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Skyline Champion Announces Third Quarter Fiscal 2020 Results

Skyline Champion Corporation (NYSE:SKY) ("Skyline Champion") today announced financial results for its third quarter ended December 28, 2019 of the fiscal year ending March 28, 2020 ("fiscal 2020").

Third Quarter Fiscal 2020 Highlights (compared to Third Quarter Fiscal 2019)

  • Net sales decreased 3.5% to $342.2 million
  • U.S. factory-built homes sold increased 0.3% to 5,033
  • Gross profit as a percent of sales expanded by 180 basis points to 20.1%
  • Net income increased 62.0% to $17.0 million
  • Earnings per share ("EPS") of $0.30, an increase of 57.9% compared to EPS of $0.19
  • Excluding non-recurring expenses, Adjusted EPS was $0.32, an increase of 18.5% compared to $0.27
  • Adjusted EBITDA increased 12.6% to $29.7 million
  • Adjusted EBITDA margin expanded by 130 basis points to 8.7%
  • Generated net cash from operating activities of $20.9 million and paid down $5.0 million of revolving debt facility

"I am very pleased with our ability to improve profitability across several key metrics while generating solid cash flow during the third quarter," said Mark Yost, Skyline Champion’s Chief Executive Officer. "We achieved these gains in a quarter in which our topline was lower as a result of our Canadian and Trucking operations as well as U.S. product mix changes."

"As we look forward, we continue to have a positive view about the underlying health of the market and demand for our product offerings. We are particularly excited about the favorable response to our homes at the Louisville Manufactured Housing Show and to our Genesis® brand of homes and accessory dwelling units (ADUs) which debuted at the NAHB International Builders’ Show in Las Vegas. We believe that these products offer a cost effective and attractive solution for housing needs across the country."

Third Quarter Fiscal 2020 Results

Net sales for the third quarter fiscal 2020 decreased 3.5% to $342.2 million compared to the prior-year third quarter. The number of U.S. factory-built homes sold by Skyline Champion in the third quarter fiscal 2020 increased 0.3% to 5,033 compared to the prior year third quarter. The increase in number of homes sold was more than offset by a 2% decrease in average selling price ("ASP") per U.S. home sold to $60,600. ASP decreased primarily due to a shift in product mix between single and multiple wide units. The number of Canadian factory-built homes sold in the quarter decreased to 276 homes compared to 329 homes in the prior-year third quarter.

Total backlog for Skyline Champion was $133 million as of December 28, 2019 compared to $181 million as of December 29, 2018 as industry retailers have continued to normalize their order cadence.

Gross profit increased by 6.4% to $68.9 million in the third quarter fiscal 2020 compared to the prior-year period. Gross profit was 20.1% of net sales for the third quarter fiscal 2020, a 180 basis point improvement compared to 18.3% in the third quarter fiscal 2019. Gross profit expansion was driven by material pricing from synergies and market normalization as well as benefits from rationalization of product offerings.

Selling, general and administrative expenses in the third quarter fiscal 2020 decreased to $45.2 million from $48.8 million in the same period last year due to a reduction in equity-based compensation and acquisition integration costs.

Net income for the third quarter fiscal 2020 was $17.0 million, compared to net income of $10.5 million during the same period of the prior year. The increase in net income was driven by an increase in profitability from higher gross profit, a reduction in equity-based compensation and acquisition integration costs, and lower net interest expense. EPS improved to $0.30, compared to earnings per share of $0.19. Excluding non-recurring expenses, Adjusted EPS of $0.32 increased 18.5% from $0.27.

Adjusted EBITDA for the third quarter fiscal 2020 increased by 12.6% to $29.7 million compared to the third quarter fiscal 2019. The increase was primarily driven by gross profit improvement. The Adjusted EBITDA margin expanded by 130 basis points to 8.7%.

As of December 28, 2019, Skyline Champion had $171.3 million of cash and cash equivalents and $44.4 million of unused borrowing capacity under its revolving credit facility.

Conference Call and Webcast Information:

Skyline Champion management will host a conference call tomorrow, January 29, 2020, at 8:00 a.m. Eastern Time, to discuss Skyline Champion’s financial results.

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 13698124. The replay will be available until 11:59 P.M. Eastern Time on February 12, 2020.

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 approximately 7,000 people and is the largest independent, publicly traded, factory-built housing company in North America. With more than 65 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, park-models and modular buildings for the 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 21 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—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) foreign currency gains and losses, (f) equity-based compensation awards granted before December 31, 2018, (g) restructuring charges and other, (h) impairment of assets, and (i) 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. 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 our 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.

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," "should," "will," "estimates," "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. Skyline Champion cautions 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, but are not limited to: general economic conditions; availability of wholesale and retail financing; the health of the U.S. housing market as a whole; federal, state, and local regulations pertaining to the manufactured housing industry; the cyclical nature of the manufactured housing industry; general or seasonal weather conditions affecting sales; potential impact of natural disasters on sales and raw material costs; potential periodic inventory adjustments by independent retailers; interest rate levels; the impact of inflation; the impact of high or rising fuel costs; the cost of labor and raw materials; competitive pressures on pricing and promotional costs; Skyline Champion's relationships with its shareholders, customers, and other stakeholders; catastrophic events impacting insurance costs; the availability of insurance coverage for various risks to Skyline Champion; market demographics; and management's ability to attract and retain executive officers and key personnel and other risks and uncertainties more fully described in Skyline Champion’s Form 10-K for fiscal year ended March 30, 2019 previously filed with the Securities and Exchange Commission ("SEC"), as well as the other filings that Skyline Champion makes with 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, 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 in thousands, except per share amounts)

 
 

 

 

December 28,

2019

 

 

March 30,

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

171,287

 

 

$

126,634

 

Trade accounts receivable, net

 

 

42,233

 

 

 

57,649

 

Inventories

 

 

107,938

 

 

 

122,638

 

Other current assets

 

 

13,377

 

 

 

11,369

 

Total current assets

 

 

334,835

 

 

 

318,290

 

Long-term assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

110,944

 

 

 

108,587

 

Goodwill

 

 

173,521

 

 

 

173,406

 

Amortizable intangible assets, net

 

 

44,714

 

 

 

48,936

 

Deferred tax assets

 

 

30,435

 

 

 

34,058

 

Other noncurrent assets

 

 

30,029

 

 

 

16,677

 

Total assets

 

$

724,478

 

 

$

699,954

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Floor plan payable

 

$

32,375

 

 

$

33,321

 

Accounts payable

 

 

27,325

 

 

 

43,421

 

Other current liabilities

 

 

118,603

 

 

 

129,561

 

Total current liabilities

 

 

178,303

 

 

 

206,303

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

39,330

 

 

 

54,330

 

Deferred tax liabilities

 

 

3,746

 

 

 

3,422

 

Other

 

 

33,902

 

 

 

23,927

 

Total long-term liabilities

 

 

76,978

 

 

 

81,679

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock

 

 

1,570

 

 

 

1,569

 

Additional paid-in capital

 

 

483,371

 

 

 

479,226

 

Accumulated deficit

 

 

(6,046

)

 

 

(58,208

)

Accumulated other comprehensive loss

 

 

(9,698

)

 

 

(10,615

)

Total stockholders' equity

 

 

469,197

 

 

 

411,972

 

Total liabilities and stockholders' equity

 

$

724,478

 

 

$

699,954

 

 

SKYLINE CHAMPION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 28,

2019

 

 

December 29,

2018

 

 

December 28,

2019

 

 

December 29,

2018 (a)

 

 

 

 

 

 

 

 

Net sales

 

$

342,239

 

 

$

354,671

 

 

$

1,068,585

 

 

$

1,032,368

 

Cost of sales

 

 

273,338

 

 

 

289,935

 

 

 

849,594

 

 

 

853,472

 

Gross profit

 

 

68,901

 

 

 

64,736

 

 

 

218,991

 

 

 

178,896

 

Selling, general, and administrative expenses

 

 

45,237

 

 

 

48,848

 

 

 

145,354

 

 

 

222,005

 

Operating income (loss)

 

 

23,664

 

 

 

15,888

 

 

 

73,637

 

 

 

(43,109

)

Interest expense, net

 

 

328

 

 

 

813

 

 

 

1,019

 

 

 

2,712

 

Other expense

 

 

 

 

 

125

 

 

 

 

 

 

7,845

 

Income (loss) before income taxes

 

 

23,336

 

 

 

14,950

 

 

 

72,618

 

 

 

(53,666

)

Income tax expense

 

 

6,299

 

 

 

4,437

 

 

 

20,456

 

 

 

13,699

 

Net income (loss)

 

$

17,037

 

 

$

10,513

 

 

$

52,162

 

 

$

(67,365

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.30

 

 

$

0.19

 

 

$

0.92

 

 

$

(1.28

)

Diluted

 

$

0.30

 

 

$

0.19

 

 

$

0.92

 

 

$

(1.28

)

(a)

 

Includes seven months of results from the Skyline operations.

 

SKYLINE CHAMPION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollars in thousands)

 

 

 

Nine Months Ended

 

 

 

December 28,

2019

 

 

December 29,

2018 (a)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

52,162

 

 

$

(67,365

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

9,826

 

 

 

8,219

 

Amortization of intangible assets

 

 

4,069

 

 

 

3,316

 

Amortization of deferred financing fees

 

 

384

 

 

 

409

 

Fair market value adjustment for asset classified as held for sale

 

 

986

 

 

 

 

Equity-based compensation

 

 

6,168

 

 

 

97,589

 

Deferred taxes

 

 

4,222

 

 

 

3,223

 

Loss on disposal of property, plant, and equipment

 

 

126

 

 

 

1

 

Foreign currency transaction (gain) loss

 

 

(93

)

 

 

188

 

Change in assets and liabilities net of business acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

15,441

 

 

 

8,414

 

Inventories

 

 

14,980

 

 

 

4,991

 

Prepaids and other assets

 

 

(6,199

)

 

 

(286

)

Accounts payable

 

 

(16,130

)

 

 

(11,756

)

Accrued expenses and other liabilities

 

 

(12,865

)

 

 

4,975

 

Net cash provided by operating activities

 

 

73,077

 

 

 

51,918

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(12,110

)

 

 

(7,627

)

Cash acquired in business acquisition

 

 

 

 

 

9,722

 

Proceeds from disposal of property, plant, and equipment

 

 

44

 

 

 

17

 

Proceeds from sale of held for sale asset

 

 

1,100

 

 

 

 

Decrease in note receivable

 

 

 

 

 

284

 

Net cash (used in) provided by investing activities

 

 

(10,966

)

 

 

2,396

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Changes in floor plan financing, net

 

 

(946

)

 

 

9,133

 

Borrowings on revolving debt facility

 

 

 

 

 

46,900

 

Payments on revolving debt facility

 

 

(15,000

)

 

 

 

Payments on term-loans and other debt

 

 

 

 

 

(46,900

)

Payments for deferred financing fees

 

 

 

 

 

(2,169

)

Stock option exercises

 

 

109

 

 

 

1,615

 

Tax payments for equity-based compensation

 

 

(2,131

)

 

 

(4,117

)

Members' capital distribution

 

 

 

 

 

(65,277

)

Net cash used in financing activities

 

 

(17,968

)

 

 

(60,815

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

510

 

 

 

(1,130

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

44,653

 

 

 

(7,631

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

126,634

 

 

 

136,616

 

Cash, cash equivalents, and restricted cash at end of period

 

$

171,287

 

 

$

128,985

 

(a)

 

Includes seven months of results from the Skyline operations.

 

SKYLINE CHAMPION CORPORATION

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(Unaudited, dollars in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 28,

2019

 

 

December 29,

2018

 

 

Change

 

 

December 28,

2019

 

 

December 29,

2018 (a)

 

 

Change

 

Reconciliation of Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

17,037

 

 

$

10,513

 

 

$

6,524

 

 

$

52,162

 

 

$

(67,365

)

 

$

119,527

 

Income tax expense

 

 

6,299

 

 

 

4,437

 

 

 

1,862

 

 

 

20,456

 

 

 

13,699

 

 

 

6,757

 

Interest expense, net

 

 

328

 

 

 

813

 

 

 

(485

)

 

 

1,019

 

 

 

2,712

 

 

 

(1,693

)

Depreciation and amortization

 

 

4,516

 

 

 

4,577

 

 

 

(61

)

 

 

13,895

 

 

 

11,535

 

 

 

2,360

 

EBITDA

 

 

28,180

 

 

 

20,340

 

 

 

7,840

 

 

 

87,532

 

 

 

(39,419

)

 

 

126,951

 

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

 

 

965

 

 

 

3,662

 

 

 

(2,697

)

 

 

3,606

 

 

 

97,589

 

 

 

(93,983

)

Foreign currency transaction (gain) loss

 

 

(68

)

 

 

155

 

 

 

(223

)

 

 

(93

)

 

 

188

 

 

 

(281

)

Transaction and equity offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,721

 

 

 

(7,721

)

Acquisition integration costs

 

 

560

 

 

 

1,998

 

 

 

(1,438

)

 

 

1,938

 

 

 

5,500

 

 

 

(3,562

)

Restructuring charges and other

 

 

108

 

 

 

252

 

 

 

(144

)

 

 

343

 

 

 

1,362

 

 

 

(1,019

)

Fair market value adjustment for asset classified as held for sale

 

 

 

 

 

 

 

 

 

 

 

986

 

 

 

 

 

 

986

 

Adjusted EBITDA

 

$

29,745

 

 

$

26,407

 

 

$

3,338

 

 

$

94,312

 

 

$

72,941

 

 

$

21,371

 

(a)

 

Includes seven months of results from the Skyline operations.

 

SKYLINE CHAMPION CORPORATION

RECONCILIATION OF NET INCOME (LOSS) 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 28,

2019

 

 

December 29,

2018

 

 

December 28,

2019

 

 

December 29,

2018 (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

17,037

 

 

$

10,513

 

 

$

52,162

 

 

$

(67,365

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

786

 

 

 

3,314

 

 

 

3,000

 

 

 

95,358

 

Transaction and equity offering costs

 

 

 

 

 

 

 

 

 

 

 

6,879

 

Acquisition integration costs

 

 

422

 

 

 

1,359

 

 

 

1,460

 

 

 

3,740

 

Restructuring charges and other

 

 

81

 

 

 

85

 

 

 

259

 

 

 

1,018

 

Fair market value adjustment for asset classified as held for sale

 

 

 

 

 

 

 

 

743

 

 

 

 

Adjusted net income

 

 

18,326

 

 

 

15,271

 

 

 

57,624

 

 

 

39,630

 

Less: Undistributed earnings allocated to participating securities

 

 

47

 

 

 

125

 

 

 

217

 

 

 

1,371

 

Adjusted net income attributable to the Company's common shareholders

 

$

18,279

 

 

$

15,146

 

 

$

57,407

 

 

$

38,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic net income per share

 

$

0.32

 

 

$

0.27

 

 

$

1.02

 

 

$

0.73

 

Adjusted diluted net income per share

 

$

0.32

 

 

$

0.27

 

 

$

1.01

 

 

$

0.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average basic shares outstanding

 

 

56,521

 

 

 

56,249

 

 

 

56,457

 

 

 

52,595

 

Average diluted shares outstanding

 

 

56,788

 

 

 

56,249

 

 

 

56,705

 

 

 

52,595

 

(a)

 

Includes seven months of results from the Skyline operations.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200128005607/en/

Contacts

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