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Skyline Champion Announces Third Quarter Fiscal 2021 Results

February 01, 2021

TROY, Mich.--(BUSINESS WIRE)-- Skyline Champion Corporation (NYSE:SKY) (“Skyline Champion”), today announced financial results for its third quarter ended December 26, 2020 for the fiscal year ending April 3, 2021 (“fiscal 2021”).

Third Quarter Fiscal 2021 Highlights (compared to Third Quarter Fiscal 2020)

  • Net sales increased 10.3% to $377.6 million
  • U.S. factory-built homes sold increased 6.2% to 5,343
  • Total backlog increased 267.1% to $488.5 million
  • Average selling price (“ASP”) per U.S. home sold increased 4.0% to $63,000
  • Gross profit margin declined by 110 basis points to 19.0%
  • Net income increased by 26.8% to $21.6 million
  • Earnings per share (“EPS”) increased to $0.38 from $0.30
  • Excluding non-recurring expenses, Adjusted EPS increased to $0.38 from $0.32
  • Adjusted EBITDA increased 7.8% to $32.1 million
  • Adjusted EBITDA margin decreased by 20 basis points to 8.5%
  • Net cash provided by operating activities increased by 91.1% to $40.0 million

“I am impressed with the team’s ability to increase production in this unpredictable operating environment, while balancing enhanced safety protocols in our facilities,” said Mark Yost, Skyline Champion’s President and Chief Executive Officer. “We generated double digit net sales growth and delivered strong financial performance during the quarter despite headwinds from rapidly increasing material costs. With the strong long term housing outlook magnified by our investment to enhance online design and quoting solutions, we are focused on increasing capacity utilization and automation to take care of our customers.”

Third Quarter Fiscal 2021 Results

Net sales for the third quarter fiscal 2021 increased 10.3% to $377.6 million compared to the prior-year period. The number of U.S. factory-built homes sold in the third quarter fiscal 2021 increased 6.2% to 5,343 compared to the prior year third quarter, as a result of strong demand and increased production levels. ASP per U.S. home sold increased 4.0% to $63,000 due to price increases in response to rising material costs, partly offset by a shift in product mix. The number of Canadian factory-built homes sold in the quarter increased to 318 homes compared to 276 homes in the prior-year period due to stronger demand and increased production levels. Total backlog for Skyline Champion was $488.5 million as of December 26, 2020 compared to $133.1 million as of December 28, 2019. Backlog increased $98.4 million during the quarter compared to a decrease of $38.9 million in the third quarter fiscal 2020 driven by strong order levels that have outpaced production.

Gross profit increased by 4.2% to $71.8 million in the third quarter fiscal 2021 compared to the prior-year period. Gross profit margin was 19.0% of net sales, a 110 basis point reduction compared to 20.1% in the third quarter fiscal 2020. The compression in the gross profit margin was due to increased material costs caused by market volatility in certain commodities including forest products, partially offset by direct labor efficiencies, fixed cost leverage and operational improvements.

Selling, general, and administrative expenses (“SG&A”) in the third quarter fiscal 2021 decreased to $44.3 million from $45.2 million in the same period last year due to decreased travel and marketing-related expenses, integration costs, and equity-based compensation. These cost reductions were partially offset by increases in variable incentive compensation.

Net income for the third quarter fiscal 2021 was $21.6 million, an improvement compared to net income of $17.0 million during the same period of the prior year. The increase in net income was mainly driven by the increase in sales and gross profit, as well as reductions in SG&A and income tax expense.

Adjusted EBITDA for the third quarter fiscal 2021 increased by 7.8% to $32.1 million compared to the third quarter fiscal 2020 primarily driven by an increase in net sales. Adjusted EBITDA margin declined by 20 basis points to 8.5% due to higher material costs.

As of December 26, 2020, Skyline Champion had $267.1 million of cash and cash equivalents. During the quarter, the Company repaid $38.0 million on its revolving credit facility and has no significant long term debt maturities until June 2023.

Conference Call and Webcast Information:

Skyline Champion management will host a conference call tomorrow, February 2, 2021, at 8:00 a.m. Eastern Time, to discuss Skyline Champion’s financial results and an update on current operations.

Investors and other interested parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of Skyline Champion’s website at http://skylinechampion.com. The online replay will be available on the same website immediately following the call.

The conference call can also be accessed by dialing (877) 407-4018 (domestic) or (201) 689-8471 (international). A telephonic replay will be available approximately two hours after the call by dialing (844) 512-2921, or for international callers, (412) 317-6671. The passcode for the live call and the replay is 13714647. The replay will be available until 11:59 P.M. Eastern Time on February 16, 2021.

About Skyline Champion Corporation:

Skyline Champion Corporation (NYSE: SKY) was formed on June 1, 2018 as the result of the combination of Skyline Corporation (“Skyline”) and the operating assets of Champion Enterprises Holdings, LLC (“Champion”). The combined company employs over 7,000 people and is the largest independent, publicly traded, factory-built housing company in North America. With almost 70 years of homebuilding experience and 38 manufacturing facilities throughout the United States and western Canada, Skyline Champion is well positioned with a leading portfolio of manufactured and modular homes, ADUs, park-models and modular buildings for the single-family, multi-family, hospitality, senior and workforce housing sectors.

In addition to its core home building business, Skyline Champion operates a factory-direct retail business, Titan Factory Direct, with 18 retail locations spanning the southern United States, and Star Fleet Trucking, providing transportation services to the manufactured housing and other industries from several dispatch locations across the United States.

Skyline Champion builds homes under some of the most well-known brand names in the factory-built housing industry including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, Shore Park, Silvercrest, Titan Homes in the U.S., and Moduline and SRI Homes in western Canada.

Presentation of Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) throughout this press release, Skyline Champion has provided non-GAAP financial measures—Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Earnings Per Share (including dilutive securities, if any)—which present operating results on a basis adjusted for certain items. Skyline Champion uses these non-GAAP financial measures for business planning purposes and in measuring its performance relative to that of its competitors. Skyline Champion believes that these non-GAAP financial measures are useful financial metrics to assess its operating performance from period-to-period by excluding certain items that Skyline Champion believes are not representative of its core business. These non-GAAP financial measures are not intended to replace, and should not be considered superior to, the presentation of Skyline Champion’s financial results in accordance with U.S. GAAP.

Skyline Champion defines Adjusted EBITDA as net income or loss plus (a) the provision for income taxes, (b) interest expense, net, (c) depreciation and amortization, (d) gain or loss from discontinued operations, (e) equity-based compensation awards granted before December 31, 2018, (f) restructuring charges, (g) impairment of assets, and (h) other non-operating costs including those for the acquisition and integration of businesses. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. Skyline Champion believes that Adjusted EBITDA is commonly used by investors to evaluate its performance and that of its competitors. However, Skyline Champion’s use of Adjusted EBITDA may vary from that of others in its industry. Adjusted EBITDA is reconciled from the respective measure under U.S. GAAP in the tables below. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by net sales reported in the statement of operations. Adjusted EPS is calculated as net income or loss plus (a) equity-based compensation awards granted before December 31, 2018, (b) restructuring charges, (c) impairment of assets, and (d) other non-operating costs including those for the acquisition and integration of businesses, including the related tax effect, if any, on these items.

Forward-Looking Statements

Statements in this press release, including certain statements regarding Skyline Champion’s strategic initiatives, and future market demand are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of words such as "believe," "expect," "future," "anticipate," "intend," "plan," "foresee," "may," "could," "should," "will," "potential," "continue," or other similar words or phrases. Similarly, statements that describe objectives, plans, or goals also are forward-looking statements. Such forward-looking statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of Skyline Champion. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied, or projected by such forward-looking statements. Risks and uncertainties include 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; the impact of recent political instability and social unrest on economic conditions generally; 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; supply-related issues; labor-related issues; 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, exacerbated by the COVID-19 pandemic; 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 possible mergers and acquisitions; the prices and availability of materials; 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 goodwill might become impaired; the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks; and other risks set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section, and other sections, as applicable, in our Annual Reports on Form 10-K, including our Annual Report on Form 10-K for the fiscal year ended March 28, 2020 previously filed with the Securities and Exchange Commission (“SEC”), as well as in our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed with or furnished to the SEC.

If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, then the developments and future events concerning Skyline Champion set forth in this press release may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this release. We anticipate that subsequent events and developments will cause our expectations and beliefs to change. Skyline Champion assumes no obligation to update such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless obligated to do so under the federal securities laws.

SKYLINE CHAMPION CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars and shares in thousands)

 

 

December 26,

2020

 

 

March 28,

2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

267,060

 

 

$

209,455

 

Trade accounts receivable, net

 

 

41,325

 

 

 

45,733

 

Inventories, net

 

 

131,123

 

 

 

126,386

 

Other current assets

 

 

15,517

 

 

 

17,239

 

Total current assets

 

 

455,025

 

 

 

398,813

 

Long-term assets:

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

103,826

 

 

 

109,291

 

Goodwill

 

 

173,521

 

 

 

173,521

 

Amortizable intangible assets, net

 

 

39,272

 

 

 

43,357

 

Deferred tax assets

 

 

19,516

 

 

 

21,812

 

Other noncurrent assets

 

 

34,705

 

 

 

34,906

 

Total assets

 

$

825,865

 

 

$

781,700

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Floor plan payable

 

$

25,595

 

 

$

33,914

 

Accounts payable

 

 

38,603

 

 

 

38,703

 

Other current liabilities

 

 

143,453

 

 

 

114,030

 

Total current liabilities

 

 

207,651

 

 

 

186,647

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

39,330

 

 

 

77,330

 

Deferred tax liabilities

 

 

4,008

 

 

 

3,264

 

Other

 

 

42,681

 

 

 

40,144

 

Total long-term liabilities

 

 

86,019

 

 

 

120,738

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock

 

 

1,569

 

 

 

1,570

 

Additional paid-in capital

 

 

488,558

 

 

 

485,552

 

Retained earnings (accumulated deficit)

 

 

50,720

 

 

 

(48

)

Accumulated other comprehensive loss

 

 

(8,652

)

 

 

(12,759

)

Total stockholders' equity

 

 

532,195

 

 

 

474,315

 

Total liabilities and stockholders' equity

$

825,865

 

 

$

781,700

 

SKYLINE CHAMPION CORPORATION

CONSOLIDATED INCOME STATEMENTS

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 26,
2020

 

 

December 28,

2019

 

 

December 26,
2020

 

 

December 28,

2019

 

 

 

 

 

 

 

 

Net sales

 

$

377,581

 

 

$

342,239

 

 

$

973,232

 

 

$

1,068,585

 

Cost of sales

 

 

305,797

 

 

 

273,338

 

 

 

784,652

 

 

 

849,594

 

Gross profit

 

 

71,784

 

 

 

68,901

 

 

 

188,580

 

 

 

218,991

 

Selling, general, and administrative expenses

 

 

44,286

 

 

 

45,237

 

 

 

126,466

 

 

 

145,354

 

Operating income

 

 

27,498

 

 

 

23,664

 

 

 

62,114

 

 

 

73,637

 

Interest expense, net

 

 

795

 

 

 

328

 

 

 

2,601

 

 

 

1,019

 

Other income

 

 

(180

)

 

 

 

 

 

(6,993

)

 

 

 

Income before income taxes

 

 

26,883

 

 

 

23,336

 

 

 

66,506

 

 

 

72,618

 

Income tax expense

 

 

5,284

 

 

 

6,299

 

 

 

15,493

 

 

 

20,456

 

Net income

 

$

21,599

 

 

$

17,037

 

 

$

51,013

 

 

$

52,162

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.38

 

 

$

0.30

 

 

$

0.90

 

 

$

0.92

 

Diluted

 

$

0.38

 

 

$

0.30

 

 

$

0.90

 

 

$

0.92

 

SKYLINE CHAMPION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollars in thousands)

 

 

Nine Months Ended

 

 

 

December 26, 2020

 

 

December 28,

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

51,013

 

 

$

52,162

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,076

 

 

 

13,895

 

Amortization of deferred financing fees

 

 

380

 

 

 

384

 

Fair market value adjustment for asset classified as held for sale

 

 

 

 

 

986

 

Equity-based compensation

 

 

4,625

 

 

 

6,168

 

Deferred taxes

 

 

3,251

 

 

 

4,222

 

(Gain) loss on disposal of property, plant, and equipment

 

 

(75

)

 

 

126

 

Foreign currency transaction gain

 

 

(421

)

 

 

(93

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

4,577

 

 

 

15,441

 

Inventories

 

 

(3,388

)

 

 

14,980

 

Prepaids and other assets

 

 

(2,239

)

 

 

(6,199

)

Accounts payable

 

 

(284

)

 

 

(16,130

)

Accrued expenses and other liabilities

 

 

33,301

 

 

 

(12,865

)

Net cash provided by operating activities

 

 

103,816

 

 

 

73,077

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(4,235

)

 

 

(12,110

)

Proceeds from company owned life insurance policy

 

 

1,186

 

 

 

 

Proceeds from disposal of property, plant, and equipment

 

 

1,836

 

 

 

44

 

Proceeds from sale of held for sale asset

 

 

 

 

 

1,100

 

Net cash used in investing activities

 

 

(1,213

)

 

 

(10,966

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Changes in floor plan financing, net

 

 

(8,318

)

 

 

(946

)

Payments on revolving debt facility

 

 

(38,000

)

 

 

(15,000

)

Stock option exercises

 

 

67

 

 

 

109

 

Tax payment for equity-based compensation

 

 

(1,687

)

 

 

(2,131

)

Net cash used in financing activities

 

 

(47,938

)

 

 

(17,968

)

Effect of exchange rate changes on cash, and 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

 

SKYLINE CHAMPION CORPORATION

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

(Unaudited, dollars in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 26,
2020

 

 

December 28,
2019

 

 

Change

 

 

December 26,
2020

 

 

December 28,
2019

 

 

Change

 

Reconciliation of Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,599

 

 

$

17,037

 

 

$

4,562

 

 

$

51,013

 

 

$

52,162

 

 

$

(1,149

)

Income tax expense

 

 

5,284

 

 

 

6,299

 

 

 

(1,015

)

 

 

15,493

 

 

 

20,456

 

 

 

(4,963

)

Interest expense, net

 

 

795

 

 

 

328

 

 

 

467

 

 

 

2,601

 

 

 

1,019

 

 

 

1,582

 

Depreciation and amortization

 

 

4,386

 

 

 

4,516

 

 

 

(130

)

 

 

13,076

 

 

 

13,895

 

 

 

(819

)

EBITDA

 

 

32,064

 

 

 

28,180

 

 

 

3,884

 

 

 

82,183

 

 

 

87,532

 

 

 

(5,349

)

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

 

 

 

 

 

965

 

 

 

(965

)

 

 

1,358

 

 

 

3,606

 

 

 

(2,248

)

Acquisition integration costs

 

 

 

 

 

560

 

 

 

(560

)

 

 

 

 

 

1,938

 

 

 

(1,938

)

Other

 

 

 

 

 

40

 

 

 

(40

)

 

 

 

 

 

250

 

 

 

(250

)

Fair market value adjustment to held for sale property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

986

 

 

 

(986

)

Adjusted EBITDA

 

$

32,064

 

 

$

29,745

 

 

$

2,319

 

 

$

83,541

 

 

$

94,312

 

 

$

(10,771

)

SKYLINE CHAMPION CORPORATION

RECONCILIATION OF NET INCOME TO ADJUSTED EARNINGS PER SHARE

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

(Certain amounts shown net of tax, as applicable)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 26,
2020

 

 

December 28,
2019

 

 

December 26,
2020

 

 

December 28,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,599

 

 

$

17,037

 

 

$

51,013

 

 

$

52,162

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

786

 

 

 

1,128

 

 

 

3,000

 

Acquisition integration costs

 

 

 

 

 

422

 

 

 

 

 

 

1,460

 

Other

 

 

 

 

 

81

 

 

 

 

 

 

259

 

Fair market value adjustment to held for sale property

 

 

 

 

 

 

 

 

 

 

 

743

 

Adjusted net income

 

 

21,599

 

 

 

18,326

 

 

 

52,141

 

 

 

57,624

 

Less: Undistributed earnings allocated to participating securities

 

 

 

 

 

47

 

 

 

57

 

 

 

217

 

Adjusted net income attributable to the Company's common shareholders

 

$

21,599

 

 

$

18,279

 

 

$

52,084

 

 

$

57,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic net income per share

 

$

0.38

 

 

$

0.32

 

 

$

0.92

 

 

$

1.02

 

Adjusted diluted net income per share

 

$

0.38

 

 

$

0.32

 

 

$

0.92

 

 

$

1.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average basic shares outstanding

 

 

56,702

 

 

 

56,521

 

 

 

56,630

 

 

 

56,457

 

Average diluted shares outstanding

 

 

56,990

 

 

 

56,788

 

 

 

56,883

 

 

 

56,705

 

 

Investor contact information:
Name: Sarah Janowicz
Email: investorrelations@championhomes.com
Phone: (248) 614-8211

Source: Skyline Champion Corporation

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