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Skyline Champion Announces Third Quarter Fiscal 2021 Results

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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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210201005855/en/

Contacts

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