be recorded over a weighted-average life of 3.15 years.

The Corporation records all stock-based payments, including grants of stock options, in the consolidated statements of operations based on their fair values at the date of grant. The Corporation currently uses the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock options on the date of grant using an option-pricing model is affected by stock price as well as assumptions that include expected stock price volatility over the term of the awards, expected life of the awards, risk-free interest rate, and expected dividends.

~~The fair value of the options granted during the first half of fiscal 2018 and 2017 were estimated at the date of grant using the following weighted average assumptions:~~

   2018 2017
Volatility
   65.9 % 66.0 %
Risk-free interest rate
   2.13 % 1.47 %
Expected option life in years
   7.50 7.50
Dividend yield
   0 % 0 %

Volatility is estimated based on historical volatility measured monthly for a time period equal to the expected life of the option ending on the date of grant. The risk-free interest rate is determined based on observed U.S. Treasury yields in effect at the time of the grant for maturities equivalent to the expected life of the options. The expected option life (estimated average period of time the options will be outstanding) is estimated based on the expected exercise date of the options. The expected dividend yield of zero is estimated based on the dividend yield at the time of grant as adjusted for any expected changes during the life of the options.

~~Restricted Stock –~~$54.5 million. In the first quarter of fiscal ~~2018~~2022, the Company adjusted the preliminary purchase price allocation by $0.2 million as a result of the final working capital settlement. The Company accounted for the acquisition as a business combination under the acquisition method of accounting provided by FASB ASC 805, Business Combinations (“ASC 805”). As such, the purchase price was allocated to the net assets acquired, inclusive of intangible assets, with the excess fair value recorded to goodwill. The purchase price allocation for this acquisition is preliminary and ~~third quarter~~could change.

The preliminary allocation of ~~fiscal 2017,~~ the ~~Corporation issued 36,000 shares~~purchase price was as follows:


(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

Goodwill is primarily attributable to expected synergies from the combination of the companies, including, but not limited to, expected cost synergies through procurement activities and ~~15,000 shares~~operational improvements through sharing of ~~restricted stock valued~~best practices. Goodwill, which is deductible for income tax purposes, was allocated to the U.S. Factory-built Housing reporting unit.

Cash, trade accounts receivable, inventory, other assets, accounts payable, and accrued liabilities were generally stated at ~~approximately $221,000~~historical carrying values given the short-term nature of these assets and ~~$216,000, respectively. No restricted stock was vested at December 3, 2017,~~liabilities. Intangible assets include $13.0 million in customer relationships and $8.1 million associated with the~~non-vested~~ ~~shares had a weighted average grant date~~ ScotBilt trade name and were based on an independent appraisal. The fair value of ~~$8.58 per share. The value~~the customer relationships was determined using the ~~market price~~multi-period excess earnings method and the fair value of the ~~Corporation’s common stock~~trade name was determined using the relief-from-royalty method. The Company estimates that each intangible asset has a weighted average useful life of ten years from the acquisition date. Fair value estimates of property, plant, and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals were based on a combination of market, cost, and sales comparison approaches, as appropriate. Level 3 fair value estimates of $10.5 million related to property, plant, and equipment and $21.1 million related to intangible assets were recorded in the accompanying consolidated balance sheet as of April 3, 2021.

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 ~~date~~acquisition date.

3.Inventories, net

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

~~Item 1.~~ ~~Financial Statements — (Continued).~~


(Dollars in thousands)	October 2, 2021		April 3, 2021
Raw materials	$	104,179	$	91,916
Work in process		24,036		21,642
Finished goods and other		51,761		52,555
Total inventories, net	$	179,976	$	166,113

At October 2, 2021 and April 3, 2021, reserves for obsolete inventory were $4.5 million and $4.6 million, respectively.

Skyline Champion Corporation ~~and Subsidiary Companies~~

Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~ —~~(Continued)~~

- Continued

4.Property, Plant, and Equipment

~~NOTE 9 Stock-Based Compensation~~—~~(Continued)~~

~~The restricted stock’s value~~Property, plant, and equipment are stated at cost. Depreciation is ~~to be expensed over a five-year vesting period using~~calculated primarily on a straight-line ~~method. Compensation~~basis, generally over the following estimated useful lives: land improvements – 3 to 10 years; buildings and improvements – 8 to 25 years; and vehicles and machinery and equipment – 3 to 8 years. Depreciation expense for the ~~second quarter~~three months ended October 2, 2021 and ~~first half~~September 26, 2020 was $3.3 million and $3.1 million, respectively. Depreciation expense for the six months ended October 2, 2021 and September 26, 2020 was $6.5 million and $6.0 million, respectively.

The components of ~~fiscal 2018~~property, plant, and equipment were as follows:


(Dollars in thousands)	October 2, 2021			April 3, 2021
Land and improvements	$	38,966		$	36,470
Buildings and improvements		96,324			97,005
Machinery and equipment		61,384			57,790
Construction in progress		10,591			1,889
Property, plant, and equipment, at cost		207,265			193,154
Less: accumulated depreciation		(84,360	)		(78,014	)
Property, plant, and equipment, net	$	122,905		$	115,140

5.Goodwill, Intangible Assets, and Cloud Computing Arrangements

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At October 2, 2021 and April 3, 2021, the Company had goodwill of $192.0 million and $191.8 million, respectively.

Intangible Assets

The components of amortizable intangible assets were as follows:


(Dollars in thousands)	October 2, 2021									April 3, 2021
	Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total
Gross carrying amount	$	61,923		$	21,393		$	83,316		$	61,963		$	21,409		$	83,372
Accumulated amortization		(20,934	)		(7,309	)		(28,243	)		(18,158	)		(6,379	)	$	(24,537	)
Amortizable intangibles, net	$	40,989		$	14,084		$	55,073		$	43,805		$	15,030		$	58,835

During the three months ended October 2, 2021 and September 26, 2020, amortization of intangible assets was ~~approximately $22,000~~$1.9 million and ~~$40,000,~~$1.3 million, respectively. ~~Unrecognized compensation~~During the six months ended October 2, 2021 and September 26, 2020, amortization of intangible assets was $3.8 million and $2.7 million, respectively.

Cloud Computing Arrangements

The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed technology. At October 2, 2021 and April 3, 2021, the Company had capitalized cloud computing costs of $10.6 million and $0.3 million within other noncurrent assets, respectively. There was 0 amortization of capitalized cloud computing costs during the three and six months ended October 2, 2021 and September 26, 2020, respectively, as the related cloud computing technology has not yet been placed in service.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

6.Other Current Liabilities

The components of other current liabilities were as follows:


(Dollars in thousands)	October 2, 2021		April 3, 2021
Customer deposits	$	59,807	$	58,888
Accrued volume rebates		23,048		18,207
Accrued warranty obligations		25,419		24,033
Accrued compensation and payroll taxes		45,484		42,560
Accrued insurance		15,716		12,421
Other		31,273		24,586
Total other current liabilities	$	200,747	$	180,695

7.Accrued Warranty Obligations

Changes in the accrued warranty obligations were as follows:


	Three months ended						Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Balance at beginning of period	$	31,079		$	24,695		$	30,469		$	24,969
Warranty expense		10,880			8,394			21,184			14,753
Cash warranty payments		(10,104	)		(8,629	)		(19,798	)		(15,262	)
Balance at end of period		31,855			24,460			31,855			24,460
Less: noncurrent portion in other long-term liabilities		(6,436	)		(5,790	)		(6,436	)		(5,790	)
Total current portion	$	25,419		$	18,670		$	25,419		$	18,670

8.Debt and Floor Plan Payable

Long-term debt consisted of the following:


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

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”). The Amended Credit Agreement replaced the Company’s previously existing $100.0 million revolving credit facility. Outstanding borrowings of $26.9 million on the 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 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 is included in other noncurrent assets on the consolidated balance sheet. The Company wrote off $0.3 million of deferred financing fees associated with the previously existing credit facility, which is included in interest expense, ~~at December 3, 2017 was approximately $380,000.~~net for the three and six months ended October 2, 2021.

~~NOTE 10 Earnings Per Share~~

~~Basic earnings per common share is computed~~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 plus 1.875% and 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 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 October 2, 2021the interest rate under the Amended Credit Agreement was 1.2%. At October 2, 2021, letters of credit issued under the Amended Credit Agreement totaled $30.4 million and total available borrowings were $169.6 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 October 2, 2021, including related costs and fees, was 1.74%. 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 October 2, 2021.

Floor Plan Payable

The Company’s retail operations utilize floor plan financing to fund the purchase of manufactured homes for display or resale. At October 2, 2021 and April 3, 2021, the Company had outstanding borrowings on floor plan financing agreements of $30.8 million and $25.7 million, respectively. Total credit line capacity provided under the agreements was $57.0 million as of October 2, 2021. Borrowings are secured by the homes and are required to be repaid when the Company sells the home to a customer.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

9.Revenue Recognition

The following tables disaggregate the Company’s revenue by sales category for the three and six months ended October 2, 2021 and September 26, 2020:


	Three months ended October 2, 2021
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	469,127	$	38,501	$	—	$	507,628
Commercial		2,572		—		—		2,572
Transportation		—		—		14,025		14,025
Total	$	471,699	$	38,501	$	14,025	$	524,225


	Six months ended October 2, 2021
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total

Manufacturing and retail	$	925,018	$	76,332	$	—	$	1,001,350
Commercial		4,001		—		—		4,001
Transportation		—		—		29,071		29,071
Total	$	929,019	$	76,332	$	29,071	$	1,034,422

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

Manufacturing and retail	$	275,969	$	24,558	$	—	$	300,527
Commercial		7,391		—		—		7,391
Transportation		—		—		14,448		14,448
Total	$	283,360	$	24,558	$	14,448	$	322,366



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

Manufacturing and retail	$	524,828	$	39,753	$	—	$	564,581
Commercial		7,391		—		—		7,391
Transportation		—		—		23,679		23,679
Total	$	532,219	$	39,753	$	23,679	$	595,651

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

10.Income Taxes

For the three months ended October 2, 2021 and September 26, 2020, the Company recorded $16.4 million and $5.6 million of income tax expense and had an effective tax rate during each period of 24.4%. For the six months ended October 2, 2021 and September 26, 2020, the Company recorded $30.4 million and $10.2 million of income tax expense and had an effective tax rate of 24.5% and 25.8%, respectively.

The Company’s effective tax rate for the three months and six months ended October 2, 2021 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, results in foreign jurisdictions, and tax benefits from vested equity compensation. The Company’s effective tax rate for the three months and six months ended September 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, and results in foreign jurisdictions.

At October 2, 2021, 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.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 ~~reporting~~ 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 ~~combination~~more dilutive of: (i) the two class method, assuming the participating securities are not exercised or converted; or (ii) the summation of ~~dilutive common share equivalents, comprised of shares issuable under the Corporation’s Stock Incentive Plan and the weighted-average number of~~average common shares outstanding ~~during the reporting period. Dilutive~~and additional common ~~share equivalents include~~shares that would have been outstanding if the dilutive ~~effect ofin-the-money~~ ~~options to purchase~~potential common shares ~~which is calculated based on~~had been issued. During the ~~average share price for each period using~~three and six months ended September 26, 2020, the ~~treasury stock method.~~two-class method was more dilutive.

The following table sets forth the computation of basic and diluted earnings per ~~share (dollars in thousands, except per share amounts):~~common share:

   Three-Months Ended    Six-Months Ended
   December 3,
2017    November 30,
2016    December 3,
2017    November 30,
2016
   (Unaudited)
Net income (loss)
   $ 2,964    $ (595 )    $ 4,571    $ 149








Weighted average share outstanding:

Basic
   8,391,244    8,391,244    8,391,244    8,391,244
Common stock equivalents— treasury stock method
   171,655    —      139,947    121,659








Diluted
   8,562,899    8,391,244    8,531,191    8,512,903
Net income (loss) per share:

Basic
   $ .35    $ (.07 )    $ .54    $ .02








Diluted
   $ .35    $ (.07 )    $ .54    $ .02


	Three months ended					Six months ended
(Dollars and shares in thousands, except per share data)	October 2, 2021		September 26, 2020				October 2, 2021		September 26, 2020
Numerator:
Net income	$	50,723	$	17,511			$	93,624	$	29,414
Undistributed earnings allocated to participating securities		—		(19	)			—		(53	)
Net income attributable to the Company's common shareholders	$	50,723	$	17,492			$	93,624	$	29,361
Denominator:
Basic weighted-average shares outstanding		56,808		56,654				56,757		56,593
Dilutive securities		400		255				455		238
Diluted weighted-average shares outstanding		57,208		56,909				57,212		56,831

Basic net income per share	$	0.89	$	0.31			$	1.65	$	0.52
Diluted net income per share	$	0.89	$	0.31			$	1.64	$	0.52

There were 23,417 and 139,532 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three-months ended December 3, 2017 and November 30, 2016, respectively. There were 46,168 and 8,727 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the~~six-months~~ ~~ended December 3, 2017 and November 30, 2016.~~

~~Item 1.~~ ~~Financial Statements — (Continued).~~

Skyline Champion Corporation ~~and Subsidiary Companies~~

Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~ —~~(Continued)~~

- Continued

~~NOTE 11 Net Gain~~

12.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 ~~Sale of Property, Plant~~net sales, earnings before interest, taxes, depreciation, and ~~Equipment~~amortization (“EBITDA”) and operating assets.

~~On November 22, 2017,~~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 ~~Corporation sold anon-income~~ ~~producing parcel of land located in McMinnville, Oregon. Proceeds of $1,231,000 were received,~~Company’s transportation operations, corporate costs incurred for all segments and ~~a gain of $762,000~~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 deferred tax items not specifically allocated to another segment.

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


	Three months ended						Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020

Net sales:
U.S. Factory-built Housing	$	471,699		$	283,360		$	929,019		$	532,219
Canadian Factory-built Housing		38,501			24,558			76,332			39,753
Corporate/Other		14,025			14,448			29,071			23,679
Consolidated net sales	$	524,225		$	322,366		$	1,034,422		$	595,651
Operating income:
U.S. Factory-built Housing EBITDA	$	78,075		$	28,697		$	141,092		$	53,090
Canadian Factory-built Housing EBITDA		6,390			5,951			12,056			10,857
Corporate/Other EBITDA		(11,351	)		(6,221	)		(17,328	)		(13,828	)
Other income		11			(2,599	)		(43	)		(6,813	)
Depreciation		(3,264	)		(3,048	)		(6,521	)		(5,969	)
Amortization		(1,874	)		(1,360	)		(3,762	)		(2,721	)
Consolidated operating income	$	67,987		$	21,420		$	125,494		$	34,616
Depreciation:
U.S. Factory-built Housing	$	2,619		$	2,391		$	5,229		$	4,789
Canadian Factory-built Housing		273			248			558			363
Corporate/Other		372			409			734			817
Consolidated depreciation	$	3,264		$	3,048		$	6,521		$	5,969
Amortization of U.S. Factory-built Housing intangible assets:	$	1,874		$	1,360		$	3,762		$	2,721
Capital expenditures:
U.S. Factory-built Housing	$	5,269		$	1,054		$	12,527		$	1,939
Canadian Factory-built Housing		236			85			341			242
Corporate/Other		379			102			2,237			371
Consolidated capital expenditures	$	5,884		$	1,241		$	15,105		$	2,552

(Dollars in thousands)							October 2, 2021			April 3, 2021
Total Assets:
U.S. Factory-built Housing (1)							$	605,669		$	578,897
Canadian Factory-built Housing (1)								93,773			87,224
Corporate/Other (1)								310,888			251,781
Consolidated total assets							$	1,010,330		$	917,902

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(1)

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

~~Likewise,~~

13.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 ~~August 31, 2017,~~its agreement to pay the ~~Corporation sold~~financial institution. The risk of loss from these agreements is spread over numerous retailers. The repurchase price is generally determined by the original sales price of the product less contractually defined curtailment payments. Excluding the resale value of the homes, the contingent repurchase obligation as of October 2, 2021 was estimated to be $243.4 million. The Company accounts for the guarantees under its repurchase agreements with the retailers’ financing institutions by estimating and deferring a~~non-income~~ ~~producing parcel~~ portion of ~~land located in Elkhart, Indiana. Proceeds~~the related product sale that represents the estimated fair value of ~~$420,000 were received,~~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 ~~$60,000~~$1.5 million and $1.4 million was ~~recognized~~recorded as of October 2, 2021 and April 3, 2021, respectively. Losses incurred on homes repurchased were not significant during the three or six months ended October 2, 2021 or September 26, 2020.

At October 2, 2021, the Company was contingently obligated for $30.4 million under letters of credit, primarily consisting of $12.6 million to support long-term debt, $17.5 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 $35.1 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 ~~first quarter.~~

~~NOTE~~ United Kingdom historically provided certain guarantees to two customers. Those guarantees provide contractual liability for proven construction defects up to 12 ~~Subsequent Event~~

years from the date of delivery of certain products. The ~~Exchange~~

Legal Proceedings

The Company has agreed to indemnify counterparties in the ordinary course of its business in agreements to acquire and ~~outstanding equity interests~~sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims that arise in the ordinary course of ~~each~~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.

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, ~~Inc., a Delaware corporation (“~~~~CHB~~”)Genesis Homes, Athens Park Models, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and ~~CHB International B.V.,~~Moduline and SRI Homes in western Canada. The Company operates 35 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 to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 18 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 industry 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 ~~Dutch private limited liability company (“~~~~CIBV~~~~”) (the shares~~number of ~~stock~~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 ~~CHB~~age, the population of first-time home buyers, and ~~CIBV~~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 $1,369 million as of October 2, 2021 compared to $390.1 million as of September 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 certain material input costs, most significantly forest products for much of fiscal 2022. In addition, we are also experiencing supply disruption, higher freight costs and fluctuating prices for many of our other material inputs. Finding and retaining qualified labor continues to be ~~contributed~~a challenge for our plants which requires us to ~~Skyline,~~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 “~~Contributed Shares~~”longer lead-time caused by larger backlogs and changing prices could result in cancellations in future periods.

For the six months ended October 2, 2021, approximately 77% 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 43,949 and ~~(ii) in exchange~~36,312 units during the five months ended August 31, 2021 and 2020, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 19.5% and 15.6%, for the ~~Contributed Shares, Skyline will issue~~five months ended August 31, 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, manufactured housing’s most recent annual shipment levels still operate at lower levels than the long-term historical average of over 200,000 units.

Acquisitions and Expansions

Over the last several years, demand for the Company’s products, primarily affordable housing in the U.S., has continued to ~~Champion Holdings that number~~improve. As a result, the Company has focused on operational improvements to make existing manufacturing facilities more profitable as well as executing measured expansion of ~~shares~~its manufacturing and retail footprints.

The Company has increased capacity through strategic acquisitions and expansions of ~~Skyline common stock, $0.0277 par value per share, such that at~~its manufacturing operations. The Company is focused on growing in strong housing markets across the ~~closing, Champion Holdings (or~~U.S.

On June 21, 2021, the Company acquired two idle facilities in Navasota, Texas in order to strengthen its ~~members) will hold 84.5%,~~production capabilities in the Texas market. The Company intends to initiate production in one of these facilities by the end of fiscal 2022. On February 28, 2021, the Company acquired ScotBilt. In calendar 2020, ScotBilt shipped over 1,600 homes from its two manufacturing facilities in Georgia providing affordable housing throughout Alabama, Florida, Georgia and ~~Skyline’s shareholders will hold 15.5%,~~the Carolinas. ScotBilt has approximately 400 employees in its two

manufacturing facilities. The Company believes ScotBilt is an excellent fit because of the ~~common stock~~compatible company cultures and because of ~~the combined company on a fully-diluted basis (the “~~~~Shares Issuance~~~~”). The contribution of the Contributed Shares by Champion Holdings to Skyline, and the Shares Issuance by Skyline to Champion Holdings, are collectively referred to herein as the “~~~~Exchange~~~~.” In connection with the closing of the Exchange, Skyline will file the Company Charter Amendment (described below) and will change its name to “Skyline Champion Corporation.”~~

~~Immediately prior to the closing of the Exchange, Skyline will amend and restate its articles of incorporation to provide for, among other things, (i) the change~~ScotBilt’s strong presence in the ~~name~~attractive Mid-South region, which helps to balance national distribution and complements the Company’s existing manufacturing footprint. The operations of ScotBilt are included in the financial results of the Company since the date of the acquisition. On January 14, 2021, the Company acquired two idled facilities in Pembroke, North Carolina, which provides an opportunity to further expand its manufacturing footprint in the South and Southeast markets. The Company is currently assessing prospects for initiating production in one or both of these facilities.

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 ~~described above; (ii)~~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

The outbreak 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, and the Company, as well as the Company’s employees, customers, and suppliers.

The Company has prioritized the safety and well-being of its employees and customers and has implemented standards to operate in accordance with social-distancing protocols and public health authority guidelines. Beginning in March 2020, the Company took actions to temporarily idle certain facilities in response to government shutdown orders or reduced demand. By late April 2020, most 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. As of October 2, 2021, 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 during the first quarter of fiscal 2021. The Company’s U.S. operations incurred $1.9 million of expense related to the extended benefits. Various government programs have been announced to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in the United States 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 $2.6 million and $6.2 million, respectively, for payroll subsidies under CEWS during the three and six months ended September 26, 2020. The Company also recognized $0.6 million for payroll subsidies under the CARES Act during the first quarter of fiscal 2021. In addition, the CARES Act allowed for deferring payment of certain payroll taxes. Through October 2, 2021, the Company has deferred $11.8 million of payroll taxes that will be paid beginning in December 2021.

UNAUDITED INCOME STATEMENTS FOR THE SECOND QUARTER OF FISCAL 2022 VS. 2021


	Three months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020

Results of Operations Data:
Net sales	$	524,225		$	322,366
Cost of sales		394,898			259,573
Gross profit		129,327			62,793
Selling, general, and administrative expenses		61,340			41,373
Operating income		67,987			21,420
Interest expense, net		845			864
Other income (expense)		11			(2,599	)
Income before income taxes		67,131			23,155
Income tax expense		16,408			5,644
Net income	$	50,723		$	17,511

Reconciliation of Adjusted EBITDA:
Net income	$	50,723		$	17,511
Income tax expense		16,408			5,644
Interest expense, net		845			864
Depreciation and amortization		5,138			4,408
Equity-based compensation (for awards granted prior to December 31, 2018)		—			388
Other		—			122
Adjusted EBITDA	$	73,114		$	28,937
As a percent of net sales:
Gross profit		24.7	%		19.5	%
Selling, general, and administrative expenses		11.7	%		12.8	%
Operating income		13.0	%		6.6	%
Net income		9.7	%		5.4	%
Adjusted EBITDA		13.9	%		9.0	%

NET SALES

The following table summarizes net sales for the three months ended October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021		September 26, 2020		$ Change			% Change
Net sales	$	524,225	$	322,366	$	201,859			62.6	%
U.S. manufacturing and retail net sales	$	471,699	$	283,360	$	188,339			66.5	%
U.S. homes sold		5,902		4,689		1,213			25.9	%
U.S. manufacturing and retail average home selling price	$	79.9	$	60.4	$	19.5			32.3	%
Canadian manufacturing net sales	$	38,501	$	24,558	$	13,943			56.8	%
Canadian homes sold		358		302		56			18.5	%
Canadian manufacturing average home selling price	$	107.5	$	81.3	$	26.2			32.2	%
Corporate/Other net sales	$	14,025	$	14,448	$	(423	)		(2.9	%)
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 three months ended October 2, 2021 were $524.2 million, an increase of $201.9 million, or 62.6%, over the three months ended September 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 $188.3 million, or 66.5%, for the three months ended October 2, 2021 compared to the three months ended September 26, 2020. The change was primarily due to an increase in the number of ~~authorized shares~~homes sold during the period of ~~common stock~~25.9%, an increase in the average home selling price of 32.3%, and the impact of the ~~Company from 15,000,000~~acquisition of ScotBilt. Demand for our products has increased significantly in recent periods and we have been able to ~~115,000,000 shares; (iii) a provision stating~~increase production in response to that demand. The average selling price increased during the period due to pricing actions enacted in response to rising material, freight, and labor costs. 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 $13.9 million, or 56.8% for the three months ended October 2, 2021 compared to the same period in the prior fiscal year, primarily due to an 18.5% increase in the number of ~~directors shall be as specified~~homes sold and a 32.2% increase in average home selling price. The increase in volume was due to an increase in demand and production rates. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $0.6 million due to fluctuations in the ~~Company’s bylaws; and (iv) certain other ministerial revisions to update and modernize~~translation of the ~~articles of incorporation and remove various extraneous provisions (collectively, the “~~~~Company Charter Amendment~~~~”).~~

~~The Exchange is expected to close as soon as practicable after the satisfaction or waiver of all the conditions~~Canadian dollar to the ~~closing~~U.S. dollar during the three months ended October 2, 2021 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 October 2, 2021, net sales decreased $0.4 million, or 2.9%, primarily attributable to lower revenue from the shipment of recreational vehicles.

GROSS PROFIT

The following table summarizes gross profit for the three months ended October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change
Gross profit:
U.S. Factory-built Housing	$	116,604		$	54,546		$	62,058		113.8	%
Canadian Factory-built Housing		8,868			4,787			4,081		85.3	%
Corporate/Other		3,855			3,460			395		11.4	%
Total gross profit	$	129,327		$	62,793		$	66,534		106.0	%
Gross profit as a percent of net sales		24.7	%		19.5	%

Gross profit as a percent of sales during the three months ended October 2, 2021 was 24.7% compared to 19.5% during the three months ended September 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 $62.1 million, or 113.8%, during the three months ended October 2, 2021 compared to the same period in the ~~Exchange Agreement, which is currently expected~~prior fiscal year. Gross profit was 24.7% as a percent of segment net sales for the three months ended October 2, 2021, compared to be19.2% in the ~~first half~~same period of ~~2018.~~the prior fiscal year. The increase in gross profit is due to the increase in homes sold and operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes.

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~Canadian Factory-built Housing:

~~Notes~~Gross profit for the Canadian Factory-built Housing segment increased by $4.1 million, or 85.3%, during the three months ended October 2, 2021, compared to ~~Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 12 Subsequent Event~~—~~(Continued)~~

~~Representations and Warranties; Covenants~~

~~Each of Skyline and Champion Holdings makes customary representations and warranties~~the same period in the ~~Exchange Agreement. Skyline also has agreed~~prior fiscal year, primarily due to ~~various covenants~~increased sales volume. Gross profit as a percent of net sales was 23.0% for the three months ended October 2, 2021, compared to 19.5% in the ~~Exchange Agreement, including, without limitation,~~same period of the prior fiscal year. The improvement is due to ~~cause a special meeting of Skyline’s shareholders to be held as promptly as practicable to consider~~direct labor and ~~approve~~manufacturing efficiencies from the ~~Company Charter Amendment and~~increase in home sales, partially offset by higher material costs.

Corporate/Other:

Gross profit for the ~~Shares Issuance (the “~~~~Company Shareholder Approval Matters~~”)Corporate/Other segment increased $0.4 million, or 11.4%, ~~and to file a proxy statement with~~during the ~~Securities and Exchange Commission (“~~~~SEC~~~~”) relating to such special meeting.~~

~~The Exchange Agreement contains customary covenants governing the conduct of Skyline’s and Champion Holdings’ respective businesses, access to information pertaining~~three months ended October 2, 2021, compared to the ~~parties’ businesses, and notification of certain events, among other things, between the date~~same period of the ~~Exchange Agreement and the closing. Pursuant to the Exchange Agreement, Skyline is subject tocustomary “no-shop” restrictions~~ which restrict its ability to solicit alternative acquisition proposals from third parties and to provide information to and engage in discussions with third parties regarding alternative acquisition proposals. However, prior to receiving approval of the Company Shareholder Approval Matters by Skyline’s shareholders, Skyline may, under certain circumstances, provide information to and participate in discussions with third parties with respect to certain unsolicited alternative acquisition proposals as provided in the Exchange Agreement.

The Exchange Agreement provides that, prior to the closing of the Exchange, Skyline may declare and pay a special cash dividend to its shareholders in the aggregate amount of Skyline’s “net cash” (generally defined in the Exchange Agreement as Skyline’s aggregate cash and cash equivalents, less the aggregate amount of Skyline’s indebtedness and debt-like items, and less Skyline’s aggregate transaction expenses incurred in connection with the Exchange, each as determined as of the close of business on the last business day immediately prior to the date Skyline gives notice of the special dividend to the NYSE American), if any. If declared, Skyline must pay the special dividend at least one business day prior to the closing date.

~~Closing Conditions~~

Consummation of the Exchange is subject to various conditions, including, without limitation, (i) approval by Skyline’s shareholders of the Company Shareholder Approval Matters; (ii) the receipt of all required regulatory approvals (without the imposition of any burdensome divestiture condition on the parties, as described in the Exchange Agreement); (iii) the absence of any law, order, or legal injunction which prohibits the consummation of the Exchange and the absence of certain other litigation matters; (iv) the NYSE American listing application for the Company’s shares to be issued in the Shares Issuance shall have been conditionally approved; (v) the accuracy of the parties’ respective representations and warranties and the performance of their respective obligations; (vi) the absence of the occurrence of a material adverse effect with respect to each of Skyline and Champion Holdings, and their subsidiaries, each taken as a whole, between the date of the Exchange Agreement and closing; and (vii) certain other customary conditions.

~~Item 1.~~ ~~Financial Statements — (Continued).~~

~~Skyline Corporation and Subsidiary Companies~~

~~Notes to Consolidated Financial Statements (Unaudited)~~ —~~(Continued)~~

~~NOTE 12 Subsequent Event~~—~~(Continued)~~

~~Termination and Termination Fees~~

The Exchange Agreement contains certain termination rights in favor of Skyline and Champion Holdings, as set forth therein. Upon the termination of the Exchange Agreement under specified circumstances, and upon Skyline entering into or closing another acquisition transaction within 12 months after termination of the Exchange Agreement, Skyline may be required to pay Champion Holdings a termination fee of $10 million. Any termination fee triggered under the Exchange Agreement will accrue upon Skyline entering into or closing another acquisition transaction within 12 months after termination, but the fee is not payable by Skyline to Champion Holdings until two business days after the date that the other acquisition closes or is terminated unless the board of directors of Skyline adversely changes its favorable recommendation of the Exchange to its shareholders and Champion Holdings terminates the Exchange Agreementfiscal year, as a result of ~~such change~~changes in ~~recommendation, in which case, a termination fee~~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 October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	43,014		$	29,601		$	13,413		45.3	%
Canadian Factory-built Housing		2,751			1,683			1,068		63.5	%
Corporate/Other		15,575			10,089			5,486		54.4	%
Total selling, general, and administrative expenses	$	61,340		$	41,373		$	19,967		48.3	%
Selling, general, and administrative expense as a percent of net sales		11.7	%		12.8	%

Selling, general, and administrative expenses were $61.3 million for the three months ended October 2, 2021, an increase of $3$20.0 million, ~~in cash is immediately due and payable by Skyline to Champion Holdings upon such termination, and if Skyline subsequently enters into~~ or closes another acquisition transaction within 12 months after termination, an additional $7 million cash termination fee would accrue and would become payable two business days after the date that the other acquisition closes or is terminated.

~~In addition~~48.3%, compared to the ~~termination fee, if~~same period in the ~~Exchange Agreement~~prior fiscal year. The following is ~~terminated~~a summary of the change by ~~either Skyline~~operating segment.

U.S. Factory-built Housing:

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $13.4 million, or ~~Champion Holdings because~~45.3%, during the three months ended October 2, 2021, as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses as a percent of ~~Skyline’s shareholders do not approve~~segment net sales decreased to 9.1% for the ~~Company Shareholder Approval Matters, then Skyline must pay Champion Holdings $2~~three months ended October 2, 2021, compared to 10.4% during the comparable period of the prior fiscal year, primarily due to increased leverage of fixed costs resulting from the increase in sales. 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 due to the growth in housing demand; and (iii) 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 $1.1 million, or 63.5%, for the three months ended October 2, 2021 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as ~~reimbursement~~a percent of segment net sales increased to 7.1% for ~~fees~~the three months ended October 2, 2021, compared to 6.9% during the comparable period of the prior fiscal year. The increase in expenses resulted from an increase in commissions and incentive compensation as well as wage expense from headcount increases due to the growth in housing demand.

Corporate/Other:

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred ~~by Champion Holdings~~for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $5.5 million, or 54.4%, during the three months ended October 2, 2021, compared to the same period of the prior fiscal year, due to an increase in ~~connection~~employee compensation, primarily equity and incentive compensation as well as $2.1 million of costs related to investments made to enhance our customer buying experience and supporting systems.

INTEREST EXPENSE, NET

The following table summarizes the components of interest expense, net for the three months ended October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change			% Change
Interest expense	$	993		$	974		$	19			2.0	%
Less: Interest income		(148	)		(110	)		(38	)		34.5	%
Interest expense, net	$	845		$	864		$	(19	)		(2.2	%)
Average outstanding floor plan payable	$	29,300		$	27,309
Average outstanding long-term debt	$	12,430		$	77,330

Interest expense, net was $0.8 million for the three months ended October 2, 2021, remaining consistent with the ~~Exchange Agreement. Any expense reimbursement paid by Skyline will be credited against, and thereby reduce, any termination fee that may become due and payable.~~

~~The foregoing descriptions~~same period of the Exchange Agreement, the Exchange, and the Shares Issuance are summaries, do not purport to be complete, and are qualified in their entirety by reference to the full text of the Exchange Agreement, and the exhibits attached thereto, copies of which are attached as Exhibits 2.1 to the Current Report on~~Form 8-K filed~~ ~~with Securities and Exchange Commission on January 5, 2018.~~

~~Item 2.~~

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

~~Overview~~

~~Established in 1951 and headquartered in Elkhart, Indiana, the Corporation designs, produces and markets manufactured housing, modular housing and park models.~~prior fiscal year. The Company ~~sells its products to independent dealers, developers, campgrounds and manufactured housing communities located throughout the United States and Canada.~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)~~.

~~Overview~~—~~(Continued)~~

~~Manufactured housing products are built according to standards established by the U.S. Department~~wrote off $0.3 million of Housing and Urban Development. Modular homes are built according to state, provincial or local building codes. Park models are built according to specifications established by the American National Standards Institute, and are intended to provide temporary living accommodations for individuals seeking leisure travel and outdoor recreation.

To better serve the needs of its dealers, developers, campgrounds and communities, the Corporation has eight manufacturing facilities located in Leola, Pennsylvania, Sugarcreek, Ohio, Ocala, Florida, Lancaster, Wisconsin, Arkansas City, Kansas, San Jacinto, California, Woodland, California and McMinnville, Oregon. Manufactured and modular housing are marketed under a number of trademarks, and are available in a variety of dimensions. Park models are marketed under the “Shore Park” trademark. Manufactured housing, modular housing and park models are sold to customers either through floor plandeferred financing ~~with various financial institutions, credit terms, or on a cash basis.~~

~~Manufactured Housing, Modular Housing and Park Model Industry Conditions~~

New home sales and the overall housing market is subject to seasonal swings. Typically, the demand for our primary product, single family housing, is highest in the spring and summer months and like the general housing market is lower in the winter months. Likewise, the production and sale of manufactured housing, modular housing and park models can be affected by winter weather conditions at the Corporation’s northern plants. Demand for park models, used primarily for vacation and retirement living often offsets slower single-family homes sales during the winter months.

Although the overall demand for new homes is rising, our industry’s products still do not enjoy the favorable financing options afforded conventional site built homes. Industry trade associations at the state and national level are working to improve legislation to make available more favorable financing options for affordable home buyers. Government Sponsored Enterprises’ Federal National Mortgage Association and Federal Home Loan Mortgage Corporation recently released their “Underserved Markets Plan” that describes specifically their three-year plan to meet the “Duty to Serve” obligations as outlined in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as further amended by the Housing and Economic Recovery Act of 2008. The creation and expansion of a secondary chattel loan market could have a positive effect on the demand for affordable manufactured housing as more favorable finance options are made available.

Sales of manufactured housing, modular housing and park models are affected by the strength of the U.S. economy, interest rate and employment levels, consumer confidence and the availability of wholesale and retail financing. Recent trends regarding calendar year unit shipments of the Corporation’s products and their respective industries are as follows:

Manufactured Housing
   2012    2013 2014 2015 2016
Industry
   54,891    60,210 64,344 70,519 81,169
Percentage Increase
      9.7 % 6.9 % 9.6 % 15.1 %
Corporation
   1,848    2,205 2,678 2,872 3,606
Percentage Increase
      19.3 % 21.5 % 7.2 % 25.6 %

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Manufactured Housing, Modular Housing and Park Model Industry Conditions — (Continued)~~

Modular Housing
   2012    2013 2014 2015 2016
*Industry
   13,290    14,020 13,844 13,974 13,881
Percentage Increase (Decrease)
      5.5 % (1.3 %) 0.9 % (0.7 %)
**Corporation
   382    350 477 341 334
Percentage Increase (Decrease)
      (8.4 %) 36.3 % (28.5 %) (2.1 %)
*       Domestic shipment only. Canadian industry shipments not available.
**     Includes domestic and Canadian unit shipments



Park Models

Industry
   2,780    3,598 3,781 3,649 3,669
Percentage Increase (Decrease)
      29.4 % 5.1 % (3.5 %) 0.5 %
Corporation
   138    171 307 380 419
Percentage Increase
      23.9 % 79.5 % 23.8 % 10.3 %

~~Fiscal 2018 Second Quarter and First Half Results~~

~~The Corporation experienced the following results~~fees during the second quarter ofended October 2, 2021, which offset the reduction in interest expense from lower average outstanding borrowing balance on the Company's revolving credit facility during the second quarter ended October 2, 2021 versus the same quarter in fiscal ~~2018:~~2021.

~~Net sales were $57,765,000, an approximate 10.1 percent decrease from~~

OTHER EXPENSE (INCOME)

The following table summarizes other income for the ~~$64,226,000 reported in~~three months ended October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021		September 26, 2020			$ Change		% Change
Other expense (income)	$	11	$	(2,599	)	$	2,610		(100.4	%)

Other income decreased $2.6 million, or 100.4%, during the three months ended October 2, 2021, as compared to the same period of the prior fiscal year. The decrease is due to a ~~year ago.~~

reduction in the wage subsidies provided by a Canadian government sponsored financial assistance program initially enacted in response to the pandemic.

~~Operating~~

INCOME TAX EXPENSE

The following table summarizes income tax expense for ~~fiscal 2018~~the three months ended October 2, 2021 and September 26, 2020:


	Three months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change

Income tax expense	$	16,408		$	5,644		$	10,764		190.7	%
Effective tax rate		24.4	%		24.4	%

Income tax expense for the three months ended October 2, 2021 was ~~$3,001,000 as~~$16.4 million, representing an effective tax rate of 24.4%, compared to income tax expense of $5.6 million, representing an ~~operating loss~~effective tax rate of ~~$509,000~~24.4% for ~~fiscal 2017. Current year operating~~the three months ended September 26, 2020.

The Company’s effective tax rate for the three months ended October 2, 2021 differs from the federal statutory income ~~includes a $762,000 net gain on~~tax rate of 21.0% due primarily to the ~~sale~~effect of ~~property, plant~~state and ~~equipment. Prior year’s operating loss included a $1,362,000 loss, excluding corporate overhead allocation, attributable~~local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits from vested equity compensation. The Company’s effective tax rate for the three months ended September 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to ~~facilities~~the effect of non-deductible expenses, state and local income taxes, tax credits, and results in ~~Elkhart, Indiana and Mansfield, Texas that closed in the fourth quarter of fiscal 2017.~~

foreign jurisdictions.

ADJUSTED EBITDA

~~Net income for fiscal 2018 was $2,964,000 as compared to a net loss of $595,000 for fiscal 2017. On a basic per share basis,~~The following table reconciles net income, ~~was $.35 as compared~~the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a ~~net loss of $.07~~non-GAAP financial measure, for the ~~comparable period a year ago.~~

three months ended October 2, 2021 and September 26, 2020:

~~The Corporation experienced~~


	Three months ended
(Dollars in thousands)	October 2, 2021		September 26, 2020		$ Change			% Change
Net income	$	50,723	$	17,511	$	33,212		*
Income tax expense		16,408		5,644		10,764		*
Interest expense, net		845		864		(19	)		(2.2	%)
Depreciation and amortization		5,138		4,408		730			16.6	%
Equity-based compensation (for awards granted prior to December 31, 2018)		—		388		(388	)	*
Other		—		122		(122	)	*
Adjusted EBITDA	$	73,114	$	28,937	$	44,177		*

* indicates that the ~~following results during~~calculated percentage is not meaningful

Adjusted EBITDA for the ~~first half~~three months ended October 2, 2021 was $73.1 million, an increase of ~~fiscal 2018:~~

~~Net sales were $116,227,000, an approximate 7.3 percent decrease~~$44.2 million from ~~the $125,402,000 reported in~~ the same period of the prior fiscal year. The increase is primarily a ~~year ago.~~

~~Operating~~result of higher operating income due to increases in sales volume and gross margin, partially offset by higher SG&A expenses.

UNAUDITED INCOME STATEMENTS FOR THE FIRST HALF OF FISCAL 2022 VS. 2021


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020

Results of Operations Data:
Net sales	$	1,034,422		$	595,651
Cost of sales		793,565			478,855
Gross profit		240,857			116,796
Selling, general, and administrative expenses		115,363			82,180
Operating income		125,494			34,616
Interest expense, net		1,494			1,806
Other income		(43	)		(6,813	)
Income before income taxes		124,043			39,623
Income tax expense		30,419			10,209
Net income	$	93,624		$	29,414

Reconciliation of Adjusted EBITDA:
Net income	$	93,624		$	29,414
Income tax expense		30,419			10,209
Interest expense, net		1,494			1,806
Depreciation and amortization		10,283			8,690
Equity-based compensation (for awards granted prior to December 31, 2018)		—			1,358
Adjusted EBITDA	$	135,820		$	51,477
As a percent of net sales:
Gross profit		23.3	%		19.6	%
Selling, general, and administrative expenses		11.2	%		13.8	%
Operating income		12.1	%		5.8	%
Net income		9.1	%		4.9	%
Adjusted EBITDA		13.1	%		8.6	%

NET SALES

The following table summarizes net sales for ~~fiscal 2018 was $4,755,000 as~~the six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021		September 26, 2020		$ Change		% Change

Net sales	$	1,034,422	$	595,651	$	438,771		73.7	%
U.S. manufacturing and retail net sales	$	929,019	$	532,219	$	396,800		74.6	%
U.S. homes sold		12,274		8,717		3,557		40.8	%
U.S. manufacturing and retail average home selling price	$	75.7	$	61.1	$	14.6		23.9	%
Canadian manufacturing net sales	$	76,332	$	39,753	$	36,579		92.0	%
Canadian homes sold		743		494		249		50.4	%
Canadian manufacturing average home selling price	$	102.7	$	80.5	$	22.2		27.6	%
Corporate/Other net sales	$	29,071	$	23,679	$	5,392		22.8	%
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 six months ended October 2, 2021 were $1,034.4 million, an increase of $438.8 million, or 73.7%, over the six months ended September 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 $396.8 million, or 74.6%, for the six months ended October 2, 2021 compared to ~~operating income of $321,000 for fiscal 2017. Current year operating income includes a $702,000 net gain on~~ the ~~sale of property, plant and equipment. Prior year’s operating income included a $2,517,000 loss, excluding corporate overhead allocation, attributable~~six months ended September 26, 2020. The increase was primarily due to ~~the Elkhart and Mansfield facilities.~~

Net income for fiscal 2018 was $4,571,000 as compared to a net income of $149,000 for fiscal 2017. On a basic per share basis, net income was $.54 as compared to a net income of $.02 for the comparable period a year ago.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Secured Revolving Credit Facility~~

As previously referenced, the Corporation (the “Loan Parties,” and Skyline Corporation and Skyline Homes, Inc., the “Borrowers” and each a “Borrower”) entered into a Credit Agreement (the “Agreement”) with Chase and other ancillary agreements and documents, including a Security Agreement and Patent and Trademark Security Agreement (collectively referred to along with the Agreement as the “Loan Documents”). Under the Agreement, Chase will provide a three-year revolving credit facility with loan advances to the Borrowers of up to a maximum of $10,000,000, subject to a borrowing base set forth in the Agreement (the “New Facility”).

Loan advances bear interest at either 50 basis points above Chase’s floating prime rate (“CBFR”) or 150 basis points in excess of the LIBOR rate for the applicable period (the “Adjusted LIBO Rate”). Loans are secured by the Loan Parties’ assets, now owned or hereafter acquired, except for real property and any life insurance policies owned by any Borrower on the effective date of the Agreement. Interest is payable in arrears on a monthly basis in the case of the CBFR or at the end of the applicable interest rate in the case of the Adjusted LIBO Rate, and all principal and accrued but unpaid interest is due and payable at the maturity of the New Facility. Borrowers may at any time prepay in whole or in part any loan amounts, subject to minimum amounts and breakage costs.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Secured Revolving Credit Facility— (Continued)~~

If the Borrowers default in their obligations under the Agreement, then the unpaid balances will bear interest at 2.0% per annum in excess of the rate that would apply in the absence of a default. Other remedies available to Chase upon an event of default include the right to accelerate the maturity of all obligations, the right to foreclose on and otherwise repossess the collateral securing the obligations, and all other rights set forth in the Loan Documents.

~~The Corporation was in compliance as of December 3, 2017 with covenants associated with the Agreement.~~

~~Subsequent Event~~

~~The Exchange~~

~~On January 5, 2018, the Corporation (“~~~~Skyline~~~~” or the “~~~~Company~~~~”) and Champion Enterprises Holdings, LLC (“~~~~Champion Holdings~~~~”) entered into a Share Contribution & Exchange Agreement (the “~~~~Exchange Agreement~~”) pursuant to which the two companies will combine their operations. Under the Exchange Agreement, (i) Champion Holdings will contribute to Skyline all of the issued and outstanding shares of common stock of Champion Holdings’ wholly-owned operating subsidiaries through the contribution of all of the issued and outstanding equity interests of each of Champion Home Builders, Inc., a Delaware corporation (“~~CHB~~~~”), and CHB International B.V., a Dutch private limited liability company (“~~~~CIBV~~~~”) (the shares of stock of CHB and CIBV to be contributed to Skyline, the “~~~~Contributed Shares~~”), and (ii) in exchange for the Contributed Shares, Skyline will issue to Champion Holdings that number of shares of Skyline common stock, $0.0277 par value per share, such that at the closing, Champion Holdings (or its members) will hold 84.5%, and Skyline’s shareholders will hold 15.5%, of the common stock of the combined company on a fully-diluted basis (the “~~Shares Issuance~~~~”). The contribution of the Contributed Shares by Champion Holdings to Skyline, and the Shares Issuance by Skyline to Champion Holdings, are collectively referred to herein as the “~~~~Exchange~~~~.” In connection with the closing of the Exchange, Skyline will file the Company Charter Amendment (described below) and will change its name to “Skyline Champion Corporation.”~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Subsequent Event — (Continued)~~

~~The Exchange — (Continued)~~

Immediately prior to the closing of the Exchange, Skyline will amend and restate its articles of incorporation to provide for, among other things, (i) the change in the name of the Company as described above; (ii) an increase in the number of ~~authorized shares~~homes sold during the period of ~~common stock~~3,557, an increase in the average selling price of 23.9%, and the impact of the ~~Company from 15,000,000 to 115,000,000 shares; (iii) a provision stating that~~acquisition of ScotBilt. The increase in the number of directors shall be as specified in the Company’s bylaws; and (iv) certain other ministerial revisions to update and modernize the articles of incorporation and remove various extraneous provisions (collectively, the “~~Company Charter Amendment~~”). The Exchange is expected to close as soon as practicable after the satisfaction or waiver of all the conditions to the closing in the Exchange Agreement, which is currently expected to be in the first half of 2018.

~~Representations and Warranties; Covenants~~

Each of Skyline and Champion Holdings makes customary representations and warranties in the Exchange Agreement. Skyline also has agreed to various covenants in the Exchange Agreement, including, without limitation, to cause a special meeting of Skyline’s shareholders to be held as promptly as practicable to consider and approve the Company Charter Amendment and the Shares Issuance (the “~~Company Shareholder Approval Matters~~~~”), and to file a proxy statement with the Securities and Exchange Commission (“~~~~SEC~~~~”) relating to such special meeting.~~

The Exchange Agreement contains customary covenants governing the conduct of Skyline’s and Champion Holdings’ respective businesses, access to information pertaining to the parties’ businesses, and notification of certain events, among other things, between the date of the Exchange Agreement and the closing. Pursuant to the Exchange Agreement, Skyline is subject to~~customary “no-shop” restrictions~~ which restrict its ability to solicit alternative acquisition proposals from third parties and to provide information to and engage in discussions with third parties regarding alternative acquisition proposals. However, prior to receiving approval of the Company Shareholder Approval Matters by Skyline’s shareholders, Skyline may, under certain circumstances, provide information to and participate in discussions with third parties with respect to certain unsolicited alternative acquisition proposals as provided in the Exchange Agreement.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Subsequent Event — (Continued)~~

~~Closing Conditions~~

~~Termination and Termination Fees~~

The Exchange Agreement contains certain termination rights in favor of Skyline and Champion Holdings, as set forth therein. Upon the termination of the Exchange Agreement under specified circumstances, and upon Skyline entering into or closing another acquisition transaction within 12 months after termination of the Exchange Agreement, Skyline may be required to pay Champion Holdings a termination fee of $10 million. Any termination fee triggered under the Exchange Agreement will accrue upon Skyline entering into or closing another acquisition transaction within 12 months after termination, but the fee is not payable by Skyline to Champion Holdings until two business days after the date that the other acquisition closes or is terminated unless the board of directors of Skyline adversely changes its favorable recommendation of the Exchange to its shareholders and Champion Holdings terminates the Exchange Agreement ashomes sold was a result of ~~such change~~increased production levels at many of the Company’s manufacturing locations in ~~recommendation,~~reaction to strong demand. The average selling price increased due to pricing actions enacted in ~~which case, a termination fee of $3~~response to rising material and labor costs. Generally, we are able to pass the increase in input costs along to our customers. Net sales in the six months ended September 26, 2020 were more negatively impacted 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 $36.6 million, ~~in cash is immediately due and payable by Skyline to Champion Holdings upon such termination, and if Skyline subsequently enters into~~ or ~~closes another acquisition transaction within 12~~92.0%, for the six months ~~after termination, an additional $7 million cash termination fee would accrue and would become payable two business days after the date that the other acquisition closes or is terminated.~~

~~In addition~~ended October 2, 2021 compared to the termination fee, if the Exchange Agreement is terminated by either Skyline or Champion Holdings because of Skyline’s shareholders do not approve the Company Shareholder Approval Matters, then Skyline must pay Champion Holdings $2 million as reimbursement for fees and expenses incurred by Champion Holdings in connection with the Exchange Agreement. Any expense reimbursement paid by Skyline will be credited against, and thereby reduce, any termination fee that may become due and payable.

The foregoing descriptions of the Exchange Agreement, the Exchange, and the Shares Issuance, are summaries, do not purport to be complete, and are qualified in their entirety by reference to the full text of the Exchange Agreement, and the exhibits attached thereto, copies of which are attached as Exhibits 2.1 to the Current Report on~~Form 8-K filed~~ ~~with Securities and Exchange Commission on January 5, 2018.~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Results of Operations – Three-Month Period Ended December 3, 2017 Compared to Three-Month Period Ended November 30, 2016~~

~~Net Sales and Unit Shipments~~

   December 3,
2017    Percent    November 30,
2016    Percent    Increase
(Decrease)

(Unaudited)
(Dollars in thousands)

Net Sales

Manufactured Housing
   $ 45,975    79.6    $ 54,207    84.4    $ (8,232 )
Modular Housing
   8,227    14.2    6,718    10.5    1,509
Park Models
   3,563    6.2    3,301    5.1    262










Total Net Sales
   $ 57,765    100.0    $ 64,226    100.0    $ (6,461 )










Unit Shipments

Manufactured Housing
   778    80.1    1,037    84.8    (259 )
Modular Housing
   114    11.7    100    8.2    14
Park Models
   79    8.2    85    7.0    (6 )










Total Unit Shipments
   971    100.0    1,222    100.0    (251 )

~~Net sales decreased approximately 10.1 percent mainly due to prior~~same period ~~net manufactured housing sales including $8,092,000 attributable to the Elkhart, Indiana and Mansfield, Texas facilities which closed~~ in the ~~fourth quarter of~~prior fiscal ~~2017. Modular housing net sales partially offset the decrease as a result of multiple facilities experiencing increased customer demand for this product.~~

~~For the following three-month periods, the percentage increase or decrease in unit shipments from the comparable period last~~ year, ~~are as follows:~~

   December 3, 2017
Skyline October 31, 2017
Industry
Manufactured Housing
   (25.0 %) 13.0 %
Modular Housing
   14.0 % Not Available
Park Models
   (7.1 %) 10.1 %
Total
   (20.5 %) Not Available

Compared to the prior year, the average net sales price for manufactured housing, modular housing and park models increased 13.0, 7.4 and 16.1 percent, respectively, primarily as a result of price increases and product sold with greater square footage and additional amenities.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Results of Operations – Three-Month Period Ended December 3, 2017 Compared to Three-Month Period Ended November 30, 2016 — (Continued)~~

~~Cost of Sales~~

   December 3,
2017    Percent of
Net Sales    November 30,
2016    Percent of
Net Sales    Decrease

(Unaudited)
(Dollars in Thousands)

Cost of Sales
   $ 49,394    85.5    $ 58,996    91.9    $ 9,602

Cost of sales, in dollars, decreased primarily as a result of prior year costs including $8,966,000 attributable to the Elkhart, Indiana and Mansfield, Texas facilities that closed in the fourth quarter of fiscal 2017. As a percentage of net sales, cost of sales decreased primarily due to the adverse effect in prior year of the Elkhart and Mansfield facilities. Margins were also positively impacted by the company’s focus on higher margin, multi-section homes, and single section manufactured housing models being a smaller proportion of current year total net sales.

~~Selling and Administrative Expenses~~

December 3,
2017 Percent of
Net Sales November 30,
2016 Percent of
Net Sales Increase

(Unaudited)
(Dollars in thousands)

Selling and administrative expenses
$ 6,132 10.6 $ 5,739 8.9 $ 393

~~The increase in selling and administrative expenses is~~ primarily due to an increase in ~~administrative salaries and wages, profit based compensation, and approximately $190,000~~homes sold of 249, coupled with a 27.6% increase in~~non-recurring~~ costs associated with the merger with Champion Holdings. Administrative salaries and wages rose due to headcount additions and competitive market conditions. Profit based compensation increased due to improved financial results. Prior period expenses included $488,000 attributable to the Elkhart, Indiana and Mansfield, Texas facilities that closed in the fourth quarter of fiscal 2017. As a percentage of net sales, average home selling ~~and administrative expenses rose due to certain costs increasing amid declining sales.~~

~~Net gain on sale of property, plant and equipment~~

~~On November 22, 2017, the Corporation sold anon-income~~ ~~producing parcel of land located in McMinnville, Oregon. Proceeds of $1,231,000 were received, and a gain of $762,000 was recognized in the second quarter.~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Results of Operations – Three-Month Period Ended December 3, 2017 Compared to Three-Month Period Ended November 30, 2016 — (Continued)~~

~~Interest Expense~~

   December 3,
2017    November 30,
2016    Decrease

(Unaudited)
(Dollars in thousands)

Interest on life insurance policies loans
   $ 32    $ 55    $ 23
Amortization on debt financing costs
   5    26    21
Interest on secured revolving credit facility
   —      5    5






   $ 37    $ 86    $ 49

~~Interest expense decreased as a result of the repayment of life insurance loans, and the refinancing of a Credit Agreement with Chase.~~

~~Results of Operations –Six-Month~~ ~~Period Ended December 3, 2017 Compared toSix-Month~~ ~~Period Ended November 30, 2016~~

~~Net Sales and Unit Shipments~~

   December 3,
2017    Percent    November 30,
2016    Percent    Increase
(Decrease)

(Unaudited)
(Dollars in thousands)

Net Sales

Manufactured Housing
   $ 91,500    78.7    $ 103,964    82.9    $ (12,464 )
Modular Housing
   15,378    13.3    13,863    11.1    1,515
Park Models
   9,349    8.0    7,575    6.0    1,774










Total Net Sales
   $ 116,227    100.0    $ 125,402    100.0    $ (9,175 )










Unit Shipments

Manufactured Housing
   1,572    78.8    1,985    83.4    (413 )
Modular Housing
   208    10.4    197    8.3    11
Park Models
   214    10.8    197    8.3    17










Total Unit Shipments
   1,994    100.0    2,379    100.0    (385 )

Net sales decreased approximately 7.3 percent mainly due to prior period net manufactured housing sales including $13,293,000 attributable to the Elkhart, Indiana and Mansfield, Texas facilities which closed in the fourth quarter of fiscal 2017. Modular housing net sales partially offset the decrease as a result of multiple facilities experiencing increased customer demand for this product. In addition, park model net sales rose as a result of management’s continuing initiative to increase this product’s exposure at substantially all of the Corporation’s facilities.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Results of Operations –Six-Month~~ ~~Period Ended December 3, 2017 Compared toSix-Month~~ ~~Period Ended November 30, 2016~~

~~Net Sales and Unit Shipments — (Continued)~~

~~For the followingsix-month~~ ~~periods, the percentage increase or decrease in unit shipments from the comparable period last year are as follows:~~

   December 3, 2017
Skyline October 31, 2017
Industry
Manufactured Housing
   (20.8 %) 12.7 %
Modular Housing
   5.6 % Not Available
Park Models
   8.6 % 11.8 %
Total
   (16.2 %) Not Available

Compared to the prior year, the average net sales price for manufactured housing, modular housing and park models increased 11.1, 5.1 and 13.6 percent, respectively, primarily as a result of price increases and product sold with greater square footage and additional amenities.

~~Cost of Sales~~

   December 3,
2017    Percent of
Net Sales    November 30,
2016    Percent of
Net Sales    Decrease
Cost of Sales
   $ 99,930    86.0    $ 113,592    90.6    $ 13,662

Cost of sales, in dollars, decreased primarily as a result of prior year costs including $14,847,000 attributable to the Elkhart, Indiana and Mansfield, Texas facilities that closed in the fourth quarter of fiscal 2017. As a percentage of net sales, cost of sales decreased primarily due to the adverse effect in prior year of the Elkhart and Mansfield facilities. Margins were also positively impacted by the company’s focus on higher margin, multi-section homes, and single section manufactured housing models being a smaller proportion of current year total net sales.

~~Selling and Administrative Expenses~~

December 3,
2017 Percent of
Net Sales November 30,
2016 Percent of
Net Sales Increase

(Unaudited)
(Dollars in thousands)

Selling and administrative expenses
$ 12,244 10.5 $ 11,489 9.2 $ 755

price. The increase in ~~selling and administrative expenses is primarily~~volume was due to an increase in ~~administrative salaries~~demand and ~~wages, health insurance costs, profit based compensation, and approximately $190,000~~production rates. The increase in~~non-recurring~~ ~~costs associated with the merger with Champion Holdings. Administrative salaries and wages rose~~ average selling price was due to ~~headcount additions~~pricing actions enacted in response to rising material and ~~competitive market conditions. Health insurance costs~~labor costs. On a constant currency basis, net sales for the Canadian segment were favorably impacted by approximately $6.8 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first six months of fiscal 2022 as compared to the same period of the prior fiscal year. Net sales in the six months ended September 26, 2020 were more 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 six months ended October 2, 2021, net sales increased $5.4 million, or 22.8%, primarily attributable to an increase in shipments of manufactured homes and recreational vehicles.

GROSS PROFIT

The following table summarizes gross profit for the six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change

Gross profit:
U.S. Factory-built Housing	$	215,815		$	102,956		$	112,859		109.6	%
Canadian Factory-built Housing		17,193			7,569			9,624		127.2	%
Corporate/Other		7,849			6,271			1,578		25.2	%
Total gross profit	$	240,857		$	116,796		$	124,061		106.2	%
Gross profit as a percent of net sales		23.3	%		19.6	%

Gross profit as a ~~result~~percent of ~~adverse claim experience and fewer employees contributing~~sales during the six months ended October 2, 2021 was 23.3% compared to 19.6% during the six months ended September 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 $112.9 million, or 109.6%, during the six months ended October 2, 2021 compared to the ~~Corporation’s health insurance plan. Profit based compensation increased~~same period in the prior fiscal year. Gross profit was 23.2% as a percent of segment net sales for the six months ended October 2, 2021 compared to 19.3% in the same period of the prior fiscal year. The increase in gross profit is due to ~~improved financial results.~~operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes and a reduction of COVID-19 related sick-pay and health benefits provided in the prior fiscal year, all partially offset by higher material costs.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Results of Operations – Six Month Period Ended December 3, 2017 Compared toSix-Month~~ ~~Period Ended November 30, 2016 — (Continued)~~Canadian Factory-built Housing:

~~Selling and Administrative Expenses — (Continued)~~

~~Prior period expenses included $963,000 attributable~~Gross profit for the Canadian Factory-built Housing segment increased by $9.6 million, or 127.2% during the six months ended October 2, 2021 compared to the ~~Elkhart, Indiana and Mansfield, Texas facilities that closed~~same period in the ~~fourth quarter of~~prior fiscal ~~2017. As a percentage of net sales, selling and administrative expenses rose due to certain costs increasing amid declining sales.~~

~~Net Gain on Sale of Property, Plant and Equipment~~

~~On November 22, 2017, the Corporation sold anon-income~~ producing parcel of land located in McMinnville, Oregon. Proceeds of $1,231,000 were received, and a gain of $762,000 was recognized in the second quarter. Likewise, on August 31, 2017, the Corporation sold a~~non-income~~ ~~producing parcel of land located in Elkhart, Indiana. Proceeds of $420,000 were received, and a loss of $60,000 was recognized in the first quarter.~~

~~Interest Expense~~

   December 3,
2017    November 30,
2016    Increase
(Decrease)
   (Unaudited)
   (Dollars in thousands)
Interest on life insurance policies loans
   $ 87    $ 112    $ (25 )
Amortization on debt financing costs
   93    51    42
Interest on secured revolving credit facility
   4    9    (5 )






   $ 184    $ 172    $ 12

~~Interest expense~~year primarily ~~increased as the result ofwrite-off~~ ~~of $69,000 in debt financing costs associated with the termination of the First Business Capital Loan Agreement in July 2017.~~

~~Liquidity and Capital Resources~~

   December 3, 2017    May 31, 2017    Increase
   (Unaudited)
   (Dollars in thousands)
Cash
   $ 12,287    $ 11,384    $ 903
Current assets, exclusive of cash
   29,097    25,918    3,179
Current liabilities
   18,707    18,385    322






Working capital
   $ 22,677    $ 18,917    $ 3,760

~~As noted in the Consolidated Statements of Cash Flows for thesix-month~~ period ended December 3, 2017, cash increased due to cash provided from operating activities of $1,694,000, cash provided from investing activities of $814,000, and cash used in financing activities of $1,605,000. Current assets, exclusive of cash, increased primarily due to a $2,051,000 increase in Accounts receivable, $432,000 increase in Other current assets, and a $696,000 increase in Inventories. Accounts receivable rose due to increased sales volume. Gross profit as a percent of net sales was 22.5% for the six months ended October 2, 2021, compared to 19.0% in ~~November 2017~~the same period of the prior fiscal year primarily due to operational efficiencies from the increase in home sales, partially offset by higher material and labor costs.

Corporate/Other:

Gross profit for the Corporate/Other segment increased $1.6 million, or 25.2%, during the six months ended October 2, 2021 compared to the same period of the prior fiscal year, primarily due to increased net sales in 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 six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change

Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	83,769		$	57,977		$	25,792		44.5	%
Canadian Factory-built Housing		5,696			3,289			2,407		73.2	%
Corporate/Other		25,898			20,914			4,984		23.8	%
Total selling, general, and administrative expenses	$	115,363		$	82,180		$	33,183		40.4	%
Selling, general, and administrative expense as a percent of net sales		11.2	%		13.8	%

Selling, general, and administrative expenses were $115.4 million for the six months ended October 2, 2021, an increase of $33.2 million, or 40.4%, 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 $25.8 million, or 44.5%, during the six months ended October 2, 2021 as compared to ~~May 2017. Other current assets increased~~the same period in the prior fiscal year. Selling, general, and administrative expenses, as a ~~result~~percent of ~~annual insurance premiums paid~~segment net sales decreased to 9.0% for the six months ended October 2, 2021 compared to 10.9% during the ~~first quarter~~comparable period of the prior fiscal ~~2018. Inventories~~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 production; (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 $2.4 million, or 73.2%, for the six months ended October 2, 2021 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 7.5% for the six months ended October 2, 2021 compared to 8.3% 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 production.

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 $5.0 million, or 23.8%, during the six months ended October 2, 2021 as compared to the same period of the prior fiscal year due to an increase in ~~homes waiting~~wages, incentive and equity compensation costs as well as $1.9 million for the investment made to enhance our customer buying experience and supporting systems.

INTEREST EXPENSE, NET

The following table summarizes the components of interest expense, net for the six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change			% Change

Interest expense	$	1,801		$	2,061		$	(260	)		(12.6	%)
Less: Interest income		(307	)		(255	)		(52	)		20.4	%
Interest expense, net	$	1,494		$	1,806		$	(312	)		(17.3	%)
Average outstanding floor plan payable	$	28,946		$	29,188
Average outstanding long-term debt	$	25,882		$	77,330

Interest expense, net was $1.5 million for the six months ended October 2, 2021, a decrease of $0.3 million, or 17.3%, compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to a lower average outstanding balance on the Company’s revolving credit facility, partially offset by the write-off of deferred financing fees of $0.3 million in association with the previously existing revolving credit facility.

OTHER EXPENSE (INCOME)

The following table summarizes other income for the six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change

Other expense (income)	$	(43	)	$	(6,813	)	$	6,770		(99.4	%)

Other income decreased $6.8 million, or 99.4%, during the six months ended October 2, 2021, 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. The programs included a Canadian wage subsidy benefit of $6.2 million and U.S. federal and state wage subsidy benefit of $0.6 million during the six months ended September 26, 2020.

INCOME TAX EXPENSE

The following table summarizes income tax expense for the six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020			$ Change		% Change

Income tax expense	$	30,419		$	10,209		$	20,210		198.0	%
Effective tax rate		24.5	%		25.8	%

Income tax expense for the six months ended October 2, 2021 was $30.4 million, representing an effective tax rate of 24.5%, compared to income tax expense of $10.2 million, representing an effective tax rate of 25.8% for the six months ended September 26, 2020.

The Company’s effective tax rate for the six months ended October 2, 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 from vested equity compensation. The Company’s effective tax rate for the six months ended September 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, 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 six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021		September 26, 2020		$ Change			% Change

Net income	$	93,624	$	29,414	$	64,210		*
Income tax expense		30,419		10,209		20,210		*
Interest expense, net		1,494		1,806		(312	)		(17.3	%)
Depreciation and amortization		10,283		8,690		1,593			18.3	%
Equity-based compensation (for awards granted prior to December 31, 2018)		—		1,358		(1,358	)	*
Adjusted EBITDA	$	135,820	$	51,477	$	84,343		*

* Indicates that the calculated percentage is not meaningful

Adjusted EBITDA for the six months ended October 2, 2021 was $135.8 million, an increase of $84.3 million, from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in sales volume and gross margin, partially offset by higher SG&A expenses.

The Company defines Adjusted EBITDA as net income or loss plus; (a) the provision for income taxes; (b) interest expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) equity based compensation for awards granted prior to December 31, 2018; (f) non-cash restructuring charges and impairment of assets; and (g) other non-operating costs including those for the acquisition and integration or disposition of businesses and idle facilities. 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 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 ~~shipped~~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 ~~December 3, 2017 as~~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 October 2, 2021 totaled $1,369 million compared to ~~May 31, 2017.~~

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Liquidity~~$390.1 million at September 26, 2020. The increase in backlog was driven by increased demand for single-family homes, which resulted in order levels that significantly outpaced production in both the U.S. and ~~Capital Resources — (Continued)~~

~~Current liabilities increased primarily~~Canada. Our ability to increase production rates to keep pace with orders is limited by individual plant capacity, the availability of and time needed to train new employees, employee attendance and availability of materials, including (most recently) raw material allocations by certain of our suppliers. We 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 six months ended October 2, 2021 and September 26, 2020:


	Six months ended
(Dollars in thousands)	October 2, 2021			September 26, 2020
Net cash provided by (used in):
Operating activities	$	88,887		$	63,842
Investing activities		(15,246	)		(1,334	)
Financing activities		(25,553	)		(8,936	)
Effect of exchange rate changes on cash, cash equivalents		(411	)		1,259
Net increase in cash and cash equivalents		47,677			54,831
Cash and cash equivalents at beginning of period		262,581			209,455
Cash and cash equivalents at end of period	$	310,258		$	264,286

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 debt payment obligations. The Company does not have any scheduled long-term debt maturities in the next twelve months. On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement which provides for a ~~$841,000 decrease~~$200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At October 2, 2021 $169.6 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 ~~Accrued warranty~~excess of cash needed to operate the business for the next year. In the event operating cash flow and ~~a $588,000 decrease in Accrued salaries~~existing cash balances were deemed inadequate to support the Company’s liquidity needs, and ~~wages;~~one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.

Cash provided by operating activities was $88.9 million for the six months ended October 2, 2021 compared to $63.8 million for the six months ended September 26, 2020. Cash provided by operating activities increased due to higher net income, partially offset by ~~a $1,234,000~~an increase in ~~Accrued volume rebates. Accrued warranty declined as a result~~inventory from higher material costs and higher stocking levels to mitigate supply chain challenges, an increase in accounts receivable from higher sales volumes, and an increase in prepaid and other assets primarily from the capitalization of ~~fewer unit sales. Accrued salaries~~cloud computing costs in fiscal 2022.

Cash used in investing activities was $15.2 million for the six months ended October 2, 2021 compared to $1.3 million for the six months ended September 26, 2020. The increase in cash used for investing activities was primarily related to an increase in capital expenditures in the current period which was related to the acquisition of two idle manufacturing facilities in Texas and ~~wages decreased~~investments in plant operations which were deferred in the prior-year due to timing of payments to employees at December 3, 2017 as compared to May 31, 2017. Accrued volume rebates rose as a result of accruals for an ongoing marketing program for manufactured housing customers that approximately begins on March 1 and approximately ends on February 28 the ~~following year. Accruals are made monthly, and the majority of payments are made during the Corporation’s fourth fiscal quarter.~~

~~Capital expenditures totaled $800,000 for~~pandemic. The Company suspended all but critical capital projects in the first half of fiscal ~~2018 as compared~~2021 due to ~~$787,000 for~~COVID-19 concerns. Capital spending in the first half of fiscal ~~2017.~~2022 reflects our reversion to normal, planned spending.

Cash used in financing activities was $25.6 million for the six months ended October 2, 2021 compared to $8.9 million for the six months ended September 26, 2020. The ~~expenditures are~~increase in cash used for ~~building improvements,~~financing was primarily related to the repayment of the Company's previously existing revolving credit facility and ~~replacing equipment~~payments of deferred financing fees related to the Amended Credit Agreement.

Critical Accounting Policies

For a discussion of our critical accounting policies that ~~had reached~~management believes affect its ~~full economic useful life.~~

~~The Corporation was~~more significant judgments and estimates used in ~~compliance as~~the preparation of ~~December 3, 2017 with credit agreement covenants associated with~~our Consolidated Financial Statements, see Part II, Item 7 of the ~~Secured Revolving Credit Facility with Chase.~~

~~At December 3, 2017, the Corporation had the ability to borrow approximately $3,973,000~~Fiscal 2021 Annual Report, under the ~~cash surrender value of certain life insurance policies. Management believes sufficient liquidity exists to meet financial obligations that will occur for at least one year after~~heading “Critical Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the ~~date of the filing of this periodic report.~~Fiscal 2021 Annual Report.

Recently Issued Accounting Pronouncements

~~In May 2014,~~For information on the ~~Financial Accounting Standards Board (FASB)~~impact of recently issued ~~Accounting Standards Update (ASU)No. 2014-09,~~~~Revenue from Contracts with Customers (Topic 606)~~~~. Subsequent to the issuance~~accounting pronouncements, see Note 1, “Basis of ~~ASUNo. 2014-09,~~ ~~FASB issued ASUNo. 2015-14,~~ ~~which deferred the effective date of ASU2014-09~~ by one year. In addition, FASB subsequently issued several ASU’s that update or clarify the new rules. For a public entity, this guidance is effective for annual reporting periods after December 15, 2017, including interim periods within that reporting period. Early application is permitted.

~~The core principal of ASU2014-09~~ is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach:

~~Identify the contract(s) with a customer;~~

~~Identify each performance obligation in the contract;~~

~~Determine the transaction price;~~

~~Allocate the transaction price to each performance obligation; and~~

~~Recognize revenue when or as each performance obligation is satisfied.~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

Presentation – Recently Issued Accounting Pronouncements, ~~— (Continued)~~

~~The Corporation is currently evaluating how~~” to the ~~adoption of ASU2014-09~~ will impact its financial position and result of operations by applying the five-step approach to each revenue stream. At this time, material changes resulting from this adoption are not anticipated with the modified retrospective method being utilized.

~~The Corporation, however, does expect to greatly increase the amount of required disclosures, including but not limited to:~~

~~Disaggregation of revenue in to categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;~~

~~The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed;~~

~~Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;~~

~~Information about performance obligations in contracts with customers; and~~

~~Impact of Inflation~~

~~The~~condensed consolidated financial statements included in this ~~report reflect transactions~~Report.

Forward-Looking Statements

Some of the statements in ~~the dollar values~~this Report are not historical in ~~which they were incurred~~nature and ~~therefore, do not attempt to measure the impact of inflation. On a long-term basis, the Corporation has adjusted selling prices in reaction to changing costs due to inflation.~~

~~Forward Looking Information~~

~~The preceding Management’s Discussion and Analysis contains~~are forward-looking statements within the meaning of ~~The~~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 ~~also made elsewhere in this report. The Corporation publishes other forward-looking statements from time to time.~~

~~Statements that are not historical in nature, including those containing~~often identified by the words ~~such as~~“will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” ~~“should,~~“hope,” ~~“expect,” “believe,” “intend,” and~~or similar ~~expressions, are intended to identify forward-looking statements. We caution to be aware of the speculative nature of “forward-looking statements.” Although these~~expressions. These statements reflect ~~the Corporation’s good faith belief based on~~management’s current ~~expectations, estimates,~~views with respect to future events and ~~projections about (among other things) the industry and the markets in which the Corporation operates, they~~ are ~~not guarantees of future performance.~~

~~Whether actual results will conform to management’s expectations and predictions is~~ subject to ~~a number of known~~risks and ~~unknown~~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 issues, including prices and availability of materials;



labor-related issues;



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;



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 ~~following:~~

~~Consumer confidence~~quality of parts sourced from suppliers and ~~economic uncertainty;~~related liability and reputational issues;

~~Availability~~

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



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



the extensive regulation affecting the production and ~~retail financing;~~

~~The health~~sale of ~~the U.S. housing market as a whole;~~

~~Regulations pertaining to the~~factory-built housing and ~~park model industries;~~

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued).~~

~~Forward Looking Information — (Continued)~~

~~The cyclical nature~~the effects of possible changes in laws with which we must comply;



the ~~manufactured housing and park model industries;~~

~~General or seasonal weather conditions affecting sales;~~

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

~~Potential~~ 

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;

~~Interest rate levels;~~



~~Impact of inflation;~~

~~Impact of labor costs;~~

~~Competitive pressures on pricing~~changes in interest and ~~promotional costs;~~foreign exchange rates;

~~Catastrophic events impacting insurance costs;~~



~~The availability of~~ insurance coverage ~~for various~~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; and



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

~~Market demographics; and~~

~~Management’s ability to attract and retain executive officers and key personnel.~~

~~Consequently, all~~If any of the ~~Corporation’s~~risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements ~~are qualified by these cautionary statements. The Corporation~~proves to be incorrect, then differences may ~~not realize the~~arise between our forward-looking statements and our actual results, anticipated by management or, even if the Corporation substantially realizes the results management anticipates, the results may not have the consequences to, or effects on, the Corporation or its business or operations that management expects. Suchand such differences may be material. ~~Except~~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 ~~applicable laws,~~law.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the ~~Corporation does not intend to publish updates or revisions~~Company’s interest rate and foreign exchange risks, see Part II, Item 7A of ~~any forward-looking statements management makes to reflect new information, future events or otherwise.~~

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

~~Not applicable.~~

~~Item 4.~~

~~Controls and Procedures.~~

~~Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures~~

~~As of December 3, 2017,~~ the ~~Corporation conducted an evaluation,~~Fiscal 2021 Annual Report, under the ~~supervision~~heading "Quantitative and ~~with the participation~~Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since April 3, 2021.

Item 4.CONTROLS AND PROCEDURES

Evaluation of ~~management including the Chief Executive Officer~~disclosure controls and ~~Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s~~procedures

The Company maintains disclosure controls and procedures ~~(as defined~~designed to provide reasonable assurance that information required to be disclosed in ~~Rule13a-15(e)~~ ofreports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~). Based upon that evaluation,~~ is recorded, processed, summarized, and reported within the ~~Chief Executive Officer~~specified time periods and ~~Chief Financial Officer concluded that~~accumulated and communicated to management, including the ~~Corporation’s~~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 ~~are not~~pursuant to Rule 13a-15(e) of the Exchange Act at October 2, 2021. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective ~~for the period ended December 3, 2017~~ as ~~a result~~ of a material weakness identified in the fourth quarter of fiscal 2017 related to the accuracy and valuation of raw materials and inventories. The Corporation is currently evaluating the effectiveness of improvementsOctober 2, 2021.

Changes in internal ~~controls~~control over ~~the accuracy and valuation of raw materials inventory.~~financial reporting

~~Item 4.~~ ~~Controls and Procedures — (Continued).~~

~~Changes~~There have been no changes in ~~Internal Control Over Financial Reporting~~

~~No change in the Corporation’s~~our internal control over financial reporting ~~(as such term is defined in Exchange Act Rule13a-15(f))~~ ~~occurred~~ during the ~~second~~ fiscal quarter ~~ended December 3, 2017~~to which this report relates that have materially affected, or isare reasonably likely to materially affect, the ~~Corporation’s~~Company’s internal control over financial reporting ~~except as noted above with respect~~

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 13 “Commitments, Contingencies and Legal Proceedings – Legal Proceedings,” to the ~~accuracy and valuation of raw materials inventory.~~condensed consolidated financial statements included in this Report.

~~PART II~~—~~OTHER INFORMATION~~

~~Item 1.~~

~~Legal Proceedings:~~

The Corporation is a party to various pending legal proceedings in the normal course of business. Management believes that any losses resulting from such proceedings would not have a material adverse effect on the Corporation’s results of operations or financial position.

~~Item 1A.~~

~~Risk Factors.~~

~~There were no material changes in the risk factors disclosed in~~ 30

Item ~~1A of the Corporation’s Form10-K~~ ~~for the year ended May 31, 2017.~~6.EXHIBITS

~~PART II~~—~~OTHER INFORMATION — (Continued)~~

~~Item 6.~~

~~Exhibits.~~

~~Exhibits (Numbered according to Item 601 of RegulationS-K,~~ ~~Exhibit Table)~~


~~2.1~~ Exhibit Number		Share Contribution & Exchange Agreement dated January 5, 2018 by and among Skyline Corporation and Champion Enterprises Holdings, LLC. (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form~~8-K~~ ~~filed on January 5, 2018).~~ Description

31.1		Certification of Chief Executive Officer ~~Pursuant~~pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 – Rule13a-14(a)/15d-14(a).~~2002. †

31.2		Certification of Chief Financial Officer ~~Pursuant~~pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 – Rule13a-14(a)/15d-14(a).~~2002. †

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

101 (INS)		~~The following materials from~~ Inline XBRL Instance Document - the ~~Corporation’s Form10-Q~~ ~~for~~instance document does not appear in the ~~fiscal quarter ended November 30, 2016 formatted in an XBRL~~ Interactive Data ~~File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations~~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 ~~Retained Earnings; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to Consolidated Financial Statements, with detailed tagging of notes and financial statement schedules.~~contained in Exhibit 101).

~~Signatures~~

† Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~registrant~~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
		~~SKYLINE CORPORATION~~
/s/ Mark Yost	President and Chief Executive Officer	November 3, 2021
~~DATE: January~~ ~~11, 2018~~ Mark Yost	(Principal Executive Officer)		~~/s/ Jon S. Pilarski~~
			~~Jon S. Pilarski~~
/s/ Laurie Hough			Executive Vice President, Chief Financial Officer and Treasurer	November 3, 2021
Laurie Hough	(Principal Financial Officer)

3132


	December 3, 2017		May 31, 2017
	(Unaudited)
ASSETS
Current Assets:
Cash	$	12,287	$	11,384
Accounts receivable		14,802		12,751
Inventories		12,929		12,233
Workers’ compensation security deposit		371		371
Other current assets		995		563

Total Current Assets		41,384		37,302

Property, Plant and Equipment, at Cost:
Land		2,016		2,965
Buildings and improvements		35,615		35,368
Machinery and equipment		16,872		16,364

		54,503		54,697
Less accumulated depreciation		44,092		43,721

		10,411		10,976
Other Assets		7,242		7,366

Total Assets	$	59,037	$	55,644


	Three-Months Ended						Six-Months Ended
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
OPERATIONS
Net sales	$	57,765		$	64,226		$	116,227		$	125,402
Cost of sales		49,394			58,996			99,930			113,592

Gross profit		8,371			5,230			16,297			11,810
Selling and administrative expenses		6,132			5,739			12,244			11,489
Net gain on sale of property, plant and equipment		762			—			702			—

Operating income (loss)		3,001			(509	)		4,755			321
Interest expense		(37	)		(86	)		(184	)		(172	)
Income tax expense		—			—			—			—

Net income (loss)	$	2,964		$	(595	)	$	4,571		$	149

Basic and diluted income (loss) per share	$	.35		$	(.07	)	$	.54		$	.02

Weighted average number of common shares outstanding:
Basic		8,391,244			8,391,244			8,391,244			8,391,244

Diluted		8,562,899			8,391,244			8,531,191			8,512,903


	Three months ended October 2, 2021
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 3, 2021		56,699	$	1,571	$	493,191	$	124,467		$	(6,646	)	$	612,583
Net income		—		—		—		50,723			—			50,723
Equity-based compensation		—		—		2,772		—			—			2,772
Net common stock issued under equity-based compensation plans		97		1		96		(1,677	)		—			(1,580	)
Foreign currency translation adjustments		—		—		—		—			(1,520	)		(1,520	)
Balance at October 2, 2021		56,796	$	1,572	$	496,059	$	173,513		$	(8,166	)	$	662,978


	Six months ended October 2, 2021
	Common Stock
	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
Net income		—		—		—		93,624			—			93,624
Equity-based compensation		—		—		4,213		—			—			4,213
Net common stock issued under equity-based compensation plans		156		3		178		(3,009	)		—			(2,828	)
Foreign currency translation adjustments		—		—		—		—			(642	)		(642	)
Balance at October 2, 2021		56,796	$	1,572	$	496,059	$	173,513		$	(8,166	)	$	662,978


	Six-Months Ended
	December 3, 2017			November 30, 2016
	(Unaudited)
	(Dollars in thousands)
Balance at the beginning of the period	$	7,557		$	7,317
Accruals for warranties		3,030			3,842
Settlements made during the period		(3,871	)		(3,280	)

Balance at the end of the period		6,716			7,879
Non-current balance		2,800			2,500

Accrued warranty	$	3,916		$	5,379


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Options outstanding at May 31, 2017		274,000	$	4.79		8.40	$	128

Granted		57,000		6.15

Options outstanding at December 3, 2017		331,000	$	5.03		8.19	$	2,470

Vested and exercisable options at December 3, 2017		90,000	$	3.54		7.66	$	805


	Number of Shares			Weighted Average Grant-Date Fair Value
Non-vested options at May 31, 2017		229,000		$	3.34
Granted		57,000			3.86
Vested		(45,000	)		2.55

Non-vested options at December 3, 2017		241,000		$	3.61


	2018			2017
Volatility		65.9	%		66.0	%
Risk-free interest rate		2.13	%		1.47	%
Expected option life in years		7.50			7.50
Dividend yield		0	%		0	%


	Three-Months Ended					Six-Months Ended
	December 3, 2017		November 30, 2016			December 3, 2017		November 30, 2016
	(Unaudited)
Net income (loss)	$	2,964	$	(595	)	$	4,571	$	149

Weighted average share outstanding:
Basic		8,391,244		8,391,244			8,391,244		8,391,244
Common stock equivalents— treasury stock method		171,655		—			139,947		121,659

Diluted		8,562,899		8,391,244			8,531,191		8,512,903
Net income (loss) per share:
Basic	$	.35	$	(.07	)	$	.54	$	.02

Diluted	$	.35	$	(.07	)	$	.54	$	.02


Manufactured Housing	2012		2013			2014			2015			2016
Industry		54,891		60,210			64,344			70,519			81,169
Percentage Increase				9.7	%		6.9	%		9.6	%		15.1	%
Corporation		1,848		2,205			2,678			2,872			3,606
Percentage Increase				19.3	%		21.5	%		7.2	%		25.6	%


Modular Housing	2012		2013			2014			2015			2016
*Industry		13,290		14,020			13,844			13,974			13,881
Percentage Increase (Decrease)				5.5	%		(1.3	%)		0.9	%		(0.7	%)
**Corporation		382		350			477			341			334
Percentage Increase (Decrease)				(8.4	%)		36.3	%		(28.5	%)		(2.1	%)

* Domestic shipment only. Canadian industry shipments not available. ** Includes domestic and Canadian unit shipments
Park Models
Industry		2,780		3,598			3,781			3,649			3,669
Percentage Increase (Decrease)				29.4	%		5.1	%		(3.5	%)		0.5	%
Corporation		138		171			307			380			419
Percentage Increase				23.9	%		79.5	%		23.8	%		10.3	%


	December 3, 2017		Percent		November 30, 2016		Percent		Increase (Decrease)
	(Unaudited) (Dollars in thousands)
Net Sales
Manufactured Housing	$	45,975		79.6	$	54,207		84.4	$	(8,232	)
Modular Housing		8,227		14.2		6,718		10.5		1,509
Park Models		3,563		6.2		3,301		5.1		262

Total Net Sales	$	57,765		100.0	$	64,226		100.0	$	(6,461	)

Unit Shipments
Manufactured Housing		778		80.1		1,037		84.8		(259	)
Modular Housing		114		11.7		100		8.2		14
Park Models		79		8.2		85		7.0		(6	)

Total Unit Shipments		971		100.0		1,222		100.0		(251	)


	December 3, 2017 Skyline			October 31, 2017 Industry
Manufactured Housing		(25.0	%)		13.0	%
Modular Housing		14.0	%		Not Available
Park Models		(7.1	%)		10.1	%
Total		(20.5	%)		Not Available


	December 3, 2017		Percent of Net Sales		November 30, 2016		Percent of Net Sales		Decrease
	(Unaudited) (Dollars in Thousands)
Cost of Sales	$	49,394		85.5	$	58,996		91.9	$	9,602


	December 3, 2017		May 31, 2017		Increase
	(Unaudited)		May 31, 2017		Increase
	(Dollars in thousands)
Cash	$	12,287	$	11,384	$	903
Current assets, exclusive of cash		29,097		25,918		3,179
Current liabilities		18,707		18,385		322

Working capital	$	22,677	$	18,917	$	3,760

~~DATE: January~~ ~~11, 2018~~

~~/s/ Martin R. Fransted~~

~~Martin R. Fransted~~

~~Controller~~