Skyline Champion Corp [SKY] Filings

10-Q 1 sky-20230930.htm 10-Q 10-Q

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 September 30, 2023

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

For the transition period from to

Commission file number: 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)

(248) 614-8211

(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 October 23, 2023: 57,617,679

SKYLINE CHAMPION CORPORATION

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and April 1, 2023	1
Condensed Consolidated Income Statements (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	3
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended September 30, 2023 and October 1, 2022	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3. Quantitative and Qualitative Disclosures About Market Risk	26

Item 4. Controls and Procedures	27

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	28

Item 6. Exhibits	29

SIGNATURES	30

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Skyline Champion Corporation

Condensed Consolidated Balance Sheets

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


	September 30, 2023			April 1, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	701,155		$	747,453
Trade accounts receivable, net		55,097			67,296
Inventories, net		182,239			202,238
Other current assets		39,447			26,479
Total current assets		977,938			1,043,466
Long-term assets:
Property, plant, and equipment, net		191,766			177,125
Goodwill		196,574			196,574
Amortizable intangible assets, net		40,299			45,343
Deferred tax assets		19,798			17,422
Other noncurrent assets		242,800			82,794
Total assets	$	1,669,175		$	1,562,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,829		$	44,702
Other current liabilities		192,322			204,215
Total current liabilities		243,151			248,917
Long-term liabilities:
Long-term debt		12,430			12,430
Deferred tax liabilities		6,417			5,964
Other liabilities		66,984			62,412
Total long-term liabilities		85,831			80,806

Stockholders' Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 57,162 and 57,108 shares issued as of September 30, 2023 and April 1, 2023, respectively		1,587			1,585
Additional paid-in capital		530,645			519,479
Retained earnings		821,628			725,672
Accumulated other comprehensive loss		(13,667	)		(13,735	)
Total stockholders’ equity		1,340,193			1,233,001
Total liabilities and stockholders’ equity	$	1,669,175		$	1,562,724

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Income Statements

(Unaudited, dollars in thousands, except per share amounts)


	Three months ended						Six months ended
	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Net sales	$	464,236		$	806,825		$	929,005		$	1,532,706
Cost of sales		347,747			532,719			682,843			1,029,265
Gross profit		116,489			274,106			246,162			503,441
Selling, general, and administrative expenses		64,454			83,915			134,893			156,197
Operating income		52,035			190,191			111,269			347,244
Interest (income), net		(10,480	)		(1,974	)		(19,781	)		(1,884	)
Other expense (income)		2,065			—			2,065			(634	)
Income before income taxes		60,450			192,165			128,985			349,762
Income tax expense		14,781			48,073			32,047			88,519
Net income	$	45,669		$	144,092		$	96,938		$	261,243
Net income per share:
Basic	$	0.80		$	2.53		$	1.69		$	4.59
Diluted	$	0.79		$	2.51		$	1.68		$	4.55

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, dollars in thousands)


	Three months ended						Six months ended
	September 30, 2023			October 1, 2022			September 30, 2023		October 1, 2022
Net income	$	45,669		$	144,092		$	96,938	$	261,243
Other comprehensive (loss) income:
Foreign currency translation adjustments		(2,115	)		(5,295	)		68		(7,599	)
Total comprehensive income	$	43,554		$	138,797		$	97,006	$	253,644

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)


	Six months ended
	September 30, 2023			October 1, 2022
Cash flows from operating activities
Net income	$	96,938		$	261,243
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,378			12,557
Amortization of deferred financing fees		162			175
Equity-based compensation		10,943			7,753
Deferred taxes		(1,919	)		3,318
Loss (gain) on disposal of property, plant, and equipment		96			(85	)
Foreign currency transaction loss		76			974
Change in assets and liabilities:
Accounts receivable		12,101			7,633
Floor plan receivables		(2,521	)		—
Inventories		20,059			11,540
Other assets		(13,434	)		(14,489	)
Accounts payable		4,387			(21,000	)
Accrued expenses and other liabilities		(12,128	)		8,947
Net cash provided by operating activities		129,138			278,566
Cash flows from investing activities
Additions to property, plant, and equipment		(22,847	)		(25,613	)
Cash paid for equity method investment		(1,000	)		—
Cash paid for investment in ECN common stock		(78,858	)		—
Cash paid for investment in ECN preferred stock		(64,520	)		—
Investment in floor plan loans		(18,466	)		—
Proceeds from floor plan loans		10,528			—
Acquisitions, net of cash acquired		—			(6,810	)
Proceeds from disposal of property, plant, and equipment		524			132
Net cash used in investing activities		(174,639	)		(32,291	)
Cash flows from financing activities
Changes in floor plan financing, net		—			3,027
Stock option exercises		224			596
Tax payments for equity-based compensation		(982	)		(1,363	)
Net cash (used in) provided by financing activities		(758	)		2,260
Effect of exchange rate changes on cash and cash equivalents		(39	)		(6,944	)
Net (decrease) increase in cash and cash equivalents		(46,298	)		241,591
Cash and cash equivalents at beginning of period		747,453			435,413
Cash and cash equivalents at end of period	$	701,155		$	677,004

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars and shares in thousands)


	Three months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 1, 2023		57,133	$	1,586	$	524,907	$	775,980		$	(11,552	)	$	1,290,921
Net income		—		—		—		45,669			—			45,669
Equity-based compensation		—		—		5,515		—			—			5,515
Net common stock issued under equity-based compensation plans		29		1		223		(21	)		—			203
Foreign currency translation adjustments		—		—		—		—			(2,115	)		(2,115	)
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193


	Six months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 1, 2023		57,108	$	1,585	$	519,479	$	725,672		$	(13,735	)	$	1,233,001
Net income		—		—		—		96,938			—			96,938
Equity-based compensation		—		—		10,943		—			—			10,943
Net common stock issued under equity-based compensation plans		54		2		223		(982	)		—			(757	)
Foreign currency translation adjustments		—		—		—		—			68			68
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193


	Three months ended October 1, 2022
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 2, 2022		56,848	$	1,573	$	506,815	$	444,702		$	(9,512	)	$	943,578
Net income		—		—		—		144,092			—			144,092
Equity-based compensation		—		—		3,793		—			—			3,793
Net common stock issued under equity-based compensation plans		77		7		642		(1,074	)		—			(425	)
Foreign currency translation adjustments		—		—		—		—			(5,295	)		(5,295	)
Balance at October 1, 2022		56,925	$	1,580	$	511,250	$	587,720		$	(14,807	)	$	1,085,743

	Six months ended October 1, 2022
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 2, 2022		56,838	$	1,573	$	502,846	$	327,902		$	(7,208	)	$	825,113
Net income		—		—		—		261,243			—			261,243
Equity-based compensation		—		—		7,753		—			—			7,753
Net common stock issued under equity-based compensation plans		87		7		651		(1,425	)		—			(767	)
Foreign currency translation adjustments		—		—		—		—			(7,599	)		(7,599	)
Balance at October 1, 2022		56,925	$	1,580	$	511,250	$	587,720		$	(14,807	)	$	1,085,743

Components of accumulated other comprehensive loss consisted solely of foreign currency translation adjustments.

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation and Business

Nature of Operations: Skyline Champion Corporation's (the “Company”) operations consist of manufacturing, retail, construction services, and transportation activities. At September 30, 2023, the Company operated 39 manufacturing facilities throughout the United States (“U.S.”) and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. In addition to its core home building business, the Company provides construction services to install and set-up factory-built homes. The Company’s retail operations consist of 31 sales centers that sell manufactured houses to consumers across the U.S. The Company’s transportation business engages independent owners/drivers to transport recreational vehicles throughout the U.S. and Canada and manufactured houses in certain regions of the U.S. The Company also has a holding company located in the Netherlands.

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 30, 2023 (the “Fiscal 2023 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.

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 2024,” will end on March 30, 2024 and will include 52 weeks. References to “fiscal 2023” refer to the Company’s fiscal year ended April 1, 2023. The three and six months ended September 30, 2023 and October 1, 2022 each included 13 and 26 weeks, respectively.

The Company’s allowance for credit losses on financial assets measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current economic conditions and forecasts that affect the collectability of the reported amount. Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings. Accounts receivable are reflected net of reserves of $2.6 million and $1.7 million at September 30, 2023 and April 1, 2023, respectively.

Floor plan receivables consist of loans the Company purchased from an independent financial institution in the first quarter of fiscal 2024 for $18.5 million, of which approximately $8.0 million remains outstanding at September 30, 2023, and amounts loaned by the Company through the financial institution to certain independent retailers for purchases of homes manufactured by the Company, of which $2.6 million was outstanding at September 30, 2023, both of which are carried net of payments received and recorded at amortized cost. The Company intends to hold the floor plan receivables until maturity or payoff. These loans are serviced by the financial institution for which we pay a servicing fee. Upon execution of the financing arrangement, the loans are generally payable at the earlier of the sale of the underlying home or two years from the origination date. At September 30, 2023, Floor Plan Receivables are included in Other Current Assets and Other Noncurrent Assets in the Condensed Consolidated Balance Sheets.

The floor plan receivables are collateralized by the related homes, mitigating loss exposure. The Company and the financial institution evaluate the credit worthiness of each independent retailer prior to credit approval, including reviewing the independent retailer’s payment history, financial condition, and overall economic environment. We evaluate the risk of credit loss in aggregate on existing loans with similar terms, based on historic experience and current economic conditions, as well as individual retailers with past due balances or other indications of heightened credit risk. The allowance for credit losses related to floor plan receivables was not material as of September 30, 2023. Loans are considered past due if any required interest or curtailment payment remains unpaid 30 days after the due date. Receivables are placed on non-performing status if any interest or installment payments are past due over 90 days. Loans are placed on nonaccrual status when interest payments are past due over 90 days. At September 30, 2023, there were no floor plan receivables on nonaccrual status and the weighted-average age of the floor plan receivables was nine months.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

Interest income from floor plan receivables is recognized on an accrual basis and is included in Interest Income in the accompanying Condensed Consolidated Income Statements. Interest income for the three and six months ended September 30, 2023 was $0.3 million and $0.6 million, respectively. There were no floor plan receivables as of October 1, 2022 or related interest income for the three and six months then ended.

In May 2022, the Company acquired certain operating assets from Manis Custom Builders, Inc. ("Manis"). In July 2022, the Company acquired 12 Factory Expo retail sales centers from Alta Cima Corporation. The purchase price and net assets acquired for both transactions were not material to the accompanying condensed consolidated financial statements.

There were no accounting standards recently issued that are expected to have a material impact on the Company’s financial position or results of operations.

2. Inventories, net

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


(Dollars in thousands)	September 30, 2023		April 1, 2023
Raw materials	$	92,121	$	100,379
Work in process		21,239		23,157
Finished goods and other		68,879		78,702
Total inventories, net	$	182,239	$	202,238

At September 30, 2023 and April 1, 2023, reserves for obsolete inventory were $9.1 million and $7.9 million, respectively.

3. 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; and vehicles and machinery and equipment – 3 to 8 years. Depreciation expense for the three months ended September 30, 2023 and October 1, 2022 was $4.7 million and $4.2 million, respectively. Depreciation expense for the six months ended September 30, 2023 and October 1, 2022 was $9.3 million and $7.8 million, respectively.

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


(Dollars in thousands)	September 30, 2023			April 1, 2023
Land and improvements	$	42,676		$	41,749
Buildings and improvements		131,386			119,226
Machinery and equipment		100,694			91,007
Construction in progress		31,035			30,010
Property, plant, and equipment, at cost		305,791			281,992
Less: accumulated depreciation		(114,025	)		(104,867	)
Property, plant, and equipment, net	$	191,766		$	177,125

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

4. Goodwill, Intangible Assets, and Cloud Computing Arrangements

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At both September 30, 2023 and April 1, 2023, the Company had goodwill of $196.6 million. At September 30, 2023, there were no accumulated impairment losses related to goodwill.

Intangible Assets

The components of amortizable intangible assets were as follows:


(Dollars in thousands)	September 30, 2023									April 1, 2023
	Customer Relationships & Other			Trade Names			Total			Customer Relationships & Other			Trade Names			Total
Gross carrying amount	$	66,019		$	21,499		$	87,518		$	66,013		$	21,497		$	87,510
Accumulated amortization		(36,200	)		(11,019	)		(47,219	)		(32,103	)		(10,064	)