UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended December 26, 2020January 1, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to to
Commission file number: 001-04714
Skyline Champion Corporation
(Exact name of registrant as specified in its charter)
Indiana |
| 35-1038277 |
(State of Incorporation) |
| (I.R.S. Employer Identification No.) |
|
| |
755 West Big Beaver Road, Suite 1000 |
|
|
Troy, Michigan |
| 48084 |
(Address of Principal Executive Offices) |
| (Zip Code) |
|
(Registrant’s telephone number, including area code)
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:):
Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding as of January 26, 2021: 56,638,83624, 2022: 56,827,132
SKYLINE CHAMPION CORPORATION
FORM 10-Q
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
|
|
Skyline Champion Corporation
Condensed Consolidated Balance Sheets
(Dollars and shares in thousands, except per share amounts)
|
| December 26, 2020 |
|
| March 28, 2020 |
|
| January 1, |
|
| April 3, |
| ||||
|
| (unaudited) |
|
|
|
|
|
| (unaudited) |
|
|
|
| |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 267,060 |
|
| $ | 209,455 |
|
| $ | 382,133 |
| $ | 262,581 |
| |
Trade accounts receivable, net |
|
| 41,325 |
|
|
| 45,733 |
|
| 46,184 |
| 57,481 |
| |||
Inventories, net |
|
| 131,123 |
|
|
| 126,386 |
|
| 185,052 |
| 166,113 |
| |||
Other current assets |
|
| 15,517 |
|
|
| 17,239 |
|
|
| 21,340 |
|
|
| 13,592 |
|
Total current assets |
|
| 455,025 |
|
|
| 398,813 |
|
|
| 634,709 |
|
|
| 499,767 |
|
Long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Property, plant, and equipment, net |
|
| 103,826 |
|
|
| 109,291 |
|
| 127,196 |
| 115,140 |
| |||
Goodwill |
|
| 173,521 |
|
|
| 173,521 |
|
| 191,970 |
| 191,803 |
| |||
Amortizable intangible assets, net |
|
| 39,272 |
|
|
| 43,357 |
|
| 53,171 |
| 58,835 |
| |||
Deferred tax assets |
|
| 19,516 |
|
|
| 21,812 |
|
| 14,304 |
| 19,914 |
| |||
Other noncurrent assets |
|
| 34,705 |
|
|
| 34,906 |
|
|
| 46,801 |
|
|
| 32,443 |
|
Total assets |
| $ | 825,865 |
|
| $ | 781,700 |
|
| $ | 1,068,151 |
|
| $ | 917,902 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Floor plan payable |
| $ | 25,595 |
|
| $ | 33,914 |
|
| $ | 34,315 |
| $ | 25,733 |
| |
Accounts payable |
|
| 38,603 |
|
|
| 38,703 |
|
| 44,200 |
| 57,214 |
| |||
Other current liabilities |
|
| 143,453 |
|
|
| 114,030 |
|
|
| 205,094 |
|
|
| 180,695 |
|
Total current liabilities |
|
| 207,651 |
|
|
| 186,647 |
|
|
| 283,609 |
|
|
| 263,642 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Long-term debt |
|
| 39,330 |
|
|
| 77,330 |
|
| 12,430 |
| 39,330 |
| |||
Deferred tax liabilities |
|
| 4,008 |
|
|
| 3,264 |
|
| 4,615 |
| 4,280 |
| |||
Other |
|
| 42,681 |
|
|
| 40,144 |
| ||||||||
Other liabilities |
|
| 34,119 |
|
|
| 42,039 |
| ||||||||
Total long-term liabilities |
|
| 86,019 |
|
|
| 120,738 |
|
|
| 51,164 |
|
|
| 85,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Common stock, $0.0277 par value, 115,000 shares authorized, 56,638 and 56,665 shares issued (including 0 and 145 shares subject to restriction) as of December 26, 2020 and March 28, 2020, respectively |
|
| 1,569 |
|
|
| 1,570 |
| ||||||||
Common stock, $0.0277 par value, 115,000 shares authorized, 56,827 and 56,640 shares issued as of January 1, 2022 and April 3, 2021, respectively |
| 1,572 |
| 1,569 |
| |||||||||||
Additional paid-in capital |
|
| 488,558 |
|
|
| 485,552 |
|
| 498,898 |
| 491,668 |
| |||
Retained earnings (accumulated deficit) |
|
| 50,720 |
|
|
| (48 | ) | ||||||||
Retained earnings |
| 241,135 |
| 82,898 |
| |||||||||||
Accumulated other comprehensive loss |
|
| (8,652 | ) |
|
| (12,759 | ) |
|
| (8,227 | ) |
|
| (7,524 | ) |
Total stockholders’ equity |
|
| 532,195 |
|
|
| 474,315 |
|
|
| 733,378 |
|
|
| 568,611 |
|
Total liabilities and stockholders’ equity |
| $ | 825,865 |
|
| $ | 781,700 |
|
| $ | 1,068,151 |
|
| $ | 917,902 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
1
Skyline Champion Corporation
Condensed Consolidated Income Statements
(Unaudited, dollars in thousands, except per share amounts)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||||||||||||
|
| December 26, 2020 |
|
| December 28, 2019 |
|
| December 26, 2020 |
|
| December 28, 2019 |
|
| January 1, |
|
| December 26, |
|
| January 1, |
|
| December 26, |
| ||||||||
Net sales |
| $ | 377,581 |
|
| $ | 342,239 |
|
| $ | 973,232 |
|
| $ | 1,068,585 |
|
| $ | 534,690 |
| $ | 377,581 |
|
| $ | 1,569,112 |
| $ | 973,232 |
| ||
Cost of sales |
|
| 305,797 |
|
|
| 273,338 |
|
|
| 784,652 |
|
|
| 849,594 |
|
|
| 377,451 |
|
|
| 305,797 |
|
|
| 1,171,016 |
|
|
| 784,652 |
|
Gross profit |
|
| 71,784 |
|
|
| 68,901 |
|
|
| 188,580 |
|
|
| 218,991 |
|
| 157,239 |
| 71,784 |
|
|
| 398,096 |
| 188,580 |
| |||||
Selling, general, and administrative expenses |
|
| 44,286 |
|
|
| 45,237 |
|
|
| 126,466 |
|
|
| 145,354 |
|
|
| 65,825 |
|
|
| 44,286 |
|
|
| 181,188 |
|
|
| 126,466 |
|
Operating income |
|
| 27,498 |
|
|
| 23,664 |
|
|
| 62,114 |
|
|
| 73,637 |
|
| 91,414 |
| 27,498 |
|
|
| 216,908 |
| 62,114 |
| |||||
Interest expense, net |
|
| 795 |
|
|
| 328 |
|
|
| 2,601 |
|
|
| 1,019 |
|
| 508 |
| 795 |
|
|
| 2,002 |
| 2,601 |
| |||||
Other income |
|
| (180 | ) |
|
| — |
|
|
| (6,993 | ) |
|
| — |
| ||||||||||||||||
Other expense (income) |
|
| 7 |
|
|
| (180 | ) |
|
| (36 | ) |
|
| (6,993 | ) | ||||||||||||||||
Income before income taxes |
|
| 26,883 |
|
|
| 23,336 |
|
|
| 66,506 |
|
|
| 72,618 |
|
| 90,899 |
| 26,883 |
|
|
| 214,942 |
| 66,506 |
| |||||
Income tax expense |
|
| 5,284 |
|
|
| 6,299 |
|
|
| 15,493 |
|
|
| 20,456 |
|
|
| 23,277 |
|
|
| 5,284 |
|
|
| 53,696 |
|
|
| 15,493 |
|
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | 67,622 |
|
| $ | 21,599 |
|
| $ | 161,246 |
|
| $ | 51,013 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
| $ | 0.38 |
|
| $ | 0.30 |
|
| $ | 0.90 |
|
| $ | 0.92 |
|
| $ | 1.19 |
|
| $ | 0.38 |
|
| $ | 2.84 |
|
| $ | 0.90 |
|
Diluted |
| $ | 0.38 |
|
| $ | 0.30 |
|
| $ | 0.90 |
|
| $ | 0.92 |
|
| $ | 1.18 |
|
| $ | 0.38 |
|
| $ | 2.81 |
|
| $ | 0.90 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
2
Skyline Champion Corporation
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, dollars in thousands)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||||||||||||
|
| December 26, 2020 |
|
| December 28, 2019 |
|
| December 26, 2020 |
|
| December 28, 2019 |
|
| January 1, |
|
| December 26, |
|
| January 1, |
|
| December 26, |
| ||||||||
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | 67,622 |
| $ | 21,599 |
|
| $ | 161,246 |
| $ | 51,013 |
| ||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Foreign currency translation adjustments |
|
| 2,151 |
|
|
| 548 |
|
|
| 4,107 |
|
|
| 917 |
|
|
| (61 | ) |
|
| 2,151 |
|
|
| (703 | ) |
|
| 4,107 |
|
Total comprehensive income |
| $ | 23,750 |
|
| $ | 17,585 |
|
| $ | 55,120 |
|
| $ | 53,079 |
|
| $ | 67,561 |
|
| $ | 23,750 |
|
| $ | 160,543 |
|
| $ | 55,120 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Skyline Champion Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
|
| Nine Months Ended |
|
| Nine months ended |
| ||||||||||
|
| December 26, 2020 |
|
| December 28, 2019 |
|
| January 1, |
|
| December 26, |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income |
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | 161,246 |
| $ | 51,013 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation |
|
| 8,994 |
|
|
| 9,826 |
|
| 9,869 |
| 8,994 |
| |||
Amortization of intangible assets |
|
| 4,082 |
|
|
| 4,069 |
|
| 5,664 |
| 4,082 |
| |||
Amortization of deferred financing fees |
|
| 380 |
|
|
| 384 |
|
| 599 |
| 380 |
| |||
Fair market value adjustment for asset classified as held for sale |
|
| — |
|
|
| 986 |
| ||||||||
Equity-based compensation |
|
| 4,625 |
|
|
| 6,168 |
|
| 6,134 |
| 4,625 |
| |||
Deferred taxes |
|
| 3,251 |
|
|
| 4,222 |
|
| 5,942 |
| 3,251 |
| |||
(Gain) loss on disposal of property, plant, and equipment |
|
| (75 | ) |
|
| 126 |
| ||||||||
Foreign currency transaction gain |
|
| (421 | ) |
|
| (93 | ) | ||||||||
Loss (gain) on disposal of property, plant, and equipment |
| 696 |
| (75 | ) | |||||||||||
Foreign currency transaction loss (gain) |
| 55 |
| (421 | ) | |||||||||||
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| 4,577 |
|
|
| 15,441 |
|
| 11,419 |
| 4,577 |
| |||
Inventories |
|
| (3,388 | ) |
|
| 14,980 |
|
| (19,133 | ) |
| (3,388 | ) | ||
Prepaids and other assets |
|
| (2,239 | ) |
|
| (6,199 | ) |
| (22,954 | ) |
| (2,239 | ) | ||
Accounts payable |
|
| (284 | ) |
|
| (16,130 | ) |
|
| (13,076 | ) |
|
| (284 | ) |
Accrued expenses and other liabilities |
|
| 33,301 |
|
|
| (12,865 | ) |
|
| 17,945 |
|
|
| 33,301 |
|
Net cash provided by operating activities |
|
| 103,816 |
|
|
| 73,077 |
|
|
| 164,406 |
|
|
| 103,816 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Additions to property, plant, and equipment |
|
| (4,235 | ) |
|
| (12,110 | ) |
| (22,784 | ) |
| (4,235 | ) | ||
Proceeds from maturity of company owned life insurance policy |
|
| 1,186 |
|
|
| — |
| ||||||||
Cash paid for acquisition |
| (207 | ) |
| — |
| ||||||||||
Proceeds from maturity of Company owned life insurance policy |
| — |
| 1,186 |
| |||||||||||
Proceeds from disposal of property, plant, and equipment |
|
| 1,836 |
|
|
| 44 |
|
|
| 70 |
|
|
| 1,836 |
|
Proceeds from sale of held for sale asset |
|
| — |
|
|
| 1,100 |
| ||||||||
Net cash used in investing activities |
|
| (1,213 | ) |
|
| (10,966 | ) |
|
| (22,921 | ) |
|
| (1,213 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Changes in floor plan financing, net |
|
| (8,318 | ) |
|
| (946 | ) |
| 8,583 |
| (8,318 | ) | |||
Payments on deferred financing fees |
| (1,130 | ) |
| — |
| ||||||||||
Payments on revolving debt facility |
|
| (38,000 | ) |
|
| (15,000 | ) |
| (26,900 | ) |
| (38,000 | ) | ||
Stock option exercises |
|
| 67 |
|
|
| 109 |
|
| 1,099 |
| 67 |
| |||
Tax payments for equity-based compensation |
|
| (1,687 | ) |
|
| (2,131 | ) |
| (3,007 | ) |
| (1,687 | ) | ||
Net cash used in financing activities |
|
| (47,938 | ) |
|
| (17,968 | ) |
|
| (21,355 | ) |
|
| (47,938 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| 2,940 |
|
|
| 510 |
|
|
| (578 | ) |
|
| 2,940 |
|
Net increase in cash and cash equivalents |
|
| 57,605 |
|
|
| 44,653 |
|
| 119,552 |
| 57,605 |
| |||
Cash and cash equivalents at beginning of period |
|
| 209,455 |
|
|
| 126,634 |
|
|
| 262,581 |
|
|
| 209,455 |
|
Cash and cash equivalents at end of period |
| $ | 267,060 |
|
| $ | 171,287 |
|
| $ | 382,133 |
|
| $ | 267,060 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
4
Skyline Champion Corporation
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, dollars and shares in thousands)
|
| Three Months Ended December 26, 2020 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 1, 2022 |
| ||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional Paid in Capital |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Total |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Balance at September 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
|
| $ | 487,557 |
|
| $ | 29,121 |
|
| $ | (10,803 | ) |
| $ | 507,444 |
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at October 2, 2021 |
|
| 56,796 |
|
| $ | 1,572 |
| $ | 496,059 |
|
| $ | 173,513 |
|
| $ | (8,166 | ) |
| $ | 662,978 |
| |||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,599 |
|
|
| — |
|
|
| 21,599 |
|
|
| — |
|
|
| — |
| — |
|
|
| 67,622 |
|
|
| — |
|
|
| 67,622 |
| ||
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 1,001 |
|
|
| — |
|
|
| — |
|
|
| 1,001 |
|
|
| — |
|
|
| — |
| 1,921 |
|
|
| — |
|
|
| — |
|
|
| 1,921 |
| ||
Net common stock issued under equity-based compensation plans |
|
| 31 |
|
|
| — |
| 918 |
|
|
| — |
|
|
| — |
|
|
| 918 |
| ||||||||||||||||||||||||||
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,151 |
|
|
| 2,151 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (61 | ) |
|
| (61 | ) |
Balance at December 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
|
| $ | 488,558 |
|
| $ | 50,720 |
|
| $ | (8,652 | ) |
| $ | 532,195 |
| ||||||||||||||||||||||||
Balance at January 1, 2022 |
|
| 56,827 |
|
| $ | 1,572 |
|
| $ | 498,898 |
|
| $ | 241,135 |
|
| $ | (8,227 | ) |
| $ | 733,378 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Nine Months Ended December 26, 2020 |
|
| Nine months ended January 1, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional Paid in Capital |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Total |
|
| Shares |
|
| Amount |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Total |
| ||||||||||||
Balance at March 28, 2020 |
|
| 56,665 |
|
| $ | 1,570 |
|
| $ | 485,552 |
|
| $ | (48 | ) |
| $ | (12,759 | ) |
| $ | 474,315 |
| ||||||||||||||||||||||||
Balance at April 3, 2021 |
|
| 56,640 |
|
| $ | 1,569 |
| $ | 491,668 |
|
| $ | 82,898 |
|
| $ | (7,524 | ) |
| $ | 568,611 |
| |||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51,013 |
|
|
| — |
|
|
| 51,013 |
|
|
| — |
|
|
| — |
| — |
|
|
| 161,246 |
|
|
| — |
|
|
| 161,246 |
| ||
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 4,625 |
|
|
| — |
|
|
| — |
|
|
| 4,625 |
|
|
| — |
|
|
| — |
| 6,134 |
|
|
| — |
|
|
| — |
|
|
| 6,134 |
| ||
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 | ) |
|
| 187 |
|
|
| 3 |
| 1,096 |
|
|
| (3,009 | ) |
|
| — |
|
|
| (1,910 | ) | ||
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,107 |
|
|
| 4,107 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (703 | ) |
|
| (703 | ) |
Balance at December 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
|
| $ | 488,558 |
|
| $ | 50,720 |
|
| $ | (8,652 | ) |
| $ | 532,195 |
| ||||||||||||||||||||||||
Balance at January 1, 2022 |
|
| 56,827 |
|
| $ | 1,572 |
|
| $ | 498,898 |
|
| $ | 241,135 |
|
| $ | (8,227 | ) |
| $ | 733,378 |
|
|
| Three Months Ended December 28, 2019 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional Paid in Capital |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at September 28, 2019 |
|
| 56,665 |
|
| $ | 1,570 |
|
| $ | 481,909 |
|
| $ | (23,083 | ) |
| $ | (10,246 | ) |
| $ | 450,150 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17,037 |
|
|
| — |
|
|
| 17,037 |
| ||||||||||||||||||||||||
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 1,465 |
|
|
| — |
|
|
| — |
|
|
| 1,465 |
| ||||||||||||||||||||||||
Net common stock issued under equity-based compensation plans |
|
| 1 |
|
|
| — |
|
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| (3 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 548 |
|
|
| 548 |
| ||||||||||||||||||||||||
Balance at December 28, 2019 |
|
| 56,666 |
|
| $ | 1,570 |
|
| $ | 483,371 |
|
| $ | (6,046 | ) |
| $ | (9,698 | ) |
| $ | 469,197 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Nine Months Ended December 28, 2019 |
|
| Three months ended December 26, 2020 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional Paid in Capital |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Total |
|
| Shares |
|
| Amount |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Total |
| ||||||||||||
Balance at March 30, 2019 |
|
| 56,657 |
|
| $ | 1,569 |
|
| $ | 479,226 |
|
| $ | (58,208 | ) |
| $ | (10,615 | ) |
| $ | 411,972 |
| ||||||||||||||||||||||||
Balance at September 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
| $ | 487,557 |
|
| $ | 29,121 |
|
| $ | (10,803 | ) |
| $ | 507,444 |
| |||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 52,162 |
|
|
| — |
|
|
| 52,162 |
|
|
| — |
|
|
| — |
| — |
|
|
| 21,599 |
|
|
| — |
|
|
| 21,599 |
| ||
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 6,168 |
|
|
| — |
|
|
| — |
|
|
| 6,168 |
|
|
| — |
|
|
| — |
| 1,001 |
|
|
| — |
|
|
| — |
|
|
| 1,001 |
| ||
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,151 |
|
|
| 2,151 |
| ||||||||||||||||||||||||
Balance at December 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
|
| $ | 488,558 |
|
| $ | 50,720 |
|
| $ | (8,652 | ) |
| $ | 532,195 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
| Nine months ended December 26, 2020 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at March 28, 2020 |
|
| 56,665 |
|
| $ | 1,570 |
| $ | 485,552 |
|
| $ | (48 | ) |
| $ | (12,759 | ) |
| $ | 474,315 |
| |||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
| — |
|
|
| 51,013 |
|
|
| — |
|
|
| 51,013 |
| ||||||||||||||||||||||||||
Equity-based compensation |
|
| — |
|
|
| — |
| 4,625 |
|
|
| — |
|
|
| — |
|
|
| 4,625 |
| ||||||||||||||||||||||||||
Cumulative adjustment for adoption of ASU 2016-13 |
|
| — |
|
|
| — |
| — |
|
|
| (245 | ) |
|
| — |
|
|
| (245 | ) | ||||||||||||||||||||||||||
Net common stock issued under equity-based compensation plans |
|
| 9 |
|
|
| 1 |
|
|
| (2,023 | ) |
|
| — |
|
|
| — |
|
|
| (2,022 | ) |
|
| (27 | ) |
|
| (1 | ) |
| (1,619 | ) |
|
| — |
|
|
| — |
|
|
| (1,620 | ) | |
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 917 |
|
|
| 917 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,107 |
|
|
| 4,107 |
|
Balance at December 28, 2019 |
|
| 56,666 |
|
| $ | 1,570 |
|
| $ | 483,371 |
|
| $ | (6,046 | ) |
| $ | (9,698 | ) |
| $ | 469,197 |
| ||||||||||||||||||||||||
Balance at December 26, 2020 |
|
| 56,638 |
|
| $ | 1,569 |
|
| $ | 488,558 |
|
| $ | 50,720 |
|
| $ | (8,652 | ) |
| $ | 532,195 |
|
Components of accumulated other comprehensive lossincome (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
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 3335 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 have beenwere 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 $6.2$0.2 million for payrolland $7.0 million of subsidies under CEWS during the nine months ended December 26, 2020. NaN payroll subsidy was recognized under CEWS during the three months ended December 26, 2020. The Company also recognized $0.2 million and $0.8 millionthese programs during the three and nine months ended December 26, 2020, for wage subsidies under the CARES Act and other state level programs in the United States.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. As of December 26, 2020, the Company had collected all of the CEWS subsidies for which it has applied. In addition, the CARES Act allows for deferring payment of certain payroll taxes. Through December 26, 2020 the Company has deferred $11.6$11.8 million of payroll taxes. The Company paid $5.9 million of the deferred payroll taxes that willin the third quarter of fiscal 2022, with the remaining amount expected to be paid beginning in December 2021.2022.
Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally 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 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 Company has evaluated subsequent events after the balance sheet date through the date of the 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 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on May 21, 202026, 2021 (the “Fiscal 20202021 Annual Report”).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes thereto. Actual results could differ from 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.
Certain prior year amounts have been reclassified to conform with the current year presentation.
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 2021,” will end on April 3, 2021 and will include 53 weeks. References to “fiscal 2020” refer to the Company’s fiscal year ended March 28, 2020. The three and nine months ended December 26, 2020 and December 28, 2019 each included 13 weeks and 39 weeks, respectively.
Recently Adopted Accounting Pronouncements: On March 29, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” using a modified retrospective approach. The standard amends several aspects of the measurement of credit losses related to certain financial instruments, including the replacement of the existing incurred credit loss model and other models with the current expected credit losses ("CECL") model. The cumulative effect of adoption resulted in an increase of $0.2 million in the allowance for credit loss and a corresponding decrease in retained earnings as of March 29, 2020. 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. As of December 26, 2020 and March 28, 2020, accountsAccounts receivable are reflected net of reserves of $0.5$1.0 million and $0.4$0.4 million at January 1, 2022 and April 3, 2021, respectively. As of December 26, 2020At both January 1, 2022 and March 28, 2020,April 3, 2021, other notes receivable are reflected net of reserves of $0.4 million and $0.5 million, respectively. Changes in expected credit losses were not significant in the first nine months of fiscal 2021. $0.4 million.
In January 2017,The Company’s fiscal year is a 52- or 53-week period that ends on the FASB issued ASU 2017-04, “Intangibles - GoodwillSaturday nearest to March 31. The Company’s current fiscal year, “fiscal 2022,” will end on April 2, 2022 and Other (Topic 350), Simplifying the Test for Goodwill Impairment,” which addresses concerns over the cost and complexity of the two-step impairment testing model, and removes the second step
6
Skyline Champion Corporation
Noteswill include 52 weeks. References to Condensed Consolidated Financial Statements - Continued
of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated“fiscal 2021” refer to the reporting unit.Company’s fiscal year ended April 3, 2021. The Company adopted the provisions of ASU 2017-04 effective March 29,three and ninemonths ended January 1, 2022 and December 26, 2020 each included 13 and the adoption did not have an impact on the Company's consolidated financial statements.39 weeks, respectively.
There were no other accounting standards recently issued that are expected to have a material impact on the Company’s financial position or results of operations.
6
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
2.Business Acquisition ScotBilt Acquisition On February 28, 2021, the Company acquired 100% of the membership interests of 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 terms of the purchase agreement, the preliminary purchase price was adjusted for cash held by ScotBilt at the closing date and working capital adjustments resulting in an initial total purchase consideration of $54.5 million. In the first quarter of fiscal 2022, the Company reduced 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 could change. The preliminary allocation of the purchase price was as follows:
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 operational improvements through sharing of 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 historical carrying values given the short-term nature of these assets and liabilities. Intangible assets include $13.0 million in customer relationships and $8.1 million associated with the ScotBilt trade name and were based on an independent appraisal. The fair value of the customer relationships was determined using the multi-period excess earnings method and the fair value of the 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 acquisition date. 3.Inventories, net
|
|
The components of inventory, net of reserves for obsolete inventory, were as follows:
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
|
| January 1, |
|
| April 3, |
| ||||
Raw materials |
| $ | 69,664 |
|
| $ | 55,408 |
|
| $ | 108,370 |
| $ | 91,916 |
| |
Work in process |
|
| 19,412 |
|
|
| 17,773 |
|
| 22,644 |
| 21,642 |
| |||
Finished goods and other |
|
| 42,047 |
|
|
| 53,205 |
|
|
| 54,038 |
|
|
| 52,555 |
|
Total inventories, net |
| $ | 131,123 |
|
| $ | 126,386 |
|
| $ | 185,052 |
|
| $ | 166,113 |
|
At December 26, 2020January 1, 2022 and March 28, 2020,April 3, 2021, reserves for obsolete inventory were $4.6$4.4 million and $4.2$4.6 million, respectively.
7
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
4.Property, Plant, and Equipment
|
|
Property, plant, and equipment are stated at cost. Depreciation is calculated primarily on a straight-line basis, generally over the following estimated useful lives: land improvements – 3 to 10 years; buildings and improvements – 8 to 25 years;years; and vehicles and machinery and equipment – 3 to 8 years.years. Depreciation expense for the three months ended January 1, 2022 and December 26, 2020 was $3.3and December 28, 2019 was $3.0 million and $3.2$3.0 million, respectively. Depreciation expense for the ninemonths ended January 1, 2022 and December 26, 2020 was $9.9and December 28, 2019 was $9.0 million and $9.8$9.0 million, respectively.
The components of property, plant, and equipment were as follows:
(Dollars in thousands) |
| January 1, |
|
| April 3, |
| ||
Land and improvements |
| $ | 39,411 |
|
| $ | 36,470 |
|
Buildings and improvements |
|
| 97,206 |
|
|
| 97,005 |
|
Machinery and equipment |
|
| 64,286 |
|
|
| 57,790 |
|
Construction in progress |
|
| 13,913 |
|
|
| 1,889 |
|
Property, plant, and equipment, at cost |
|
| 214,816 |
|
|
| 193,154 |
|
Less: accumulated depreciation |
|
| (87,620 | ) |
|
| (78,014 | ) |
Property, plant, and equipment, net |
| $ | 127,196 |
|
| $ | 115,140 |
|
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
| ||
Land and improvements |
| $ | 35,525 |
|
| $ | 35,332 |
|
Buildings and improvements |
|
| 87,096 |
|
|
| 87,222 |
|
Machinery and equipment |
|
| 54,423 |
|
|
| 51,239 |
|
Construction in progress |
|
| 1,981 |
|
|
| 1,810 |
|
Property, plant, and equipment, at cost |
|
| 179,025 |
|
|
| 175,603 |
|
Less: accumulated depreciation |
|
| (75,199 | ) |
|
| (66,312 | ) |
Property, plant, and equipment, net |
| $ | 103,826 |
|
| $ | 109,291 |
|
5.Goodwill, Intangible Assets, and Cloud Computing Arrangements
Goodwill
|
|
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 December 26, 2020January 1, 2022 and March 28, 2020,April 3, 2021, the Company had goodwill of $173.5 million.$192.0 million and $191.8 million, respectively.
Intangible Assets
The components of amortizable intangible assets were as follows:
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
|
| January 1, 2022 |
|
| April 3, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| Customer Relationships |
|
| Trade Names |
|
| Total |
|
| Customer Relationships |
|
| Trade Names |
|
| Total |
|
| Customer |
|
| Trade |
|
| Total |
|
| Customer |
|
| Trade |
|
| Total |
| ||||||||||||
Gross carrying amount |
| $ | 48,845 |
|
| $ | 13,261 |
|
| $ | 62,106 |
|
| $ | 48,370 |
|
| $ | 13,068 |
|
| $ | 61,438 |
|
| $ | 61,913 |
|
| $ | 21,389 |
|
| $ | 83,302 |
|
| $ | 61,963 |
|
| $ | 21,409 |
|
| $ | 83,372 |
|
Accumulated amortization |
|
| (16,847 | ) |
|
| (5,987 | ) |
|
| (22,834 | ) |
|
| (13,118 | ) |
|
| (4,963 | ) |
| $ | (18,081 | ) |
|
| (22,336 | ) |
|
| (7,795 | ) |
|
| (30,131 | ) |
|
| (18,158 | ) |
|
| (6,379 | ) |
| $ | (24,537 | ) |
Amortizable intangibles, net |
| $ | 31,998 |
|
| $ | 7,274 |
|
| $ | 39,272 |
|
| $ | 35,252 |
|
| $ | 8,105 |
|
| $ | 43,357 |
|
| $ | 39,577 |
|
| $ | 13,594 |
|
| $ | 53,171 |
|
| $ | 43,805 |
|
| $ | 15,030 |
|
| $ | 58,835 |
|
7During the three months ended January 1, 2022 and December 26, 2020, amortization of intangible assets was $1.9 million and $1.4 million, respectively. During the nine months ended January 1, 2022 and December 26, 2020, amortization of intangible assets was $5.7 million and $4.1 million, respectively.
Cloud Computing Arrangements
The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed software. At January 1, 2022 and April 3, 2021, the Company had capitalized cloud computing costs of $15.7 million and $0.3 million, respectively. Cloud computing costs are included in other noncurrent assets in the accompanying Consolidated Balance Sheets. There was 0 amortization of capitalized cloud computing costs during the three and nine months ended January 1, 2022 and December 26, 2020 as the related systems have not yet been placed in service.
8
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
During both the three months ended December 26, 20206. and December 28, 2019Other Current Liabilities, amortization of intangible assets was $1.4 million. During both the nine months ended December 26, 2020and December 28, 2019, amortization of intangible assets was $4.1 million.
|
|
The components of other current liabilities were as follows:
(Dollars in thousands) |
| January 1, |
|
| April 3, |
| ||
Customer deposits |
| $ | 65,114 |
|
| $ | 58,888 |
|
Accrued volume rebates |
|
| 24,849 |
|
|
| 18,207 |
|
Accrued warranty obligations |
|
| 24,508 |
|
|
| 24,033 |
|
Accrued compensation and payroll taxes |
|
| 50,149 |
|
|
| 42,560 |
|
Accrued insurance |
|
| 17,455 |
|
|
| 12,421 |
|
Other |
|
| 23,019 |
|
|
| 24,586 |
|
Total other current liabilities |
| $ | 205,094 |
|
| $ | 180,695 |
|
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
| ||
Customer deposits |
| $ | 38,096 |
|
| $ | 22,679 |
|
Accrued volume rebates |
|
| 17,876 |
|
|
| 17,469 |
|
Accrued warranty obligations |
|
| 19,725 |
|
|
| 19,179 |
|
Accrued compensation and payroll taxes |
|
| 35,200 |
|
|
| 27,776 |
|
Accrued insurance |
|
| 14,291 |
|
|
| 11,182 |
|
Other |
|
| 18,265 |
|
|
| 15,745 |
|
Total other current liabilities |
| $ | 143,453 |
|
| $ | 114,030 |
|
7.Accrued Warranty Obligations
|
|
Changes in the accrued warranty obligations were as follows:
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
|
| January 1, |
|
| December 26, |
| ||||
Balance at beginning of period |
| $ | 31,855 |
|
| $ | 24,460 |
|
| $ | 30,469 |
|
| $ | 24,969 |
|
Warranty expense |
|
| 9,146 |
|
|
| 9,863 |
|
|
| 30,330 |
|
|
| 24,616 |
|
Cash warranty payments |
|
| (10,057 | ) |
|
| (8,808 | ) |
|
| (29,855 | ) |
|
| (24,070 | ) |
Balance at end of period |
|
| 30,944 |
|
|
| 25,515 |
|
|
| 30,944 |
|
|
| 25,515 |
|
Less: noncurrent portion in other long-term liabilities |
|
| (6,436 | ) |
|
| (5,790 | ) |
|
| (6,436 | ) |
|
| (5,790 | ) |
Total current portion |
| $ | 24,508 |
|
| $ | 19,725 |
|
| $ | 24,508 |
|
| $ | 19,725 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| December 26, 2020 |
|
| December 28, 2019 |
| ||||
Balance at the beginning of the period |
| $ | 24,460 |
|
| $ | 24,437 |
|
| $ | 24,969 |
|
| $ | 23,346 |
|
Warranty expense |
|
| 9,863 |
|
|
| 10,204 |
|
|
| 24,616 |
|
|
| 29,640 |
|
Cash warranty payments |
|
| (8,808 | ) |
|
| (9,646 | ) |
|
| (24,070 | ) |
|
| (27,991 | ) |
Balance at end of period |
|
| 25,515 |
|
|
| 24,995 |
|
|
| 25,515 |
|
|
| 24,995 |
|
Less: noncurrent portion in other long-term liabilities |
|
| (5,790 | ) |
|
| (4,960 | ) |
|
| (5,790 | ) |
|
| (4,960 | ) |
Total current portion |
| $ | 19,725 |
|
| $ | 20,035 |
|
| $ | 19,725 |
|
| $ | 20,035 |
|
8.Debt and Floor Plan Payable
|
|
Long-term debt consisted of the following:
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
|
| January 1, |
|
| April 3, |
| ||||
Revolving credit facility maturing in 2023 |
| $ | 26,900 |
|
| $ | 64,900 |
| ||||||||
Revolving credit facility maturing in 2026 |
| $ | — |
| $ | 26,900 |
| |||||||||
Obligations under industrial revenue bonds due 2029 |
|
| 12,430 |
|
|
| 12,430 |
|
|
| 12,430 |
|
|
| 12,430 |
|
Total debt |
|
| 39,330 |
|
|
| 77,330 |
|
| 12,430 |
| 39,330 |
| |||
Less: current portion |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total long-term debt |
| $ | 39,330 |
|
| $ | 77,330 |
|
| $ | 12,430 |
|
| $ | 39,330 |
|
TheOn July 7, 2021, the Company hasentered into an agreementAmended and Restated Credit Agreement with a syndicate of banks that provides for a revolving credit facility of up to $100.0$200.0 million, including a $45.0 million letter of credit sub-facility of not less than $45.0 million (“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, of the Credit Agreement.
The Credit Agreementsubject to certain terms and conditions, matures on June 5, 2023in 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 accompanying consolidated balance sheets. The Company wrote off $0.3 million of deferred financing fees associated with the previously existing credit facility, which is included in interest expense, net for the nine months ended January 1, 2022.
The interest rate on borrowings under the Amended Credit Agreement adjusts based on the first lienconsolidated total net leverage of the Company from a high of LIBOR plus 2.25%1.875% and ABR plus 1.25%0.875%, at the election of the Company, when the first lienconsolidated total net leverage ratio is equal to or greater than 2.00:2.25:1.00, to a low of LIBOR plus 1.50%1.125% and ABR plus 0.50%0.125% when the first lienconsolidated total net leverage is below 0.50:1.00. In addition, the Company is obligated to pay an unused line fee ranging between 0.25%0.15% and 0.40%0.3% (depending on the first lienconsolidated total net leverage)leverage ratio) in respect of unused commitments under the Amended Credit Agreement. At December 26, 2020January 1, 2022 the interest rate on borrowings under the Amended Credit Agreement was 1.7%1.23%. At December 26, 2020,January 1, 2022, letters of credit issued under the Amended Credit Agreement totaled $33.9$30.4 million and total available borrowings were $39.2$169.6 million.
9
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 December 26, 2020,January 1, 2022, including related costs and fees, was 2.19%1.78%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029.2029.
8
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
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 December 26, 2020January 1, 2022..
Floor Plan Payable
The Company’s retail operations utilize floor plan financing to fund the purchase of manufactured homes for display or resale. At December 26, 2020January 1, 2022 and March 28, 2020,April 3, 2021, the Company had outstanding borrowings on floor plan financing agreements of $25.6$34.3 million and $33.9$25.7 million, respectively. Total credit line capacity provided under the agreements was $49.0$57.0 million as of January 1, 2022. December 26, 2020. Borrowings are secured by the financed homes and are required to be repaid when the Company sells thea financed home to a customer.
10
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 ninemonths ended January 1, 2022 and December 26, 20202020:
and
|
| Three months ended January 1, 2022 |
| |||||||||||||
(Dollars in thousands) |
| U.S. |
|
| Canadian |
|
| Corporate/ |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 478,838 |
|
| $ | 36,910 |
|
| $ | — |
|
| $ | 515,748 |
|
Commercial |
|
| 5,481 |
|
|
| — |
|
|
| — |
|
|
| 5,481 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 13,461 |
|
|
| 13,461 |
|
Total |
| $ | 484,319 |
|
| $ | 36,910 |
|
| $ | 13,461 |
|
| $ | 534,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Nine months ended January 1, 2022 |
| |||||||||||||
(Dollars in thousands) |
| U.S. |
|
| Canadian |
|
| Corporate/ |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 1,403,856 |
|
| $ | 113,242 |
|
| $ | — |
|
| $ | 1,517,098 |
|
Commercial |
|
| 9,482 |
|
|
| — |
|
|
| — |
|
|
| 9,482 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 42,532 |
|
|
| 42,532 |
|
Total |
| $ | 1,413,338 |
|
| $ | 113,242 |
|
| $ | 42,532 |
|
| $ | 1,569,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three months ended December 26, 2020 |
| |||||||||||||
(Dollars in thousands) |
| U.S. |
|
| Canadian |
|
| Corporate/ |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 332,200 |
|
| $ | 26,351 |
|
| $ | — |
|
| $ | 358,551 |
|
Commercial |
|
| 4,158 |
|
|
| — |
|
|
| — |
|
|
| 4,158 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 14,872 |
|
|
| 14,872 |
|
Total |
| $ | 336,358 |
|
| $ | 26,351 |
|
| $ | 14,872 |
|
| $ | 377,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Nine months ended December 26, 2020 |
| |||||||||||||
(Dollars in thousands) |
| U.S. |
|
| Canadian |
|
| Corporate/ |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 857,028 |
|
| $ | 66,104 |
|
| $ | — |
|
| $ | 923,132 |
|
Commercial |
|
| 11,549 |
|
|
| — |
|
|
| — |
|
|
| 11,549 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 38,551 |
|
|
| 38,551 |
|
Total |
| $ | 868,577 |
|
| $ | 66,104 |
|
| $ | 38,551 |
|
| $ | 973,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2019:
|
| Three Months Ended December 26, 2020 |
| |||||||||||||
(Dollars in thousands) |
| U.S. Factory-Built Housing |
|
| Canadian Factory-Built Housing |
|
| Corporate/ Other |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 332,200 |
|
| $ | 26,351 |
|
| $ | — |
|
| $ | 358,551 |
|
Commercial |
|
| 4,158 |
|
|
| — |
|
|
| — |
|
|
| 4,158 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 14,872 |
|
|
| 14,872 |
|
Total |
| $ | 336,358 |
|
| $ | 26,351 |
|
| $ | 14,872 |
|
| $ | 377,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended December 26, 2020 |
| |||||||||||||
(Dollars in thousands) |
| U.S. Factory-Built Housing |
|
| Canadian Factory-Built Housing |
|
| Corporate/ Other |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 857,028 |
|
| $ | 66,104 |
|
| $ | — |
|
| $ | 923,132 |
|
Commercial |
|
| 11,549 |
|
|
| — |
|
|
| — |
|
|
| 11,549 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 38,551 |
|
|
| 38,551 |
|
Total |
| $ | 868,577 |
|
| $ | 66,104 |
|
| $ | 38,551 |
|
| $ | 973,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended December 28, 2019 |
| |||||||||||||
(Dollars in thousands) |
| U.S. Factory-Built Housing |
|
| Canadian Factory-Built Housing |
|
| Corporate/ Other |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 304,568 |
|
| $ | 22,809 |
|
| $ | — |
|
| $ | 327,377 |
|
Commercial |
|
| 250 |
|
|
| — |
|
|
| — |
|
|
| 250 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 14,612 |
|
|
| 14,612 |
|
Total |
| $ | 304,818 |
|
| $ | 22,809 |
|
| $ | 14,612 |
|
| $ | 342,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended December 28, 2019 |
| |||||||||||||
(Dollars in thousands) |
| U.S. Factory-Built Housing |
|
| Canadian Factory-Built Housing |
|
| Corporate/ Other |
|
| Total |
| ||||
|
|
|
| |||||||||||||
Manufacturing and retail |
| $ | 944,472 |
|
| $ | 72,916 |
|
| $ | — |
|
| $ | 1,017,388 |
|
Commercial |
|
| 4,781 |
|
|
| — |
|
|
| — |
|
|
| 4,781 |
|
Transportation |
|
| — |
|
|
| — |
|
|
| 46,416 |
|
|
| 46,416 |
|
Total |
| $ | 949,253 |
|
| $ | 72,916 |
|
| $ | 46,416 |
|
| $ | 1,068,585 |
|
911
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
10.Income Taxes
|
|
The Company has operating leases for land, manufacturing and office facilities, and equipment. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease terms. Lease expense included in the accompanying condensed consolidated income statements is shown below:
|
| Three Months Ended |
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
| ||
Operating lease expense |
| $ | 1,362 |
|
| $ | 1,359 |
|
Short-term lease expense |
|
| 266 |
|
|
| 402 |
|
Total lease expense |
| $ | 1,628 |
|
| $ | 1,761 |
|
|
| Nine Months Ended |
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
| ||
Operating lease expense |
| $ | 4,102 |
|
| $ | 4,234 |
|
Short-term lease expense |
|
| 1,251 |
|
|
| 1,005 |
|
Total lease expense |
| $ | 5,353 |
|
| $ | 5,239 |
|
Operating lease assets and obligations included in the accompanying condensed consolidated balance sheets are below:
(Dollars in thousands) |
| December 26, 2020 |
|
| March 28, 2020 |
| ||
Right-of-use assets under operating leases: |
|
|
|
|
|
|
|
|
Other long-term assets |
| $ | 12,515 |
|
| $ | 14,808 |
|
Lease obligations under operating leases: |
|
|
|
|
|
|
|
|
Other current liabilities |
| $ | 4,305 |
|
| $ | 4,789 |
|
Other long-term liabilities |
|
| 8,210 |
|
|
| 10,019 |
|
Total lease obligation |
| $ | 12,515 |
|
| $ | 14,808 |
|
Maturities of lease obligations as of December 26, 2020, are shown below:
(Dollars in thousands) |
| December 26, 2020 |
| |
Fiscal 2021 (1) |
| $ | 1,294 |
|
Fiscal 2022 |
|
| 4,694 |
|
Fiscal 2023 |
|
| 3,754 |
|
Fiscal 2024 |
|
| 1,803 |
|
Fiscal 2025 |
|
| 1,124 |
|
Thereafter |
|
| 1,879 |
|
Total undiscounted cash flows |
|
| 14,548 |
|
Less: imputed interest |
|
| (2,033 | ) |
Lease obligations under operating leases |
| $ | 12,515 |
|
|
|
The weighted-average lease term and discount rate for operating leases are shown below:
| ||||
|
| |||
|
|
10
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
The discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate, which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments.
Cash flow information related to operating leases is shown below:
|
| Nine Months Ended |
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
| ||
Non-cash activity: |
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations |
| $ | 1,430 |
|
| $ | 1,711 |
|
Operating cash flows: |
|
|
|
|
|
|
|
|
Cash paid related to operating lease obligations |
| $ | 4,255 |
|
| $ | 4,262 |
|
|
|
For the three months ended January 1, 2022 and December 26, 2020, and December 28, 2019, the Company recorded $5.3$23.3 million and $6.3$5.3 million of income tax expense and had an effective tax rate of 19.7%25.6% and 27.0%19.7%, respectively. For the nine months ended January 1, 2022 and December 26, 2020, and December 28, 2019, the Company recorded $15.5$53.7 million and $20.5$15.5 million of income tax expense and had an effective tax rate of 23.3%25.0% and 28.2%23.3%, respectively. During the three months ended December 26, 2020, the Company completed a U.S. research and development ("R&D") tax credit study for the years 2018 and 2019 that resulted in the recognition of a tax benefit of $1.7$1.7 million.
The Company’s effective tax rate for both the three and nine months ended December 26, 2020 and December 28, 2019January 1, 2022 differs from the federal statutory income tax rate of 21.0%21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the three and nine months ended December 26, 2020 differs from the federal statutory rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits (including the $1.7 million R&D credit), and results in foreign jurisdictions.
At December 26, 2020,January 1, 2022, the Company had 0 unrecognized tax benefits. The Company does not anticipate any material changes to uncertain tax benefits in the next twelve months. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense.
11.Earnings Per Share
|
|
Basic net income per share (“EPS”) attributable to the Company was computed by dividing net income attributable to the Company by the average number of common shares outstanding during the period. Certain of the Company’s time-based restricted share awards were considered participating securities prior to the completion of the vesting period. The vesting for these time-based shares was completedoccurred in the second quarter of fiscal 2021. Diluted earnings per common share is computed based on the more dilutive of: (i) the two class method, assuming the participating securities are not exercised or converted; or (ii) the summation of average common shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued.
During the nine months ended December 26, 2020, and the three and nine months ended December 28, 2019, the two-class method was more dilutive. The two-class method was not applicable to the computation for the three months ended December 26, 202026,2020, or any subsequent periods, as the time-vested restricted share awards were fully vested and no longer considered participating securities during the period. Securities that could potentially dilute basic EPS in the future that were considered antidilutive in the three and nine months ended December 26, 2020securities. totaled 0.2 million. There were 0 antidilutive securities in the three and nine months ended December 28, 2019.
11
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
The following table sets forth the computation of basic and diluted earnings per common share:
|
| Three months ended |
| Nine months ended |
| |||||||||||
(Dollars and shares in thousands, except per share data) |
| January 1, |
|
| December 26, |
|
| January 1, |
|
| December 26, |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 67,622 |
|
| $ | 21,599 |
|
| $ | 161,246 |
|
| $ | 51,013 |
|
Undistributed earnings allocated to participating securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (62 | ) |
Net income attributable to the Company's common shareholders |
| $ | 67,622 |
|
| $ | 21,599 |
|
| $ | 161,246 |
|
| $ | 50,951 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted-average shares outstanding |
|
| 56,847 |
|
|
| 56,702 |
|
|
| 56,787 |
|
|
| 56,630 |
|
Dilutive securities |
|
| 491 |
|
|
| 288 |
|
|
| 498 |
|
|
| 253 |
|
Diluted weighted-average shares outstanding |
|
| 57,338 |
|
|
| 56,990 |
|
|
| 57,285 |
|
|
| 56,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic net income per share |
| $ | 1.19 |
|
| $ | 0.38 |
|
| $ | 2.84 |
|
| $ | 0.90 |
|
Diluted net income per share |
| $ | 1.18 |
|
| $ | 0.38 |
|
| $ | 2.81 |
|
| $ | 0.90 |
|
12
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
|
| Three Months Ended |
| Nine Months Ended |
| |||||||||||
(Dollars and shares in thousands, except per share data) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| December 26, 2020 |
|
| December 28, 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 51,013 |
|
| $ | 52,162 |
|
Undistributed earnings allocated to participating securities |
|
| — |
|
|
| (44 | ) |
|
| (62 | ) |
|
| (196 | ) |
Net income attributable to the Company's common shareholders |
| $ | 21,599 |
|
| $ | 16,993 |
|
| $ | 50,951 |
|
| $ | 51,966 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding |
|
| 56,702 |
|
|
| 56,521 |
|
|
| 56,630 |
|
|
| 56,457 |
|
Dilutive securities |
|
| 288 |
|
|
| 267 |
|
|
| 253 |
|
|
| 248 |
|
Diluted weighted-average shares outstanding |
|
| 56,990 |
|
|
| 56,788 |
|
|
| 56,883 |
|
|
| 56,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
| $ | 0.38 |
|
| $ | 0.30 |
|
| $ | 0.90 |
|
| $ | 0.92 |
|
Diluted net income per share |
| $ | 0.38 |
|
| $ | 0.30 |
|
| $ | 0.90 |
|
| $ | 0.92 |
|
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 net sales, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and operating assets.
The Company operates in 2 reportable segments: (i) U.S. Factory-built Housing, which includes manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, corporate costs directly incurred for all segments and intersegment eliminations. Segments are generally determined by geography. Segment data includes intersegment revenues and corporate office costs that are directly and exclusively incurred for each segment. Total assets for Corporate/Other primarily includes cash and certain deferred tax items not specifically allocated to another segment.
12
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
Selected financial information by reportable segment was as follows:
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
|
| January 1, |
|
| December 26, |
| ||||
|
|
|
|
|
|
| ||||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing |
| $ | 484,319 |
|
| $ | 336,358 |
|
| $ | 1,413,338 |
|
| $ | 868,577 |
|
Canadian Factory-built Housing |
|
| 36,910 |
|
|
| 26,351 |
|
|
| 113,242 |
|
|
| 66,104 |
|
Corporate/Other |
|
| 13,461 |
|
|
| 14,872 |
|
|
| 42,532 |
|
|
| 38,551 |
|
Consolidated net sales |
| $ | 534,690 |
|
| $ | 377,581 |
|
| $ | 1,569,112 |
|
| $ | 973,232 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing EBITDA |
| $ | 98,724 |
|
| $ | 35,538 |
|
| $ | 239,816 |
|
| $ | 88,628 |
|
Canadian Factory-built Housing EBITDA |
|
| 7,571 |
|
|
| 2,933 |
|
|
| 19,627 |
|
|
| 13,790 |
|
Corporate/Other EBITDA |
|
| (9,638 | ) |
|
| (6,407 | ) |
|
| (26,966 | ) |
|
| (20,235 | ) |
Other income |
|
| 7 |
|
|
| (180 | ) |
|
| (36 | ) |
|
| (6,993 | ) |
Depreciation |
|
| (3,348 | ) |
|
| (3,025 | ) |
|
| (9,869 | ) |
|
| (8,994 | ) |
Amortization |
|
| (1,902 | ) |
|
| (1,361 | ) |
|
| (5,664 | ) |
|
| (4,082 | ) |
Consolidated operating income |
| $ | 91,414 |
|
| $ | 27,498 |
|
| $ | 216,908 |
|
| $ | 62,114 |
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing |
| $ | 2,706 |
|
| $ | 2,378 |
|
| $ | 7,935 |
|
| $ | 7,167 |
|
Canadian Factory-built Housing |
|
| 279 |
|
|
| 246 |
|
|
| 837 |
|
|
| 609 |
|
Corporate/Other |
|
| 363 |
|
|
| 401 |
|
|
| 1,097 |
|
|
| 1,218 |
|
Consolidated depreciation |
| $ | 3,348 |
|
| $ | 3,025 |
|
| $ | 9,869 |
|
| $ | 8,994 |
|
Amortization of U.S. Factory-built Housing intangible assets: |
| $ | 1,902 |
|
| $ | 1,361 |
|
| $ | 5,664 |
|
| $ | 4,082 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing |
| $ | 6,799 |
|
| $ | 1,234 |
|
| $ | 19,070 |
|
| $ | 3,173 |
|
Canadian Factory-built Housing |
|
| 248 |
|
|
| 312 |
|
|
| 589 |
|
|
| 554 |
|
Corporate/Other |
|
| 632 |
|
|
| 137 |
|
|
| 3,125 |
|
|
| 508 |
|
Consolidated capital expenditures |
| $ | 7,679 |
|
| $ | 1,683 |
|
| $ | 22,784 |
|
| $ | 4,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Dollars in thousands) |
|
|
|
|
|
|
| January 1, |
|
| April 3, |
| ||||
Total Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing (1) |
|
|
|
|
|
|
| $ | 586,047 |
|
| $ | 578,897 |
| ||
Canadian Factory-built Housing (1) |
|
|
|
|
|
|
|
| 94,891 |
|
|
| 87,224 |
| ||
Corporate/Other (1) |
|
|
|
|
|
|
|
| 387,213 |
|
|
| 251,781 |
| ||
Consolidated total assets |
|
|
|
|
|
|
| $ | 1,068,151 |
|
| $ | 917,902 |
|
13
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| December 26, 2020 |
|
| December 28, 2019 |
| ||||
|
|
|
|
|
|
| ||||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing |
| $ | 336,358 |
|
| $ | 304,818 |
|
| $ | 868,577 |
|
| $ | 949,253 |
|
Canadian Factory-built Housing |
|
| 26,351 |
|
|
| 22,809 |
|
|
| 66,104 |
|
|
| 72,916 |
|
Corporate/Other |
|
| 14,872 |
|
|
| 14,612 |
|
|
| 38,551 |
|
|
| 46,416 |
|
Consolidated net sales |
| $ | 377,581 |
|
| $ | 342,239 |
|
| $ | 973,232 |
|
| $ | 1,068,585 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing EBITDA |
| $ | 35,538 |
|
| $ | 33,165 |
|
| $ | 88,628 |
|
| $ | 104,624 |
|
Canadian Factory-built Housing EBITDA |
|
| 2,933 |
|
|
| 1,786 |
|
|
| 13,790 |
|
|
| 9,085 |
|
Corporate/Other EBITDA |
|
| (6,407 | ) |
|
| (6,771 | ) |
|
| (20,235 | ) |
|
| (26,177 | ) |
Other income |
|
| (180 | ) |
|
| — |
|
|
| (6,993 | ) |
|
| — |
|
Depreciation |
|
| (3,025 | ) |
|
| (3,171 | ) |
|
| (8,994 | ) |
|
| (9,826 | ) |
Amortization |
|
| (1,361 | ) |
|
| (1,345 | ) |
|
| (4,082 | ) |
|
| (4,069 | ) |
Consolidated operating income |
| $ | 27,498 |
|
| $ | 23,664 |
|
| $ | 62,114 |
|
| $ | 73,637 |
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing |
| $ | 2,378 |
|
| $ | 2,659 |
|
| $ | 7,167 |
|
| $ | 8,365 |
|
Canadian Factory-built Housing |
|
| 246 |
|
|
| 255 |
|
|
| 609 |
|
|
| 744 |
|
Corporate/Other |
|
| 401 |
|
|
| 257 |
|
|
| 1,218 |
|
|
| 717 |
|
Consolidated depreciation |
| $ | 3,025 |
|
| $ | 3,171 |
|
| $ | 8,994 |
|
| $ | 9,826 |
|
Amortization of intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing |
| $ | 1,361 |
|
| $ | 1,345 |
|
| $ | 4,082 |
|
| $ | 4,069 |
|
Canadian Factory-built Housing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Corporate/Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consolidated amortization of intangible assets |
| $ | 1,361 |
|
| $ | 1,345 |
|
| $ | 4,082 |
|
| $ | 4,069 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing |
| $ | 1,234 |
|
| $ | 1,981 |
|
| $ | 3,173 |
|
| $ | 9,483 |
|
Canadian Factory-built Housing |
|
| 312 |
|
|
| 414 |
|
|
| 554 |
|
|
| 842 |
|
Corporate/Other |
|
| 137 |
|
|
| 306 |
|
|
| 508 |
|
|
| 1,785 |
|
Consolidated capital expenditures |
| $ | 1,683 |
|
| $ | 2,701 |
|
| $ | 4,235 |
|
| $ | 12,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
| December 26, 2020 |
|
| March 28, 2020 |
| ||
Total Assets: |
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing (1) |
|
|
|
|
|
|
|
|
| $ | 482,043 |
|
| $ | 491,110 |
|
Canadian Factory-built Housing (1) |
|
|
|
|
|
|
|
|
|
| 77,113 |
|
|
| 56,760 |
|
Corporate/Other (1) |
|
|
|
|
|
|
|
|
|
| 266,709 |
|
|
| 233,830 |
|
Consolidated total assets |
|
|
|
|
|
|
|
|
| $ | 825,865 |
|
| $ | 781,700 |
|
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 theirits agreement to pay the 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 December 26, 2020January 1, 2022 was estimated to be $148.8$281.7 million. The Company accounts for the guarantees under its repurchase agreements with the retailers’ financing
13
Skyline Champion Corporation
Notes to Condensed Consolidated Financial Statements - Continued
institutions by estimating and deferring a portion of the related product sale that represents the estimated fair value of the repurchase obligation. In addition, the Company has estimated the expected contingent net loss the Company will incur upon resale of any repurchases. These estimates are based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting retailers for which the Company has a contingent repurchase obligation. Based on these repurchase agreements and historical loss experience, as well as current economic conditions and forecasts that affect the potential loss exposure, a loss reserve of $0.91.8 million and $1.0$1.4 million was recorded as of December 26, 2020January 1, 2022 and March 28, 2020,April 3, 2021, respectively. Losses incurred on homes repurchased were not significant during the three or nine month periodsmonths ended January 1, 2022 or December 26, 2020 or December 28, 2019.2020.
At December 26, 2020,January 1, 2022, the Company was contingently obligated for $33.9$30.4 million under letters of credit, primarily consisting of $12.6$12.6 million to support long-term debt, $21.0$17.5 million to support the casualty insurance program, and $0.3$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 $34.3$35.6 million under surety bonds, generally to support performance on long-term construction contracts and license and service bonding requirements.
In the normal course of business, the Company’s former subsidiaries that operated in the United Kingdom historically provided certain guarantees to two customers. Those guarantees provide contractual liability for proven construction defects up to 12 years from the date of delivery of certain products. The guarantees remain a contingent liability of the Company which declines over time through October 2027. As of the date of this report, the Company expects few, if any, claims to be reported under the terms of the guarantees.
Legal Proceedings
The Company has agreed to indemnify counterparties in the ordinary course of its business in agreements to acquire and sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. As of the date of this filing, the Company believes the ultimate liability with respect to these contingent obligations will not have, either individually or in the aggregate, a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
14
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
The following should be read in conjunction with Skyline Champion Corporation’s condensed consolidated financial statements and the related notes that appear in Item 1 of this Report.
Overview
Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured offsite construction, company-owned retail locations, and transportation logistics services. The Company is the largest independent publicly traded factory-built solutions provider in North America (based on revenue) and markets its homes under several nationally recognized brand names including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 3335 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 primarilymainly 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, and recreational vehicles, and other products throughout the U.S. and Canada.
Industry and Company Outlook
Since July 2020, U.S. and Canadian housing demand has been robust. The limited availability of existing homes for sale and the broader need for newly built affordable, single-family housing has continued to drive demand for new homes in these markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the United States,U.S., including underlying growth trends in key homebuyer groups, such as the population over 6555 years of age, the population of first-time home buyers, and the population of households earning less than $50,000$60,000 per year. More recently, we seeWe have also seen a number of market trends pointing to increased sales of Alternative Dwelling Units (“ADUs”)accessory dwelling units and urban-to-rural migration as customers accommodate working-from-home patterns, as well as people seeking rent-to-own single-family options.
The robust demand environment has resulted in backlog of $1.5 billion as of January 1, 2022 compared to $488.5 million as of December 26, 2020. Generally higher backlog at our manufacturing facilities creates an opportunity to increase production efficiencies. Although the higher demand brings opportunities, it also has resulted in significant increases in raw material and labor costs. In addition, we are experiencing intermittent supply disruption and higher freight costs. Finding and retaining qualified labor continues to be a challenge for our plants which requires us to review our compensation programs and adjust accordingly. We intend to capitalize on these trends and drivers to growmanage our business over the medium-to-long-term. We believe that there is an opportunity for continued manufactured and modular construction market expansion driven by the foregoing trends and demand drivers, as well as construction labor shortages in certain regions (which tend to adversely and disproportionally impactanticipate or quickly react to these supply challenges and cost of site-built homes when comparedincreases and generally are able to manufactured housing)pass along increased costs to our customers. Historically, order cancellation rates have been very low, but the longer lead-time caused by larger backlogs and increased affordability of factory-built homes relative to site-built homes.changing prices could result in higher cancellations in future periods.
For the nine months ended December 26, 2020,January 1, 2022, approximately 77%78% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the Federal HUD-codeU.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
86,769 71,281 and 61,492 units during the eleveneight months ended November 30, 2021 and 2020, compared to 87,897 units shipped in same period ofrespectively. Based on industry data, the prior year. The Company’s HUDU.S. wholesale market share duringof HUD code homes sold was 19.4% and 16.2%, for the eleven-month periodeight months ended November 30, 2021 and 2020, was 15.7% versus 17.1% in the comparable period of the prior year.respectively. Annual industry shipments have generally increased each year since calendar year since 2009 when only 50,000 HUD codeHUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD codeHUD-coded manufactured homes have improved modestly in recent years, current manufactured housing’s most recent annual shipment levelshousing shipments are still operate at lower levels than the long-term historical average of over 200,000 units annually.a year.
For
Acquisitions and Expansions
Over the nine months ended December 26, 2020last several years, demand for the Company’s products, primarily affordable housing in the U.S., approximately 17%has continued to 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 its manufacturing and retail footprints. The Company has increased capacity through strategic acquisitions and expansions of its manufacturing operations. The Company is focused on growing in strong housing markets across the U.S.
On June 21, 2021, the Company acquired two idle facilities in Navasota, Texas in order to strengthen its production capabilities in the Texas market. The Company began certification of the manufacturing operations at one of these facilities in the third quarter of fiscal 2022, and expects to begin delivering products from that facility in the fourth fiscal quarter. On February 28, 2021, the Company acquired ScotBilt, which operates two manufacturing facilities in Georgia that provide affordable housing throughout Alabama, Florida, Georgia and the Carolinas. 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
15
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 U.S. manufacturing sales were modular. The industry historically reported U.S.HUD and modular market shipments quarterly and three months in arrears. However, reporting of industry shipment data is unavailable, and is expected to remain unavailable for the foreseeable future. Industry shipments of modular homeshomebuilding presence in the U.S. were 14,690as well as improving the results of operations. These acquisitions and investments are included in calendar year 2019. The Company’s modular market share during this period was 13.9%.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. As of December 26, 2020, only one manufacturing facility remained temporarily idled due to labor availability constraints. During the second and third quarters of 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 third quartersecond 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 December 26, 2020,Although the Company has generally been able to navigate the production challenges caused by the pandemic in fiscal 2022, availability of labor and certain materials have improved compared to earlier in fiscal 2021, but 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.
Since the startAs part of the fiscal year, the Company’s retail operations have adjusted their operating procedures to comply with local and state mandates; and have generally remained open but have shifted physical visits to a larger on-line presence. The Company consolidated its retail footprint by closing three retail sales centers during the second quarter of fiscal 2021 in an effort to optimize costs while taking advantage of an increase in distribution through digital marketing efforts. We have strong local independent retailers to serve customers in those areas.
Ininitial response to the pandemic, the Company offered extended benefits to employees, including increased sick pay and waived premium payments on healthcare benefits for furloughed employees. The Company’s U.S. operations incurred $2.2 million of expense related to thosethe extended benefits.benefits during the nine months ended December 26, 2020. Various government programs have been announcedwere enacted 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 StatesU.S. and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. CEWS providesprovided a cash subsidy of up to 75% of eligible employees’ remuneration, subject to certain criteria. The Company recognized $6.2 million for payroll subsidies under CEWS and $0.6 million for payroll subsidies under the CARES Act during the nine months ended December 26, 2020. No payroll subsidy was recognized under CEWS or Cares Act during the three months ended December 26, 2020. The Company also recognized $0.2 million and $0.8 million during the three and nine months ended December 26, 2020 for wage subsidies under the CARES Act and other state level programs in the United States. In addition, the CARES Act allowsallowed for deferring payment of certain payroll taxes. Through December 26, 2020 the Company has deferred $11.6$11.8 million of payroll taxes that will. The Company repaid $5.9 million in the current quarter, with the remaining amount expected to be paid beginning in December 2021.2022.
16
UNAUDITED INCOME STATEMENTS FOR THE THIRD QUARTER OF FISCAL 20212022 VS. 20202021
|
| Three Months Ended |
|
| Three months ended |
| ||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| January 1, |
|
| December 26, |
| ||||
|
|
|
|
|
|
| ||||||||||
Results of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 377,581 |
|
| $ | 342,239 |
|
| $ | 534,690 |
| $ | 377,581 |
| |
Cost of sales |
|
| 305,797 |
|
|
| 273,338 |
|
|
| 377,451 |
|
|
| 305,797 |
|
Gross profit |
|
| 71,784 |
|
|
| 68,901 |
|
| 157,239 |
|
|
| 71,784 |
| |
Selling, general, and administrative expenses |
|
| 44,286 |
|
|
| 45,237 |
|
|
| 65,825 |
|
|
| 44,286 |
|
Operating income |
|
| 27,498 |
|
|
| 23,664 |
|
| 91,414 |
|
|
| 27,498 |
| |
Interest expense, net |
|
| 795 |
|
|
| 328 |
|
| 508 |
|
|
| 795 |
| |
Other income |
|
| (180 | ) |
|
| — |
| ||||||||
Other income (expense) |
|
| 7 |
|
|
| (180 | ) | ||||||||
Income before income taxes |
|
| 26,883 |
|
|
| 23,336 |
|
| 90,899 |
|
|
| 26,883 |
| |
Income tax expense |
|
| 5,284 |
|
|
| 6,299 |
|
|
| 23,277 |
|
|
| 5,284 |
|
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 67,622 |
|
| $ | 21,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 67,622 |
|
| $ | 21,599 |
|
Income tax expense |
|
| 5,284 |
|
|
| 6,299 |
|
|
| 23,277 |
|
|
| 5,284 |
|
Interest expense, net |
|
| 795 |
|
|
| 328 |
|
|
| 508 |
|
|
| 795 |
|
Depreciation and amortization |
|
| 4,386 |
|
|
| 4,516 |
|
|
| 5,250 |
|
|
| 4,386 |
|
Equity-based compensation (for awards granted prior to December 31, 2018) |
|
| — |
|
|
| 965 |
| ||||||||
Acquisition integration costs |
|
| — |
|
|
| 560 |
| ||||||||
Other |
|
| — |
|
|
| 40 |
| ||||||||
Adjusted EBITDA |
| $ | 32,064 |
|
| $ | 29,745 |
|
| $ | 96,657 |
|
| $ | 32,064 |
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Gross profit |
|
| 19.0 | % |
|
| 20.1 | % |
| 29.4 | % |
|
| 19.0 | % | |
Selling, general, and administrative expenses |
|
| 11.7 | % |
|
| 13.2 | % |
| 12.3 | % |
|
| 11.7 | % | |
Operating income |
|
| 7.3 | % |
|
| 6.9 | % |
| 17.1 | % |
|
| 7.3 | % | |
Net income |
|
| 5.7 | % |
|
| 5.0 | % |
| 12.6 | % |
|
| 5.7 | % | |
Adjusted EBITDA |
|
| 8.5 | % |
|
| 8.7 | % |
| 18.1 | % |
|
| 8.5 | % |
NET SALES
The following table summarizes net sales for the three months ended January 1, 2022 and December 26, 2020 and December 28, 2019:2020:
|
| Three months ended |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||
Net sales |
| $ | 534,690 |
|
| $ | 377,581 |
|
| $ | 157,109 |
|
|
| 41.6 | % |
U.S. manufacturing and retail net sales |
| $ | 484,319 |
|
| $ | 336,358 |
|
| $ | 147,961 |
|
|
| 44.0 | % |
U.S. homes sold |
|
| 5,832 |
|
|
| 5,343 |
|
|
| 489 |
|
|
| 9.2 | % |
U.S. manufacturing and retail average home selling price |
| $ | 83.0 |
|
| $ | 63.0 |
|
| $ | 20.0 |
|
|
| 31.7 | % |
Canadian manufacturing net sales |
| $ | 36,910 |
|
| $ | 26,351 |
|
| $ | 10,559 |
|
|
| 40.1 | % |
Canadian homes sold |
|
| 336 |
|
|
| 318 |
|
|
| 18 |
|
|
| 5.7 | % |
Canadian manufacturing average home selling price |
| $ | 109.9 |
|
| $ | 82.9 |
|
| $ | 27.0 |
|
|
| 32.6 | % |
Corporate/Other net sales |
| $ | 13,461 |
|
| $ | 14,872 |
|
| $ | (1,411 | ) |
|
| (9.5 | %) |
U.S. manufacturing facilities in operation at end of period |
|
| 35 |
|
|
| 33 |
|
|
|
|
|
|
| ||
U.S. retail sales centers in operation at end of period |
|
| 18 |
|
|
| 18 |
|
|
|
|
|
|
| ||
Canadian manufacturing facilities in operation at end of period |
|
| 5 |
|
|
| 5 |
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
| ||||
Net sales |
| $ | 377,581 |
|
| $ | 342,239 |
|
| $ | 35,342 |
|
|
| 10.3 | % |
U.S. manufacturing and retail net sales |
| $ | 336,358 |
|
| $ | 304,818 |
|
| $ | 31,540 |
|
|
| 10.3 | % |
U.S. homes sold |
|
| 5,343 |
|
|
| 5,033 |
|
|
| 310 |
|
|
| 6.2 | % |
U.S. manufacturing and retail average home selling price |
| $ | 63.0 |
|
| $ | 60.6 |
|
| $ | 2.4 |
|
|
| 4.0 | % |
Canadian manufacturing net sales |
| $ | 26,351 |
|
| $ | 22,809 |
|
| $ | 3,542 |
|
|
| 15.5 | % |
Canadian homes sold |
|
| 318 |
|
|
| 276 |
|
|
| 42 |
|
|
| 15.2 | % |
Canadian manufacturing average home selling price |
| $ | 82.9 |
|
| $ | 82.6 |
|
| $ | 0.3 |
|
|
| 0.4 | % |
Corporate/Other net sales |
| $ | 14,872 |
|
| $ | 14,612 |
|
| $ | 260 |
|
|
| 1.8 | % |
U.S. manufacturing facilities in operation at end of period* |
|
| 33 |
|
|
| 33 |
|
|
|
|
|
|
|
|
|
U.S. retail sales centers in operation at end of period |
|
| 18 |
|
|
| 21 |
|
|
|
|
|
|
|
|
|
Canadian manufacturing facilities in operation at end of period |
|
| 5 |
|
|
| 5 |
|
|
|
|
|
|
|
|
|
*One of the Company’s manufacturing facilities is temporarily idled as of December 26, 2020, but still considered operational.
Net sales for the three months ended December 26, 2020January 1, 2022 were $377.6$534.7 million, an increase of $35.3$157.1 million, or 10.3%41.6%, over the three months ended December 28, 2019.26, 2020. The following is a summary of the change by operating segment.
17
U.S. Factory-built Housing:
Net sales for the Company’s U.S. manufacturing and retail operations increased by $31.5$148.0 million, or 10.3%.44.0%, for the three months ended January 1, 2022 compared to the three months ended December 26, 2020. The increasechange was primarily due to an increase in the number of homes sold during the period of 6.2% and9.2%, an increase in the average home selling price of 4.0%. The31.7%, and the impact of the acquisition of ScotBilt. Demand for our products has increased significantly in recent periods and we have been able to increase production in the number of homes sold is dueresponse to strong demand which has resulted in increased production levels at many of Company’s manufacturing locations.that demand. The average selling price increased during the period due to pricing actions enacted in response to rising material, freight, and labor costs partially offset byas well as a shift in product mix. Product mix fluctuations result from consumer preferences regardingto larger homes with more features and amenities. Generally, we are able to pass the sizes and styles of homes selected for purchase, options and upgrade packages, as well as regional housing dynamics.increase in input costs along to our customers.
Canadian Factory-built Housing:
The Canadian Factory-built Housing segment net sales increased by $3.5$10.6 million, or 15.5%40.1% for the three months ended December 26, 2020January 1, 2022 compared to the same period in the prior fiscal year, primarily due to a 15.2%5.7% increase in the number of homes sold and ana 32.6% increase of 0.4% in the average home selling price. The increase in the number ofvolume was due to an increase in homes sold isdriven by strong demand. The increase in average selling price was due to stronger demand comparedpricing actions enacted in response to the same period last year which has resulted in increased production levels at the Company’s Canadian manufacturing locations.rising material and labor costs. On a constant currency basis, net sales for the Canadian segment were unfavorablyalso favorably impacted by approximately $0.1$1.8 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the third quarter of fiscal 2021three months ended January 1, 2022 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 December 26, 2020,January 1, 2022, net sales increased $0.3decreased $1.4 million, or 1.8%. The increase was9.5%, primarily attributable to higher net sales inlower revenue from the Company’s transportation business from increased manufactured home and RV shipments.shipment of recreational vehicles.
GROSS PROFIT
The following table summarizes gross profit for the three months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Three months ended |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Factory-built Housing |
| $ | 143,333 |
|
| $ | 62,943 |
|
| $ | 80,390 |
|
|
| 127.7 | % |
Canadian Factory-built Housing |
|
| 10,251 |
|
|
| 5,372 |
|
|
| 4,879 |
|
|
| 90.8 | % |
Corporate/Other |
|
| 3,655 |
|
|
| 3,469 |
|
|
| 186 |
|
|
| 5.4 | % |
Total gross profit |
| $ | 157,239 |
|
| $ | 71,784 |
|
| $ | 85,455 |
|
|
| 119.0 | % |
Gross profit as a percent of net sales |
|
| 29.4 | % |
|
| 19.0 | % |
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
| ||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing |
| $ | 62,943 |
|
| $ | 61,200 |
|
| $ | 1,743 |
|
|
| 2.8 | % |
Canadian Factory-built Housing |
|
| 5,372 |
|
|
| 4,512 |
|
|
| 860 |
|
|
| 19.1 | % |
Corporate/Other |
|
| 3,469 |
|
|
| 3,189 |
|
|
| 280 |
|
|
| 8.8 | % |
Total gross profit |
| $ | 71,784 |
|
| $ | 68,901 |
|
| $ | 2,883 |
|
|
| 4.2 | % |
Gross profit as a percent of net sales |
|
| 19.0 | % |
|
| 20.1 | % |
|
|
|
|
|
|
|
|
Gross profit as a percent of sales during the three months ended December 26, 2020January 1, 2022 was 19.0%29.4% compared to 20.1%19.0% during the three months ended December 28, 2019.26, 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 $1.7$80.4 million, or 2.8%127.7%, during the three months ended December 26, 2020January 1, 2022 compared to the same period in the prior fiscal year. Gross profit was 29.6% as a percent of segment net sales for the three months ended January 1, 2022, compared to 18.7% in the same period of the prior fiscal year. Margin improvement was driven primarily by price increases in response to rising input costs and the timing of certain price adjustments for raw materials under our buying programs. We have also focused on product simplification and material SKU rationalization to improve operational efficiencies to better leverage increased production and manufacturing fixed costs.
Canadian Factory-built Housing:
Gross profit for the Canadian Factory-built Housing segment increased by $4.9 million, or 90.8%, during the three months ended January 1, 2022, compared to the same period in the prior fiscal year, primarily due to increased sales volume. Gross profit as a percent of segment net sales was 18.7%27.8% for the three months ended December 26, 2020January 1, 2022, compared to 20.1%20.4% in the same period of the prior year primarily duefiscal year. Margin improvement was driven by price increases in response to increasedrising material and labor costs, caused by market volatility in certain commodities including forest products, partially offset byas well as direct labor and manufacturing efficiencies, and increased leverage of manufacturing fixed costs caused by higher sales volumes.costs.
Canadian Factory-built Housing:
Gross profit for the Canadian Factory-built Housing segment increased by $0.9 million, or 19.1% during the three months ended December 26, 2020 compared to the same period in the prior year. Gross profit as a percent of net sales was 20.4% for the three months ended December 26, 2020, compared to 19.8% in the same period of the prior year. The increase is primarily due to higher sales volume, as well as pricing actions taken to offset material cost inflation.18
Corporate/Other:
Gross profit for the Corporate/Other segment increased $0.3$0.2 million, or 8.8%5.4%, during the three months ended December 26, 2020January 1, 2022, compared to the same period of the prior fiscal year, primarily due toas a result of changes in revenue mix.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
Selling, general, and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Factory-built Housing |
| $ | 31,324 |
|
| $ | 32,039 |
|
| $ | (715 | ) |
|
| (2.2 | %) |
| $ | 49,208 |
| $ | 31,324 |
|
| $ | 17,884 |
|
|
| 57.1 | % | |
Canadian Factory-built Housing |
|
| 2,682 |
|
|
| 2,980 |
|
|
| (298 | ) |
|
| (10.0 | %) |
| 2,958 |
| 2,682 |
|
|
| 276 |
|
|
| 10.3 | % | |||
Corporate/Other |
|
| 10,280 |
|
|
| 10,218 |
|
|
| 62 |
|
|
| 0.6 | % |
|
| 13,659 |
|
|
| 10,280 |
|
|
| 3,379 |
|
|
| 32.9 | % |
Total selling, general, and administrative expenses |
| $ | 44,286 |
|
| $ | 45,237 |
|
| $ | (951 | ) |
|
| (2.1 | %) |
| $ | 65,825 |
|
| $ | 44,286 |
|
| $ | 21,539 |
|
|
| 48.6 | % |
Selling, general, and administrative expense as a percent of net sales |
|
| 11.7 | % |
|
| 13.2 | % |
|
|
|
|
|
|
|
|
| 12.3 | % |
|
| 11.7 | % |
|
|
|
|
|
Selling, general, and administrative expenses were $44.3$65.8 million for the three months ended December 26, 2020, a decreaseJanuary 1, 2022, an increase of $1.0$21.5 million, or 48.6%, 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 decreased $0.7increased $17.9 million, or 2.2%57.1%, during the three months ended December 26, 2020January 1, 2022, as compared to the same period in the prior fiscal year. AsSelling, general, and administrative expenses as a percent of segment net sales selling, general, and administrative expenses decreasedincreased to 9.3%10.2% for the three months ended December 26, 2020January 1, 2022, compared to 10.5%9.3% during the comparable period of the prior fiscal year. The decreaseincrease in expenses resulted from a reduction in costs for travel and marketing-related expenses partially offset by increasedthe following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability.profitability; (ii) higher wage expense from increased headcount as we staffed to respond 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 decreasedincreased $0.3 million, or 10.0%10.3%, million for the three months ended December 26, 2020January 1, 2022 when compared to the same period of the prior fiscal year. AsSelling, general, and administrative expenses as a percent of segment net sales selling, general, and administrative expenses for the Canadian segment was 10.2% and 13.1%decreased to 8.0% for the three months ended December 26, 2020 and December 28, 2019, respectively.January 1, 2022, compared to 10.2% during the comparable period of the prior fiscal year. The decrease as a percentage of net sales washigher expenses are a result of increased leveragean increase in incentive compensation which is generally based on a measure of fixed costs due to increased sales volumes.profitability.
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 $0.1
$3.4 million, or 0.6%32.9%, during the three months ended December 26, 2020 asJanuary 1, 2022, compared to the same period of the prior year. Increases in professional fees and other administrative costs were mostly offset by a reductionfiscal year, due to an increase in equity compensation, expenseas well as $2.2 million of costs related to investments made to enhance our customer buying experience and integration costs from the 2018 combination of Skyline Corporation and the operating assets of Champion Enterprises Holding, LLC (the “2018 Combination”).supporting systems.
19
INTEREST EXPENSE, NET
The following table summarizes the components of interest expense, net for the three months ended January 1, 2022 and December 26, 2020 and December 28, 2019:2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
Interest expense |
| $ | 946 |
|
| $ | 1,111 |
|
| $ | (165 | ) |
|
| (14.9 | %) |
| $ | 701 |
| $ | 946 |
|
| $ | (245 | ) |
|
| (25.9 | %) | |
Less: Interest income |
|
| 151 |
|
|
| 783 |
|
|
| (632 | ) |
|
| (80.7 | %) |
|
| (193 | ) |
|
| (151 | ) |
|
| (42 | ) |
|
| 27.8 | % |
Interest expense, net |
| $ | 795 |
|
| $ | 328 |
|
| $ | 467 |
|
|
| 142.4 | % |
| $ | 508 |
|
| $ | 795 |
|
| $ | (287 | ) |
|
| (36.1 | %) |
Average outstanding floor plan payable |
| $ | 24,304 |
|
| $ | 32,178 |
|
|
|
|
|
|
|
|
|
| $ | 32,942 |
| $ | 24,304 |
|
|
|
|
|
| ||||
Average outstanding long-term debt |
| $ | 64,663 |
|
| $ | 42,663 |
|
|
|
|
|
|
|
|
|
| $ | 12,430 |
| $ | 64,663 |
|
|
|
|
|
|
Interest expense, net was $0.8$0.5 million for the three months ended December 26, 2020, an increaseJanuary 1, 2022, a decrease of $0.5$0.3 million compared to the same period of the prior fiscal year. The net increasedecrease in expense was primarily due to a reductionlower average outstanding borrowings on long-term debt, offset in interest income earnedpart by higher average borrowings on floor plan payables. The Company repaid the Company’s cash balances invested in short-term facilities and reduced interest expenseoutstanding balance on its revolving credit facility during the Company’s borrowings, both due to a reduction in interest rates.second quarter of fiscal 2022.
OTHER INCOME
The following table summarizes other income for the three months ended December 26, 2020 and December 28, 2019:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
| ||||
Other income |
| $ | (180 | ) |
| $ | — |
|
| $ | (180 | ) |
|
| 100.0 | % |
Other income for the three months ended December 26, 2020 related to payroll tax subsidies provided by certain U.S. government sponsored financial assistance programs enacted in response to the pandemic.
INCOME TAX EXPENSE
The following table summarizes income tax expense for the three months ended January 1, 2022 and December 26, 2020 and December 28, 2019:2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense |
| $ | 5,284 |
|
| $ | 6,299 |
|
| $ | (1,015 | ) |
|
| (16.1 | %) |
| $ | 23,277 |
| $ | 5,284 |
|
| $ | 17,993 |
|
|
| 340.5 | % | |
Effective tax rate |
|
| 19.7 | % |
|
| 27.0 | % |
|
|
|
|
|
|
|
|
| 25.6 | % |
|
| 19.7 | % |
|
|
|
|
|
Income tax expense for the three months ended December 26, 2020January 1, 2022 was $23.3 million, representing an effective tax rate of 25.6%, compared to income tax expense of $5.3 million, representing an effective tax rate of 19.7%, compared to income tax expense of $6.3 million, representing an effective tax rate of 27.0%, for the three months ended December 28, 2019. During the third quarter of fiscal 2021, the Company completed a U.S. R&D tax credit study for the years 2018 and 2019 that resulted in recognition of a tax benefit of $1.7 million. 26, 2020. The change in the effective tax rate for the three months ended December 26, 2020January 1, 2022 compared with the same period of the prior year, was primarily due to an increase inthe recognition of a tax credits, certainbenefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax law changes and results in foreign jurisdictions.credit study.
The Company’s effective tax rate for both the three months ended December 26, 2020 and December 28, 2019January 1, 2022 differs from the federal statutory income tax rate of 21.0%, due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the three months ended December 26, 2020 differed from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.
ADJUSTED EBITDA
The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended January 1, 2022 and December 26, 2020 and December 28, 2019:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
| ||||
Net income |
| $ | 21,599 |
|
| $ | 17,037 |
|
| $ | 4,562 |
|
|
| 26.8 | % |
Income tax expense |
|
| 5,284 |
|
|
| 6,299 |
|
|
| (1,015 | ) |
|
| (16.1 | %) |
Interest expense, net |
|
| 795 |
|
|
| 328 |
|
|
| 467 |
|
| * |
| |
Depreciation and amortization |
|
| 4,386 |
|
|
| 4,516 |
|
|
| (130 | ) |
|
| (2.9 | %) |
Equity-based compensation (for awards granted prior to December 31, 2018) |
|
| — |
|
|
| 965 |
|
|
| (965 | ) |
| * |
| |
Acquisition integration costs |
|
| — |
|
|
| 560 |
|
|
| (560 | ) |
| * |
| |
Other |
|
| — |
|
|
| 40 |
|
|
| (40 | ) |
| * |
| |
Adjusted EBITDA |
| $ | 32,064 |
|
| $ | 29,745 |
|
| $ | 2,319 |
|
|
| 7.8 | % |
* indicates that the calculated percentage is not meaningful2020:
|
| Three months ended | �� |
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||
Net income |
| $ | 67,622 |
|
| $ | 21,599 |
|
| $ | 46,023 |
|
|
| 213.1 | % |
Income tax expense |
|
| 23,277 |
|
|
| 5,284 |
|
|
| 17,993 |
|
|
| 340.5 | % |
Interest expense, net |
|
| 508 |
|
|
| 795 |
|
|
| (287 | ) |
|
| (36.1 | %) |
Depreciation and amortization |
|
| 5,250 |
|
|
| 4,386 |
|
|
| 864 |
|
|
| 19.7 | % |
Adjusted EBITDA |
| $ | 96,657 |
|
| $ | 32,064 |
|
| $ | 64,593 |
|
|
| 201.5 | % |
Adjusted EBITDA for the three months ended December 26, 2020January 1, 2022 was $32.1$96.7 million, an increase of $2.3$64.6 million from the same period of the prior fiscal year. The increase is primarily a result of higher operating income after adjusting for the effect of integration costs and equity-based compensation incurred in the prior year. The increase in operating income is primarily due to increasedincreases in net sales volume. See the definition of Adjusted EBITDA below for additional information regarding the definitionvolume and use of this metric.gross margins, partially offset by higher SG&A expenses.
20
UNAUDITED INCOME STATEMENTS FOR THE FIRST NINE MONTHS OF FISCAL 20212022 VS. 20202021
|
| Nine Months Ended |
|
| Nine months ended |
| ||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| January 1, |
|
| December 26, |
| ||||
|
|
|
|
|
|
| ||||||||||
Results of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 973,232 |
|
| $ | 1,068,585 |
|
| $ | 1,569,112 |
| $ | 973,232 |
| |
Cost of sales |
|
| 784,652 |
|
|
| 849,594 |
|
|
| 1,171,016 |
|
|
| 784,652 |
|
Gross profit |
|
| 188,580 |
|
|
| 218,991 |
|
| 398,096 |
|
|
| 188,580 |
| |
Selling, general, and administrative expenses |
|
| 126,466 |
|
|
| 145,354 |
|
|
| 181,188 |
|
|
| 126,466 |
|
Operating income |
|
| 62,114 |
|
|
| 73,637 |
|
| 216,908 |
|
|
| 62,114 |
| |
Interest expense, net |
|
| 2,601 |
|
|
| 1,019 |
|
| 2,002 |
|
|
| 2,601 |
| |
Other income |
|
| (6,993 | ) |
|
| — |
|
|
| (36 | ) |
|
| (6,993 | ) |
Income before income taxes |
|
| 66,506 |
|
|
| 72,618 |
|
| 214,942 |
|
|
| 66,506 |
| |
Income tax expense |
|
| 15,493 |
|
|
| 20,456 |
|
|
| 53,696 |
|
|
| 15,493 |
|
Net income |
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | 161,246 |
|
| $ | 51,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income |
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | 161,246 |
|
| $ | 51,013 |
|
Income tax expense |
|
| 15,493 |
|
|
| 20,456 |
|
|
| 53,696 |
|
|
| 15,493 |
|
Interest expense, net |
|
| 2,601 |
|
|
| 1,019 |
|
|
| 2,002 |
|
|
| 2,601 |
|
Depreciation and amortization |
|
| 13,076 |
|
|
| 13,895 |
|
|
| 15,533 |
|
|
| 13,076 |
|
Equity-based compensation (for awards granted prior to December 31, 2018) |
|
| 1,358 |
|
|
| 3,606 |
|
|
| — |
|
|
| 1,358 |
|
Acquisition integration costs |
|
| — |
|
|
| 1,938 |
| ||||||||
Fair market value adjustment for asset classified as held for sale |
|
| — |
|
|
| 986 |
| ||||||||
Other |
|
| — |
|
|
| 250 |
| ||||||||
Adjusted EBITDA |
| $ | 83,541 |
|
| $ | 94,312 |
|
| $ | 232,477 |
|
| $ | 83,541 |
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Gross profit |
|
| 19.4 | % |
|
| 20.5 | % |
| 25.4 | % |
|
| 19.4 | % | |
Selling, general, and administrative expenses |
|
| 13.0 | % |
|
| 13.6 | % |
| 11.5 | % |
|
| 13.0 | % | |
Operating income |
|
| 6.4 | % |
|
| 6.9 | % |
| 13.8 | % |
|
| 6.4 | % | |
Net income |
|
| 5.2 | % |
|
| 4.9 | % |
| 10.3 | % |
|
| 5.2 | % | |
Adjusted EBITDA |
|
| 8.6 | % |
|
| 8.8 | % |
| 14.8 | % |
|
| 8.6 | % |
NET SALES
The following table summarizes net sales for the nine months ended January 1, 2022 and December 26, 2020 and December 28, 2019:2020:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net sales |
| $ | 973,232 |
|
| $ | 1,068,585 |
|
| $ | (95,353 | ) |
|
| (8.9 | %) |
| $ | 1,569,112 |
| $ | 973,232 |
|
| $ | 595,880 |
|
|
| 61.2 | % | |
U.S. manufacturing and retail net sales |
| $ | 868,577 |
|
| $ | 949,253 |
|
| $ | (80,676 | ) |
|
| (8.5 | %) |
| $ | 1,413,338 |
| $ | 868,577 |
|
| $ | 544,761 |
|
|
| 62.7 | % | |
U.S. homes sold |
|
| 14,060 |
|
|
| 15,507 |
|
|
| (1,447 | ) |
|
| (9.3 | %) |
| 18,106 |
|
|
| 14,060 |
|
|
| 4,046 |
|
|
| 28.8 | % | |
U.S. manufacturing and retail average home selling price |
| $ | 61.8 |
|
| $ | 61.2 |
|
| $ | 0.6 |
|
|
| 1.0 | % |
| $ | 78.1 |
| $ | 61.8 |
|
| $ | 16.3 |
|
|
| 26.4 | % | |
Canadian manufacturing net sales |
| $ | 66,104 |
|
| $ | 72,916 |
|
| $ | (6,812 | ) |
|
| (9.3 | %) |
| $ | 113,242 |
| $ | 66,104 |
|
| $ | 47,138 |
|
|
| 71.3 | % | |
Canadian homes sold |
|
| 812 |
|
|
| 872 |
|
|
| (60 | ) |
|
| (6.9 | %) |
| 1,079 |
|
|
| 812 |
|
|
| 267 |
|
|
| 32.9 | % | |
Canadian manufacturing average home selling price |
| $ | 81.4 |
|
| $ | 83.6 |
|
| $ | (2.2 | ) |
|
| (2.6 | %) |
| $ | 105.0 |
| $ | 81.4 |
|
| $ | 23.6 |
|
|
| 29.0 | % | |
Corporate/Other net sales |
| $ | 38,551 |
|
| $ | 46,416 |
|
| $ | (7,865 | ) |
|
| (16.9 | %) |
| $ | 42,532 |
| $ | 38,551 |
|
| $ | 3,981 |
|
|
| 10.3 | % | |
U.S. manufacturing facilities in operation at end of period* |
|
| 33 |
|
|
| 33 |
|
|
|
|
|
|
|
|
| ||||||||||||||||
U.S. manufacturing facilities in operation at end of period |
| 35 |
|
|
| 33 |
|
|
|
|
|
| ||||||||||||||||||||
U.S. retail sales centers in operation at end of period |
|
| 18 |
|
|
| 21 |
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 18 |
|
|
|
|
|
| ||||
Canadian manufacturing facilities in operation at end of period |
|
| 5 |
|
|
| 5 |
|
|
|
|
|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
|
|
|
|
*One of the Company’s manufacturing facilities is temporarily idled as of December 26, 2020, but still considered operational.
Net sales for the nine months ended December 26, 2020January 1, 2022 were $973.2$1,569.1 million, a decreasean increase of $95.4$595.9 million, or 8.9%61.2%, over the nine months ended December 28, 2019.26, 2020. The following is a summary of the change by operating segment.
21
U.S. Factory-built Housing:
Net sales for the Company’s U.S. manufacturing and retail operations decreasedincreased by $80.7$544.8 million, or 8.5%.62.7%, for the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020. The decreaseincrease was primarily due to a decreasean increase in the number of homes sold during the nine months ended December 26, 2020period of 9.3%, partially offset by4,046 and an increase in the average home selling price of 1.0%26.4%. U.S. housing sales volumes were severely impacted by COVID-19-related factorsThe increase in the first few monthsnumber of homes sold was a result of increased production levels at many of the fiscal year. Production facilities operated at reduced levelsCompany’s manufacturing locations in response to strong demand for our products, as compared towell as the addition of production volume through the acquisition of ScotBilt. The average selling price increased over the prior year due to employee hiring constraints, social-distancing protocolspricing actions enacted in response to rising material and labor costs. Generally, we are able to pass increases in some areas, reduced demand. Productioninput costs along to our customers. The improvement this year is also a result of a negative impact to sales in the prior fiscal year caused by COVID-19 related plant shutdowns and demand levels began to return to morehigher than normal pre-COVID-19 levels during the second quarter and production levels have continued to increase during the third quarter. The average home selling price increased due to a shift in product mix versus the same period last year.absenteeism.
Canadian Factory-built Housing:
The Canadian Factory-built Housing segment net sales decreasedincreased by $6.8$47.1 million, or 9.3%71.3%, for the nine months ended December 26, 2020January 1, 2022 compared to the same period in the prior fiscal year, primarily due to a 6.9% decreasean increase in the number of homes sold coupled withof 267 and a 2.6% decrease29.0% increase in average home selling price. The decreaseincrease in volume was due to reduced demand andan increase in production primarily from oil-related demand drivers and the impacts of COVID-19 for first few months of the fiscal year. Production and demand levels beganrates in response to return to more normal pre-COVID-19 levels during the second quarter and production levels have continued tostrong housing demand. The increase during the third quarter. The decrease in average selling price iswas due to a shiftpricing actions enacted in product mix. Onresponse to rising material and labor costs. In addition, on a constant currency basis, net sales for the Canadian segment were unfavorablyfavorably impacted by approximately $0.9$8.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first nine months of fiscal 20212022 as compared to the same period of the prior fiscal year. Net sales during the nine months ended December 26, 2020 were negatively impacted by COVID-19 related plant shutdowns and higher than normal absenteeism.
Corporate/Other:
Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the nine months ended December 26, 2020,January 1, 2022, net sales decreased $7.9increased $4.0 million, or 16.9%. The decrease was10.3%, primarily attributable to lower net sales as a result of lower shipments caused by COVID-19-related manufacturing shutdownsan increase in both the RV and manufactured housing industries experienced mainly in the U.S. Midwest and Northeast regions in the first few months of the fiscal year. As production in the RV and manufactured housing industries started to normalize to pre-COVID-19 levels, shipments of these products also started to increase during the secondmanufactured homes and third quarters of fiscal 2021.recreational vehicles.
GROSS PROFIT
The following table summarizes gross profit for the nine months ended January 1, 2022 and December 26, 2020 and December 28, 2019:2020:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Factory-built Housing |
| $ | 165,899 |
|
| $ | 194,876 |
|
| $ | (28,977 | ) |
|
| (14.9 | %) |
| $ | 359,148 |
| $ | 165,899 |
|
| $ | 193,249 |
|
|
| 116.5 | % | |
Canadian Factory-built Housing |
|
| 12,941 |
|
|
| 15,091 |
|
|
| (2,150 | ) |
|
| (14.2 | %) |
| 27,444 |
| 12,941 |
|
|
| 14,503 |
|
|
| 112.1 | % | |||
Corporate/Other |
|
| 9,740 |
|
|
| 9,024 |
|
|
| 716 |
|
|
| 7.9 | % |
|
| 11,504 |
|
|
| 9,740 |
|
|
| 1,764 |
|
|
| 18.1 | % |
Total gross profit |
| $ | 188,580 |
|
| $ | 218,991 |
|
| $ | (30,411 | ) |
|
| (13.9 | %) |
| $ | 398,096 |
|
| $ | 188,580 |
|
| $ | 209,516 |
|
|
| 111.1 | % |
Gross profit as a percent of net sales |
|
| 19.4 | % |
|
| 20.5 | % |
|
|
|
|
|
|
|
|
| 25.4 | % |
|
| 19.4 | % |
|
|
|
|
|
Gross profit as a percent of sales during the nine months ended December 26, 2020January 1, 2022 was 19.4%25.4% compared to 20.5%19.4% during the nine months ended December 28, 2019.26, 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 decreasedincreased by $29.0$193.2 million, or 14.9%116.5%, during the nine months ended December 26, 2020January 1, 2022 compared to the same period in the prior fiscal year. Gross profit was 19.1%25.4% as a percent of segment net sales for the nine months ended December 26, 2020January 1, 2022 compared to 20.5%19.1% in the same period of the prior fiscal year. The decreaseincrease in gross profit is due to operational efficiencies and increased material costs from market volatility in certain commodities, primarily forest products, reduced leverage of manufacturing fixed costs causedresulting from higher production volumes and higher average selling prices during fiscal 2022. Higher input costs for materials and labor have generally been offset to date by reduced sales volumes, as well asincreasing the supplemental COVID-19-related sick payprices of our products. The improvement is also a result of less COVID-19 related sick-pay and health benefits which were provided to employees totaling approximately $2.2 million.in the prior fiscal year.
Canadian Factory-built Housing:
Gross profit for the Canadian Factory-built Housing segment decreasedincreased by $2.2$14.5 million, or 14.2%112.1% during the nine months ended December 26, 2020January 1, 2022 compared to the same period in the prior fiscal year primarily due to lowerincreased sales volume.volumes and the price of our products. Gross profit as a percent of net sales
was 19.6%24.2% for the nine months ended December 26, 2020,January 1, 2022, compared to 20.7%19.6% in the same period of the prior year
22
fiscal year. The increase in gross profit as a percent of sales is primarily due to increasedoperational leverage from the increase in homes sold, partially offset by higher material costs from market volatility in certain commodities, primarily forest products, and reduced leverage of manufacturing fixed costs caused by reduced sales volumes.costs.
Corporate/Other:
Gross profit for the Corporate/Other segment increased $0.7$1.8 million, or 7.9%18.1%, during the nine months ended December 26, 2020January 1, 2022 compared to the same period of the prior fiscal year, primarily due to increased net sales inand the product mix within the Company’s transportation operations. Gross profit improved as a percent of segment net sales to 25.3% from 19.4% as a result of changes in revenue mix and expansion of storage offerings.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the nine months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Selling, general, and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Factory-built Housing |
| $ | 89,301 |
|
| $ | 102,686 |
|
| $ | (13,385 | ) |
|
| (13.0 | %) |
| $ | 132,977 |
| $ | 89,301 |
|
| $ | 43,676 |
|
|
| 48.9 | % | |
Canadian Factory-built Housing |
|
| 5,971 |
|
|
| 6,749 |
|
|
| (778 | ) |
|
| (11.5 | %) |
| 8,654 |
| 5,971 |
|
|
| 2,683 |
|
|
| 44.9 | % | |||
Corporate/Other |
|
| 31,194 |
|
|
| 35,919 |
|
|
| (4,725 | ) |
|
| (13.2 | %) |
|
| 39,557 |
|
|
| 31,194 |
|
|
| 8,363 |
|
|
| 26.8 | % |
Total selling, general, and administrative expenses |
| $ | 126,466 |
|
| $ | 145,354 |
|
| $ | (18,888 | ) |
|
| (13.0 | %) |
| $ | 181,188 |
|
| $ | 126,466 |
|
| $ | 54,722 |
|
|
| 43.3 | % |
Selling, general, and administrative expense as a percent of net sales |
|
| 13.0 | % |
|
| 13.6 | % |
|
|
|
|
|
|
|
|
| 11.5 | % |
|
| 13.0 | % |
|
|
|
|
|
Selling, general, and administrative expenses were $126.5$181.2 million for the nine months ended December 26, 2020, a decreaseJanuary 1, 2022, an increase of $18.9$54.7 million, or 43.3%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.
U.S. Factory-built Housing:
Selling, general, and administrative expenses for the U.S. Factory-built Housing segment decreased $13.4increased $43.7 million, or 13.0%48.9%, during the nine months ended December 26, 2020January 1, 2022 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales decreased to 10.3%9.4% for the nine months ended December 26, 2020January 1, 2022 compared to 10.8%10.3% during the comparable period of the prior fiscal year. The decreaseincrease in selling, general, and administrative expenses resulted from a combination of factors which include:the following factors: (i) a reduction in travel and trade show expenses; (ii) lowerhigher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; and (iii) lower(ii) higher wage expense from headcount reductionsincreases to support increased sales; (iii) an increase in travel expenses compared to the same period in the prior fiscal year; and furloughs in response to COVID-19.(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 decreased $0.8increased $2.7 million, or 11.5%44.9%, for the nine months ended December 26, 2020January 1, 2022 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 9.0%7.6% for the nine months ended December 26, 2020January 1, 2022 compared to 9.3%9.0% during the comparable period of the prior fiscal year. The decreaseincrease in selling, general, and administrative expenses resulted from a reductionan increase in travelcommissions and other administrative costs,incentive compensation as well as lower wage expense from additional headcount reductions and furloughsto support the increase in response to COVID-19.sales.
Corporate/Other:
Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other decreased $4.7increased $8.4 million, or 13.2%26.8%, during the nine months ended December 26, 2020January 1, 2022 as compared to the same period of the prior year. The decrease isfiscal year due to a reduction$4.2 million of costs related to investments made to enhance our customer buying experience and supporting systems and an increase in incentive, equity compensation costs, incentive and travel expenses as well as no longer incurring costs related to integration activitieswage expense from the 2018 Combination, and a fair value adjustment of an asset classified as held for sale recorded in the prior year.additional headcount.
23
INTEREST EXPENSE, NET
The following table summarizes the components of interest expense, net for the nine months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Interest expense |
| $ | 3,007 |
|
| $ | 3,577 |
|
| $ | (570 | ) |
|
| (15.9 | %) |
| $ | 2,502 |
| $ | 3,007 |
|
| $ | (505 | ) |
|
| (16.8 | %) | |
Less: Interest income |
|
| 406 |
|
|
| 2,558 |
|
|
| (2,152 | ) |
|
| (84.1 | %) |
|
| (500 | ) |
|
| (406 | ) |
|
| (94 | ) |
|
| 23.2 | % |
Interest expense, net |
| $ | 2,601 |
|
| $ | 1,019 |
|
| $ | 1,582 |
|
|
| 155.3 | % |
| $ | 2,002 |
|
| $ | 2,601 |
|
| $ | (599 | ) |
|
| (23.0 | %) |
Average outstanding floor plan payable |
| $ | 27,560 |
|
| $ | 31,880 |
|
|
|
|
|
|
|
|
|
| $ | 30,278 |
| $ | 27,560 |
|
|
|
|
|
| ||||
Average outstanding long-term debt |
| $ | 73,108 |
|
| $ | 47,663 |
|
|
|
|
|
|
|
|
|
| $ | 12,430 |
| $ | 73,108 |
|
|
|
|
|
|
Interest expense, net was $2.6$2.0 million for the nine months ended December 26, 2020, an increaseJanuary 1, 2022, a decrease of $1.6$0.6 million, or 23.0%, compared to the same period of the prior fiscal year. The net increasedecrease in expense was primarily due to lower average outstanding borrowings on long-term debt, offset in part by higher average revolver balances combined with a reductionborrowings on floor plan payables. The Company repaid the outstanding balance on its revolving credit facility during the second quarter of interest income earned on the Company’s cash balances invested in short-term facilities and reduced interest expense on the Company’s borrowings, both due to a reduction in interest rates.fiscal 2022.
OTHER INCOMEEXPENSE (INCOME)
The following table summarizes other income for the nine months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other income |
| $ | (6,993 | ) |
| $ | — |
|
| $ | (6,993 | ) |
|
| 100.0 | % |
| $ | (36 | ) |
| $ | (6,993 | ) |
| $ | 6,957 |
|
|
| (99.5 | %) |
Other income fordecreased $7.0 million, or 99.5%, during the nine months ended December 26, 2020 was $7.0 million which wasJanuary 1, 2022, compared to the same period of the prior fiscal year. The decrease is due to a result ofreduction in the wage subsidies provided by government sponsored financial assistance programs that were enacted in responsesresponse to the COVID-19 pandemic.pandemic during fiscal 2021. The programs included a Canadian wage subsidy benefit of $6.2 million and U.S. federal and state wage subsidy benefits of $0.8 million.million recognized in the nine months ended December 26, 2020 which did not recur in the current year.
INCOME TAX EXPENSE
The following table summarizes income tax expense for the nine months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense |
| $ | 15,493 |
|
| $ | 20,456 |
|
| $ | (4,963 | ) |
|
| (24.3 | %) |
| $ | 53,696 |
| $ | 15,493 |
|
| $ | 38,203 |
|
|
| 246.6 | % | |
Effective tax rate |
|
| 23.3 | % |
|
| 28.2 | % |
|
|
|
|
|
|
|
|
| 25.0 | % |
|
| 23.3 | % |
|
|
|
|
|
Income tax expense for the nine months ended December 26, 2020January 1, 2022 was $53.7 million, representing an effective tax rate of 25.0%, compared to income tax expense of $15.5 million, representing an effective tax rate of 23.3%, compared to income tax expense of $20.5 million, representing an effective tax rate of 28.2% for the nine months ended December 28, 2019. During the third quarter of fiscal 2021, the Company completed a U.S. R&D tax credit study for the years 2018 and 2019 that resulted in recognition of a tax benefit of $1.7 million. 26, 2020. The change in the effective tax rate for the nine months ended December 26, 2020January 1, 2022 compared with the same respective period of the prior year, was primarily due to an increase inthe recognition of a tax credits, certainbenefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax law changes and results in foreign jurisdictions.credit study.
The Company’s effective tax rate for the nine months ended December 26, 2020 and December 28, 2019January 1, 2022 differs from the federal statutory income tax rate of 21.0%, due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the nine months ended December 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.
24
ADJUSTED EBITDA
The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the nine months ended January 1, 2022 and December 26, 20202020: and December 28, 2019:
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
| Nine months ended |
|
|
|
|
|
| |||||||||||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
|
| $ Change |
|
| % Change |
|
| January 1, |
|
| December 26, |
|
| $ |
|
| % |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income |
| $ | 51,013 |
|
| $ | 52,162 |
|
| $ | (1,149 | ) |
|
| (2.2 | %) |
| $ | 161,246 |
|
| $ | 51,013 |
|
| $ | 110,233 |
|
|
| 216.1 | % |
Income tax expense |
|
| 15,493 |
|
|
| 20,456 |
|
|
| (4,963 | ) |
|
| (24.3 | %) |
|
| 53,696 |
|
|
| 15,493 |
|
|
| 38,203 |
|
|
| 246.6 | % |
Interest expense, net |
|
| 2,601 |
|
|
| 1,019 |
|
|
| 1,582 |
|
| * |
|
|
| 2,002 |
|
|
| 2,601 |
|
|
| (599 | ) |
|
| (23.0 | %) | |
Depreciation and amortization |
|
| 13,076 |
|
|
| 13,895 |
|
|
| (819 | ) |
|
| (5.9 | %) |
|
| 15,533 |
|
|
| 13,076 |
|
|
| 2,457 |
|
|
| 18.8 | % |
Equity-based compensation (for awards granted prior to December 31, 2018) |
|
| 1,358 |
|
|
| 3,606 |
|
|
| (2,248 | ) |
|
| (62.3 | %) |
|
| — |
|
|
| 1,358 |
|
|
| (1,358 | ) |
|
| (100.0 | %) |
Acquisition integration costs |
|
| — |
|
|
| 1,938 |
|
|
| (1,938 | ) |
| * |
| |||||||||||||||||
Fair market value adjustment for asset classified as held for sale |
|
| — |
|
|
| 986 |
|
|
| (986 | ) |
| * |
| |||||||||||||||||
Other |
|
| — |
|
|
| 250 |
|
|
| (250 | ) |
| * |
| |||||||||||||||||
Adjusted EBITDA |
| $ | 83,541 |
|
| $ | 94,312 |
|
| $ | (10,771 | ) |
|
| (11.4 | %) |
| $ | 232,477 |
|
| $ | 83,541 |
|
| $ | 148,936 |
|
|
| 178.3 | % |
* indicates that the calculated percentage is not meaningful
Adjusted EBITDA for the nine months ended December 26, 2020January 1, 2022 was $83.5$232.5 million, a decreasean increase of $10.8$148.9 million, from the same period of the prior fiscal year. The decreaseincrease is primarily a result of lowerhigher operating income after adjusting for the effects of integration costsdue to increases in net sales volume and gross margins, partially offset by higher SG&A expenses and the fair market value adjustment for an asset classified as held for sale incurredreduction in wage subsidies received in the prior year. The decrease in operating income is primarily due to a decrease in sales volume and a decrease in gross margin, partially offset by lower SG&A expenses.
The Company defines Adjusted EBITDA as net income or loss plus:plus; (a) the provision for income taxes; (b) interest expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) equity-basedequity based compensation for awards granted prior to December 31, 2018; (f) non-cash restructuring charges; (g)charges and impairment of assets; and (h)(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 net sales, operating income, or earnings per share prepared on a U.S. GAAP basis. The Company believes thatAdjusted 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 commonly usednot necessarily comparable to similarly titled measures reported by investors to evaluate its performance and that of its competitors. However, the Company’s use of Adjusted EBITDA may vary from that of others in its industry.other companies.
In evaluating Adjusted EBITDA, investors should be aware that, in the future, the Company may incur expenses similar to those adjusted for in this presentation. This presentation of Adjusted EBITDA should not be construed as an implication that the Company’s future results will be unaffected by unusual or nonrecurring items.
Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
Adjusted EBITDA:
• does not reflect the interest expense on our debt; • excludes impairments; and • does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; Also about Adjusted EBITDA: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and • other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
|
|
|
|
|
|
|
|
|
|
Given these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using non-GAAP financial measures only on a supplemental basis.
BACKLOG
25
BACKLOG
Although orders from customers can be cancelled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at December 26, 2020January 1, 2022 totaled $488.5 million$1.5 billion compared to $133.1$488.5 million at December 28, 2019.26, 2020. The increase in backlog iswas driven by increased demand for single-family homes, which has resulted in order levels that have significantly outpaced production in both the U.S. and Canada. Production levels vary widely by plant, but have, on
average, surpassed last year’s average production rates throughout the third quarter of fiscal 2021. IncreasingOur ability to increase production rates to keep pace with orders is limited by individual plant capacity, timethe availability of and time needed to train new employees, employee attendance and accessibilityavailability of materials. Productionmaterials, including certain allocations of raw materials by our suppliers. We may also be limited by additional instancesexperience greater order cancellations in the future as a result of COVID-19 related impacts, including intermittent facility shutdowns.higher prices and the longer time required to manufacture and deliver our products.
Liquidity and Capital Resources
Sources and Uses of Cash
The following table presents summary cash flow information for the nine months ended January 1, 2022 and December 26, 20202020:
and December 28, 2019:
|
| Nine months ended |
| |||||
(Dollars in thousands) |
| January 1, |
|
| December 26, |
| ||
Net cash provided by (used in): |
|
|
|
|
|
| ||
Operating activities |
| $ | 164,406 |
|
| $ | 103,816 |
|
Investing activities |
|
| (22,921 | ) |
|
| (1,213 | ) |
Financing activities |
|
| (21,355 | ) |
|
| (47,938 | ) |
Effect of exchange rate changes on cash, cash equivalents |
|
| (578 | ) |
|
| 2,940 |
|
Net increase in cash and cash equivalents |
|
| 119,552 |
|
|
| 57,605 |
|
Cash and cash equivalents at beginning of period |
|
| 262,581 |
|
|
| 209,455 |
|
Cash and cash equivalents at end of period |
| $ | 382,133 |
|
| $ | 267,060 |
|
|
| Nine Months Ended |
| |||||
(Dollars in thousands) |
| December 26, 2020 |
|
| December 28, 2019 |
| ||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
| $ | 103,816 |
|
| $ | 73,077 |
|
Investing activities |
|
| (1,213 | ) |
|
| (10,966 | ) |
Financing activities |
|
| (47,938 | ) |
|
| (17,968 | ) |
Effect of exchange rate changes on cash, cash equivalents |
|
| 2,940 |
|
|
| 510 |
|
Net increase in cash and cash equivalents |
|
| 57,605 |
|
|
| 44,653 |
|
Cash and cash equivalents at beginning of period |
|
| 209,455 |
|
|
| 126,634 |
|
Cash and cash equivalents at end of period |
| $ | 267,060 |
|
| $ | 171,287 |
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The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flowflows from operations for the next year are expected to be adequate to cover working capital requirements and capital expenditures, and debt payment obligations.expenditures. 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 $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At January 1, 2022, $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 covenant that requiresof 3.25 to 1.00, subject to an upward adjustment upon the Company’s first lien debt levelsconsummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to remain less than 2.75 times of the consolidated trailing twelve-month EBITDA.1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.
Cash provided by operating activities was $103.8$164.4 million duringfor the nine months ended December 26, 2020January 1, 2022 compared to $73.1$103.8 million duringfor the nine months ended December 28, 2019. The increase of $30.7 million in cash from26, 2020. Cash provided by operating activities is primarilyincreased due to increased depositshigher net income in the current year, partially offset by an increase in inventory from customers, deferralhigher material costs and higher stocking levels to mitigate supply chain challenges, an increase in prepaid and other assets primarily from the capitalization of certain$15.4 million of cloud computing costs in fiscal 2022, and a $5.9 million payment of payroll tax obligations resulting fromtaxes which were deferred in the prior fiscal year under the CARES Act regulations, and the benefit of the CEWS subsidy received, partially offset by slightly lower net income compared to the same period of the prior year.regulations.
Cash used in investing activities was $22.9 million for the nine months ended January 1, 2022 compared to $1.2 million for the nine months ended December 26, 2020 compared to $11.0 million during the nine months ended December 28, 2019.2020. The decrease in cash used for investing activities isincrease was primarily related to a decreasean increase in capital expenditures in the current period which is primarilyperiod. The Company acquired two idle manufacturing facilities in Texas and made investments in plant improvements to facilitate increased production or operational efficiencies. The Company deferred all non-essential spending in the first half of fiscal 2021 due to deferral of non-essential spending as well as COVID-19 concerns.non-recurring spending incurred in the prior year related to: (i) expansion of production capacity at the Leesville, Louisiana manufacturing facility; and (ii) investment in equipment to facilitate improvement in safety and operating efficiencies. In addition, the Company received $1.2 million of proceeds from the maturity of a Company owned life insurance policy and $1.8 million of proceeds from the sale of fixed assets during fiscal 2021. The Company received proceeds of $1.1 million from the disposition of a held for sale property in fiscal 2020.
Cash used in financing activities was $21.4 million for the nine months ended January 1, 2022 compared to $47.9 million for the nine months ended December 26, 2020 compared to $18.0 million during the nine months ended December 28, 2019. Cash2020. The decrease in cash used infor financing activities during the first nine months of fiscal 2021 was related to a $38.0 million repayment on the revolving credit facility, net repayments of the floor plan payable balance of $8.3 million and payments for remittance of employee taxes associated with share-based compensation programs of $1.7 million. Cash used in financing activities during the first nine months of fiscal 2020 was primarily related to $15.0 millionlower repayments during fiscal 2022 of repayments on the Company's previously existing revolving credit facility, a $2.1 million payment for remittance of employee taxes associated with share-based compensation programs and a $0.9 million net repayment of thefacility. The Company also saw an increase in floor plan payable balance.financing during fiscal 2022, which had decreased in fiscal 2021 in response to lowering financed retail inventories in response to the pandemic.
Critical Accounting Policies
For a discussion of our critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements, see Part II, Item 7 of the Fiscal 20202021 Annual Report, under the heading “Critical
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Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal 20202021 Annual Report, with the exception of adoption of new accounting pronouncements as discussed in Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements.”Report.
Recently Issued Accounting Pronouncements
For information on the impact of recently issued accounting pronouncements, see Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements,” to the condensed consolidated financial statements included in this Report.
Forward-Looking Statements
Some of the statements in this Report are not historical in nature and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words “will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in our forward-looking statements. These risks and uncertainties includestatements, 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 quality of parts sourced from suppliers and related liability and reputational issues; • data security breaches, cybersecurity attacks, and other information technology disruptions; • the potential disruption of operations caused by the conversion to new information systems; • the extensive regulation affecting the production and sale of factory-built housing and the effects of possible changes in laws with which we must comply; • the potential impact of natural disasters on sales and raw material costs; • the risks associated with mergers and acquisitions, including integration of operations and information systems; • periodic inventory adjustments by, and changes to relationships with, independent retailers; • changes in interest and foreign exchange rates; • insurance coverage and cost issues; • the possibility that all or part of our intangible assets, including goodwill, might become impaired; • the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks; 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 Securities and Exchange Commission. |
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If any of the risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements proves to be incorrect, then differences may arise between our forward-looking statements and our actual results, and such differences may be material. Investors should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. We assume no obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof, except as required by law.
27 Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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For a discussion of the Company’s interest rate and foreign exchange risks, see Part II, Item 7A of the Fiscal 20202021 Annual Report, under the heading "Quantitative and Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since March 28, 2020.April 3, 2021.
Item 4.CONTROLS AND PROCEDURES
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Evaluation of disclosure controls and procedures
The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the specified time periods and accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management, with the participation of the CEO and CFO, evaluated the effectiveness of the company’sCompany’s disclosure controls and procedures (pursuantpursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act)Act at December 26, 2020.January 1, 2022. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 26, 2020January 1, 2022..
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
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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 condensed consolidated financial statements included in this Report.
29 Item 6.EXHIBITS
30 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Skyline Champion Corporation Registrant
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