Form 8-K/A - Current report: [Amend]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

    Date of Report (Date of earliest event reported): October 13, 2023

   

SKYLINE CHAMPION CORPORATION

(Exact name of Registrant as Specified in Its Charter)


Indiana	001-04714	35-1038277
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS 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: (248) 614-8211

   

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

Introductory Note

As previously reported by Skyline Champion Corporation (the “Company”) in its Current Report on Form 8-K filed on October 19, 2023 (the “Original Filing”), on October 13, 2023, the Company completed the acquisition of 100% of the equity interests (the “Transaction”) of Regional Enterprises, LLC and related companies (collectively, “Regional Homes”), which prior to the Transaction were subsidiaries of Regional Holdings Corporation.

The Company is filing this Current Report on Form 8-K/A (this “Amendment”) to amend and supplement the Original Filing to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.

Except as described above, no other changes have been made to the Original Filing and this Amendment does not modify or update any other information in the Original Filing. Information in the Original Filing not affected by the inclusion of the financial information described above and attached hereto remains unchanged. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Company’s filings with the Securities and Exchange Commission dated subsequent to the date of the Original Filing.

Item 9.01 Financial Statements and Exhibits.


a)	Financial statements of the businesses acquired

The audited consolidated financial statements of Regional Holdings Corporation as of and for the year ended December 31, 2022, which include the financial information of Regional Homes (in addition to certain subsidiaries not acquired in the Transaction), are filed as exhibit 99.1 to this Amendment and incorporated by reference herein.

The unaudited consolidated financial statements of Regional Holdings Corporation as of and for the six months ended June 30, 2023, which include the financial information of Regional Homes (in addition to certain subsidiaries not acquired in the Transaction), are filed as exhibit 99.2 to this Amendment and incorporated by reference herein.


b)	Pro forma financial information

(i) the Company’s unaudited pro forma condensed combined balance sheet as of September 30, 2023, after giving effect to the Transaction as if it had been completed on September 30, 2023; (ii) the Company’s unaudited pro forma condensed combined income statements for the six months ended September 30, 2023 and the year ended April 1, 2023 after giving effect to the Transaction, in each case, as if it had been completed on April 3, 2022; and (iii) the related notes to the unaudited pro forma financial information, filed as Exhibit 99.3 to this Amendment and incorporated by reference herein.


c)	Exhibits

The following exhibits are furnished herewith:


Exhibit No.	Description
23.1	Consent of BMSS, LLC (as successor in interest to Haddox Reid Eubank Betts PLLC).
99.1	Audited consolidated financial statements of Regional Holdings Corporation and Subsidiaries as of and for the year ended December 31, 2022.
99.2	Unaudited consolidated financial statements of Regional Holdings Corporation as of and for the six months ended June 30, 2023.
99.3	Unaudited pro forma condensed combined financial statements of Skyline Champion Corporation as of and for the six months ended September 30, 2023 and for the year ended April 1, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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 hereunto duly authorized.


			Skyline Champion Corporation

Date:	December 28, 2023	By:	/s/ Robert Spence
			Robert Spence Senior Vice President, General Counsel and Secretary

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-227539) of Skyline Champion Corporation of our report dated May 18, 2023 with respect to the consolidated financial statements of Regional Holdings Corporation and subsidiaries as of and for the year ended December 31, 2022 appearing in the Current Report on Form 8-K/A of Skyline Champion Corporation.

Please be advised that Haddox Reid Eubank Betts PLLC merged with and into BMSS, LLC effective December 1, 2023. Consequently, any references to Haddox Reid Eubank Betts PLLC in our report should now be read as a reference to BMSS, LLC.

/s/ BMSS, LLC

Ridgeland, Mississippi

December 28, 2023

REGIONAL HOLDINGS CORPORATION

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR’S REPORT

December 31, 2022

CONTENTS

    DESCRIPTION

    PAGE

     
INDEPENDENT AUDITOR’S REPORT

1

     
FINANCIAL STATEMENTS:

3

     
Consolidated Balance Sheet

3

     
Consolidated Statement of Income

5

     
Consolidated Statement of Changes in Shareholder’s Equity

6

     
Consolidated Statement of Cash Flows

7

     
Notes to Consolidated Financial Statements

9

INDEPENDENT AUDITOR’S REPORT

To the Shareholder

Regional Holdings Corporation and subsidiaries

Flowood, Mississippi

Opinion

We have audited the accompanying consolidated financial statements of Regional Holdings Corporation and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2022, and the related consolidated statements of income, changes in shareholder’s equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Regional Holdings Corporation and subsidiaries as of December 31, 2022, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Regional Holdings Corporation and subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Regional Holdings Corporation and subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore,

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is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Regional Holdings Corporation and subsidiaries’ internal control. Accordingly, no such opinion is expressed.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Regional Holdings Corporation and subsidiaries’ ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ Haddox Reid Eubank Betts PLLC

Ridgeland, Mississippi

May 18, 2023

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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2022


ASSETS
	2022
CURRENT ASSETS:
Cash and cash equivalents	$	33,552,914
Accounts receivable, net of allowances		9,646,039
Floorplan loans receivable		3,304,112
Prepaid expenses and other		1,053,781
Inventories		187,522,216
Due from related party		204,022
Total current assets		235,283,084
PROPERTY AND EQUIPMENT,
net of accumulated depreciation		70,439,162
OTHER ASSETS:
Notes receivable		2,329,359
Operating lease right-of-use assets		2,985,249
Investments in equity securities		591,443
Investments in affiliates		14,149,243
Software and intangible assets		843,703
Goodwill		3,087,312
Total other assets		23,986,309

Total assets	$	329,708,555

LIABILITIES AND SHAREHOLDER'S EQUITY
	2022

CURRENT LIABILITIES:
Accounts payable	$	4,013,853
Customer deposits		4,336,139
Sales tax payable		754,023
Commissions payable		4,176,824
Accrued interest		928,909
Current maturities of notes payable		4,176,298
Current portion of operating lease liabilities		664,518
Current portion of floorplan loans		55,941,631
Other current liabilities		545,329
Total current liabilities		75,537,524

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - CONTINUED

DECEMBER 31, 2022



Notes payable, net of current maturities		96,540,459
Floorplan loans, net of current portion		58,855,872
Operating lease liabilities, net of current portion		2,401,562
Other		5,877,030
Total other liabilities		163,674,923
Total liabilities		239,212,447
SHAREHOLDER'S EQUITY
Controlling interest:
Class A voting common stock, no par; 10,000 shares authorized; 10,000 issued and outstanding at December 31, 2022		10,000
Additional paid-in capital		24,370,120
Retained earnings		65,590,347
Noncontrolling interest		525,641
Total equity		90,496,108
Total liabilities and shareholder's equity	$	329,708,555

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2022


	2022
SALES:
Home sales	$	400,663,628
Land sales		13,739,320
		414,402,948
COST OF SALES:
Home sales		299,464,723
Land sales		11,701,951
		311,166,674
GROSS PROFIT		103,236,274
RENTAL INCOME		7,454,134
OTHER OPERATING INCOME		1,175,057
TOTAL INCOME		111,865,465
OPERATING EXPENSES:
Selling, general, and administrative expenses		61,157,292
Captive insurance premiums		4,349,150
Charitable contributions		679,068
Depreciation and amortization		2,144,623
Total operating expenses		68,330,133
OPERATING INCOME		43,535,332
OTHER INCOME (EXPENSE):
Gain on sale of fixed assets		920,374
Interest expense		(10,107,031	)
Interest expense - related party		(332,134	)
Equity in income of affiliates		12,782,153
Investment (loss)		(184,422	)
Total other income		3,078,940
CONSOLIDATED NET INCOME	$	46,614,272
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		639,417
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS	$	45,974,855

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2022


	Class A
	Voting		Additional					Total
	Common		Paid-In		Retained			Controlling			Noncontrolling
	Stock		Capital		Earnings			Interest			Interests			Total
BALANCE, January 1, 2022	$	10,000	$	23,360,643	$	36,815,771		$	60,186,414		$	758,320		$	60,944,734

Cash contributed		-		1,009,477		-			1,009,477			102,500			1,111,977
Net income		-		-		45,974,855			45,974,855			639,417			46,614,272
Dividends and distributions		-		-		(17,200,279	)		(17,200,279	)		(974,596	)		(18,174,875	)
BALANCE, December 31, 2022	$	10,000	$	24,370,120	$	65,590,347		$	89,970,467		$	525,641		$	90,496,108

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2022


	2022
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Net income	$	46,614,272
Adjustments to reconcile net income to net cash used in operating activities:
Equity in income of affiliates		(12,782,153	)
Investment losses		230,309
Depreciation expense		2,144,623
Noncash operating lease expense		660,932
Amortization of debt issuance costs		35,382
Gain on disposal of fixed asset		(920,374	)
Increase in assets:
Accounts receivable		(6,596,874	)
Prepaid expenses and other assets		(784,009	)
Inventories		(41,927,721	)
Increase (decrease) in liabilities:
Customer deposits		(1,823,192	)
Accounts payable		(137,167	)
Commissions payable		1,388,230
Unearned revenue		(4,122,396	)
Accrued expenses		479,123
Other current liabilities		71,224
Operating lease liabilities		(580,101	)
Other noncurrent liabilities		(714,392	)
Net cash used in operating activities, net of effects from acquisitions		(18,764,284	)
Cash flows from investing activities:
Purchases of property and equipment		(14,160,361	)
Proceeds from sale of property and equipment		3,209,807
Purchases of investments		(327,950	)
Proceeds from sale of investments		152,055
Issuances on notes receivable		(38,250	)
Collections on notes receivable		1,196,596
Distributions from affiliates		11,318,108
Net decrease in floorplan loans receivable		1,257,979
Additions to intangible assets		(698,824	)
Due from related parties, net		(167,656	)
Net cash provided by investing activities		1,741,504

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED

YEAR ENDED DECEMBER 31, 2022


Cash flows from financing activities:
Notes payable payments		(21,877,418	)
Notes payable proceeds		43,213,629
Floorplan lines of credit - payments		(200,073,216	)
Floorplan lines of credit - proceeds		220,777,434
Dividends and distributions		(18,174,875	)
Capital contributions		1,111,977
Net cash provided by financing activities		24,977,531

NET INCREASE IN CASH AND CASH EQUIVALENTS		7,954,751

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		25,598,163

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	33,552,914

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:

Cash paid during the year for interest	$	9,924,660

SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:

Operating lease right-of-use assets and lease liabilities recognized at January 1, 2022	$	3,646,181

Operating lease right-of-use assets and lease liabilities recognized during 2022	$	50,233

The accompanying notes are an integral part of these financial statements.

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Regional Holdings Corporation (the Company) operations consist of retail, manufacturing, and leasing of manufactured homes, modular homes, and recreational vehicles primarily in the Southeastern United States. The Company also engages in commercial and recreational real estate investing. At December 31, 2022, the Company operated 43 home centers in Mississippi (19), Louisiana (8), Alabama (7), Florida (3), South Carolina (3), North Carolina (2), and Texas (1) and a 900+ manufactured housing unit lease portfolio. The Company’s manufacturing division consists of 4 facilities in northwest Alabama through a 33% interest. Subsequent to December 31, 2022, the Company effectively purchased the other two thirds membership as disclosed further in Note 10.

Retail

The Company’s retail division operates primarily under the Regional Homes and Town & Country Homes brands (Regional Enterprises). In addition to the 43 home centers, it also conducts commercial operations. The commercial division of Retail supplies homes to various manufactured home communities, with locations stretching from Kansas to Florida.

In support of the retail operations, the Company owns the commercial property on which several of its home centers operate and two commercial office buildings, including the Company’s headquarters located in Flowood, Mississippi. The Company also provides inventory floorplan financing to Regional Enterprises and various other independent dealers who purchase homes from the Company’s manufacturing division. The Company also performs last-mile delivery and setup for some of its home centers.

Manufacturing

The Company’s manufacturing division operates under the Hamilton Homebuilders and Winston Homebuilders brands and constructs factory-built manufactured and modular homes sold to the Company’s retail division, other independent home centers, and manufactured home communities. Hamilton Homebuilders produces a mid-range price point home while Winston Homebuilders produces a high-end product. The retail division of the Company accounted for 63% of production in 2022. The Company is a one-third (1/3) owner in the manufacturing division which is presented as an equity investment in the consolidated financial statements.

Leasing

The Company’s leasing division is engaged in the purchasing, leasing, and management of individual and commercial manufactured home residential rental units in Mississippi, Alabama, Louisiana, Georgia, South Carolina, and Florida. The leasing division also includes a commercial real estate in Mississippi.

Other Operations

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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

owner in an entity which owns and operates an aircraft used by Company management. The aircraft entity is presented as an equity investment in the consolidated financial statements.

Basis of Accounting and Principles of Consolidation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles accepted in the United States of America. The consolidated financial statements include the accounts of Regional Holdings Corporation and all majority-owned subsidiaries as of December 31, 2022. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all checking accounts, undeposited cash and checks, and certificates of deposit with maturities of ninety days or less to be cash and cash equivalents.

Accounts Receivable

The Company’s receivables arise in the normal course of business and are accounted for under the reserve method whereby an allowance for doubtful accounts is utilized to reduce the receivables to the net realizable value. The allowance is based upon management’s review of outstanding receivables, historical collection information, and existing economic conditions. Receivables are charged to the allowance account when they are deemed to be uncollectible. As of December 31, 2022, the Company had an allowance for doubtful accounts of $335,000.

Floor Plan Loans Receivable

Generally, the majority of a mobile home dealership’s inventory is financed through a financing institution, such as is offered by the Company through one of its subsidiaries. That arrangement is often referred to as being floor planned and is covered by a written contract between the Company and the dealership that establishes the maximum that can be borrowed under the plan.

Floor plan loans are secured by the dealership’s inventory and normally will be settled within a year as the related inventory is sold. The floor plan loans bear interest at effective rates that vary depending on the terms of each dealership's respective loan agreement(s).

The Company provides an allowance for uncollectible loans that is maintained at a level that, in management’s opinion, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio on an individual loan basis, including the nature of the portfolio, changes in its risk profile, credit concentrations, historical trends and existing economic conditions, as well as the balance of impaired loans. As of December 31, 2022, all floor plan loans receivables not eliminated through divisional or company consolidation were issued to third party borrowers, and the Company had no non- accrual loans, no impaired loans, and no allowance for loan losses. No concessions have been granted on repayment terms.

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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Inventories

Inventories of new and used manufactured or modular housing and recreational vehicles are valued using the specific cost identification method, not to exceed market values.

Property and Equipment

Property and equipment are stated at cost. The Company provides for depreciation using the straight-line method over the estimated useful lives of the various classes of property, ranging from 5 to 39 years. Expenditures for renovations and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. At the time of retirement or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.

Intangible Assets

Intangible assets subject to amortization consist primarily of an internally developed enterprise resource planning system (ERP). ERP costs are amortized using the straight-line method over the estimated period benefited, which is generally 5 years.

Goodwill represents the excess of the purchase price of businesses acquired over the fair value of net tangible and identifiable assets acquired. The Company evaluates the recoverability of goodwill by estimating the future cash flows of the business reporting segments to which the intangible relates. This evaluation is made annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Management of the Company has determined that no impairment losses exist as of December 31, 2022.

Impairment of Long-Lived Assets

It is the Company’s policy to evaluate the recoverability of long-lived assets, such as property, plant, and equipment, operating lease right-of-use assets and amortizable intangible assets, whenever events and changes in circumstances indicate that the carrying amount of assets may not be recoverable. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon a combination of market and cost approaches, as appropriate. No impairment losses were recorded in the year ended December 31, 2022.

Long-lived assets expected to be sold or otherwise disposed of within one year are classified as assets held for sale and included in other current assets in the consolidated balance sheet. The Company had no assets classified as held for sale at December 31, 2022.

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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Investments in Affiliated Entities

The Company’s investments in affiliated entities are accounted for under the equity method if the Company has the ability to exert significant influence over the affiliate’s operating and financial policies (generally defined as an ownership interest greater than twenty percent but not more than fifty percent of the affiliate). The investments in affiliated entities accounted for under the equity method are recorded at cost and adjusted for the Company’s share of undistributed earnings and losses.

Revenue Recognition

The Company recognizes revenue for the transfer of goods or services to customers in an amount that reflects the consideration the Company has received for those goods or services. The Company’s Retail operation recognizes revenues when products are available for customer possession and substantially all proceeds related to the sale are received or upon the satisfaction of all contractual obligations. The performance obligations related to these services are considered satisfied at the time the products are available for customer possession or upon the satisfaction of all contractual obligations. Any performance obligations related to warranties and repairs are the responsibility of the manufacturers and not the Company. Revenues from rentals are recorded as they accrue. Land sales are recorded at the time the title and risk of ownership pass.

Customer Deposits

Customer deposits for the Retail division of the Company are down payments received from a customer for the purchase of a manufactured or modular home. Once the home is delivered to the customer’s site and the sale is finalized, the deposit is recognized as revenue.

Leases

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-02 “Leases” (Topic 842), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Lease liabilities are recognized at the present value at the future minimum lease payments over the lease term as of the commencement date plus any option periods that are probable of being exercised at the lease inception. Lease assets are recognized at the present value of future minimum lease payments over the lease term as of the commencement date, plus any initial direct costs incurred and lease payments made, less any lease incentives received. After the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis. The accounting applied by a lessor is substantially equivalent to the previous guidance.

Topic 842 requires entities to use a modified retrospective transition method. The Company elected to apply the effective date adoption method with an effective date of January 1, 2022, and has elected to use the available package of practical expedients. There was no impact to retained earnings as a result of the adoption. The recognized balance of the ROU assets and liabilities were approximately $3,000,000 as of the effective date.

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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

The Company determines if an arrangement contains a lease at inception. If an arrangement is considered a lease, the Company determines at the commencement date whether the lease is an operating or finance lease. The Company only has operating leases and therefore, after the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis. The Company has made a policy election to classify leases with an initial lease term of 12 months or less as short-term leases, and these leases are not recorded in the accompanying consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised. Lease cost related to short-term leases is recognized on a straight-line basis over the lease term.

Income Taxes

The Company has elected to be taxed as a “small business corporation” under federal and state statutes and is therefore, not subject to federal and state income taxes and is considered a partnership for income tax purposes. The shareholder is liable for individual federal and state income taxes on his respective portions of the Company’s taxable income.

Management does not anticipate any adjustments from any tax authorities that would result in a material change to the Company’s financial position. The Company has not recognized a provision for any unrecognized tax benefits, or interest or penalties thereon, in the accompanying consolidated balance sheet.

Recently Issued Accounting Pronouncements Pending Adoption

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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of December 31, 2022:



	2022
Land	$	34,329,021
Buildings/Office units		43,598,399
Vehicles and equipment		1,915,379
		79,842,799
Less accumulated depreciation		9,403,637
	$	70,439,162

- 13 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Depreciation expense for the year ended December 31, 2022 was $2,005,421.

NOTE 3 - INVESTMENTS IN AFFILIATED ENTITIES

The Company’s ownership interest in these affiliated entities is comprised of the following as of December 31, 2022


Hamilton Home Builders and Affiliates	33	%
Aviation Group, LLC	33	%

The summarized financial position, results of operations and composition of the Company’s total investment in these affiliated entities as of December 31, 2022 and for the year then ended are as follows:



	Hamilton Home Builders and Affiliates		Aviation Group			Total
Combined entities:
Assets	$	89,366,674	$	836,330		$	90,203,004
Liabilities		32,837,465		-			32,837,465
Shareholder's equity		56,529,209		836,330			57,365,539
Revenue		327,799,000		73,621			327,872,621
Net income		45,430,978		(429,605	)		45,001,373
Company's investment:
Shareholder's equity		13,929,094		220,149			14,149,243
Net income		13,056,931		(274,778	)		12,782,153

The Company purchases certain inventories from its related manufacturing activities, Hamilton Homebuilders and Winston Homebuilders (Manufacturing). Manufacturing sells these inventories to the Company at market prices and recognizes gross profit on these sales. Inventories held by the Company at December 31, 2022 include purchases from Manufacturing, for which the Company’s share of Manufacturing’s gross profit is not realized until sold to an unrelated party. As such, the Company’s investment in affiliates, as shown on the consolidated balance sheet, related to Manufacturing at December 31, 2022 has been reduced by $4,925,503. Likewise, the Company’s share of equity in income of affiliates, as shown on the consolidated statement of income, related to Manufacturing has been reduced by $2,051,214. This reduction represents the change in the Company’s unrealized share of Manufacturing’s gross profit from December 31, 2021 to December 31, 2022.

- 14 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

NOTE 4 - CREDIT FACILITIES AND DEBT

The Company’s debt at December 31, 2022, consists of notes payable to banks and other financial institutions as follows:


	2022
Revolving lines of credit with interest due monthly; fixed, capped variable, and variable rates ranging from 4.75% to 9.00% at December 31, 2022, based on benchmark interest rate(s) plus or minus applicable spread(s); maturing from May 2024 to January 2027; secured by inventory.	$	121,914,588
Revolving line of credit with interest rates of 5% at December 31, 2022 secured by real estate.		3,093,899
Notes payable with interest payments due quarterly at fixed rates ranging from 5.50% to 7.00%; matures December 31, 2024.		33,739,000
Notes payable with fixed and variable interest rates adjusted in 2026 based on benchmark interest rate(s) plus or minus applicable spread(s); Rates ranging from 2.99% to 5.00%; maturing from March 2026 to February 2036; secured by real estate.		11,130,276
Note payable to related party with interest rate of 6.00%; interest due monthly; principal matures December 2029.		5,459,740
Notes payable with fixed and capped variable interest rates ranging from 4.25% to 7.00% based on benchmark interest rate(s) plus applicable spread(s); maturing from June 2024 to June 2031; secured by real estate and manufactured homes leased to customers.		11,771,276
Note payable with an interest rate of 3.25% monthly payments of $23,136; matures January 2026; secured by real estate.		2,945,275
Notes payable with interest rates ranging from 2.70% to 7.50%; maturing from June 2023 to October 2033; secured by real estate.		22,262,652
Revolving line of credit with interest due monthly based on prime; maturing November 2024; secured by real estate.		3,197,554
Total long-term debt		215,514,260
Less current maturities		60,117,929
Amounts due in more than one year	$	155,396,331

Approximate maturities of long-term debt for the years subsequent to December 31, 2022 are as follows:


2023	$	60,117,929
2024		73,580,105
2025		13,057,999
2026		8,057,646
2027		38,825,077
Thereafter		21,875,504
	$	215,514,260

NOTE 5 - CASH AND CASH EQUIVALENTS

Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed Federally insured limits. The Company has never experienced any losses related to these balances.

- 15 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

NOTE 6 - LEASES

As discussed in Note 1, the Company adopted the new lease accounting standard effective January 1, 2022. The Company’s financial results for reporting periods beginning on or after January 1, 2022, are presented under the new standard, while financial results for prior periods continue to be reported in accordance with the prior standard and the Company’s historical accounting policy.

The Company leases office space in various locations under operating leases. The basic lease period is generally two to five years and most leases contain renewal options which give the Company the right to extend the lease for varying periods. Rent expense for 2022 totaled $1,311,126. Future minimum rental payments due under operating leases for fiscal years subsequent to December 31, 2022, are as follows:


2023	$	803,999
2024		709,289
2025		584,053
2026		537,289
2027		327,466
Thereafter		548,924
Total lease payments		3,511,020
Less imputed interest		(444,940	)
Total lease liabilities	$	3,066,080

The weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2022 was 6.59 years. The weighted-average discount rate related to the Company’s lease liabilities as of December 31, 2022 was 5.13%. The Company has elected to use its incremental borrowing rate which reflects the fixed rate at which the Company would borrow a similar amount.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company has pending legal claims incurred in the normal course of business. The claims, in the opinion of management, can be disposed of without material adverse effect on the financial position or results of operations of the Company.

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company utilizes two captive insurers, Regional Underwriters, Inc. and JC Underwriters, Inc. to insure various aspects of the Company’s operations. A captive insurer is generally defined as an insurance company that is wholly-owned and controlled by its insureds to insure the risk of its owners and insureds. The captive insurers and the Company have common owners. In 2022, the Company paid and expensed insurance premiums totaling $4,349,150, to these related party captives for insurance against uninsured or underinsured properties.

NOTE 9 - SUBSEQUENT EVENTS

On January 27, 2023, the other two-thirds membership interests in Hamilton were redeemed for a total purchase price of $30,000,000 with an effective date of January 1, 2023. Of the total purchase price,

- 16 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

$29,550,000 was redeemed by Hamilton and $450,000 was redeemed by the Company and a related entity held 100% by the Company’s owner. The purchase agreement stipulated that $10,000,000 was payable in cash at the closing date and the remaining $20,000,000 is payable pursuant to promissory notes entered into between Hamilton and the selling members. Principal and interest payments are payable in ten semi-annual payments beginning July 27, 2023 and ending January 27, 2028. The notes bear interest at 3.84%. These notes are subordinate to existing and future indebtedness of the Company and are subject to the right to offset as defined in the purchase agreement. In the event there is a change of control of Hamilton, any outstanding principal and interest is payable immediately upon consummation of the change in control.

The Company has evaluated subsequent events through May 18, 2023, the date the financial statements were approved by management and thereby available to be issued and except as discussed above has determined that there are no subsequent events of a material nature requiring adjustment to or disclosure in the accompanying consolidated financial statements

- 17 -

REGIONAL HOLDINGS CORPORATION

AND SUBSIDIARIES

CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR’S REVIEW REPORT

JUNE 30, 2023

CONTENTS

    DESCRIPTION

    PAGE

     
INDEPENDENT AUDITOR’S REVIEW REPORT

1

     
FINANCIAL STATEMENTS:

2

     
Consolidated Balance Sheet (unaudited)

2

     
Consolidated Statement of Income (unaudited)

4

     
Consolidated Statement of Changes in Shareholder’s Equity (unaudited)

5

     
Consolidated Statement of Cash Flows (unaudited)

6

     
Notes to Consolidated Financial Statements (unaudited)

8

Independent Auditor's Review Report

To the Shareholder

Regional Holdings Corporation and Subsidiaries

Flowood, Mississippi

Results of Review of Interim Financial Information

We have reviewed the accompanying financial statements of Regional Holdings Corporation and subsidiaries which comprise the consolidated balance sheet as of June 30, 2023, and the related consolidated statements of income, changes in shareholder’s equity and cash flows for the six months then ended, and the related notes to the consolidated financial statements (collectively referred to as the interim financial information).

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.

Basis for Review Results

We conducted our review in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Regional Holdings Corporation and subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

Responsibilities of Management for the Interim Financial Information

Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

/s/ BMSS, LLC

Ridgeland, Mississippi

December 28, 2023

- 1 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)


ASSETS
	June 30, 2023
CURRENT ASSETS:
Cash and cash equivalents	$	70,219,266
Accounts receivable, net of allowances		49,506,363
Floorplan receivable		2,058,798
Investments		30,000
Prepaid expenses and other current assets		2,181,692
Inventory		163,449,403
Due from related party		3,699,324
Total current assets		291,144,846
PROPERTY AND EQUIPMENT,
net of accumulated depreciation		112,506,098
OTHER ASSETS:
Investments in affiliates		220,148
Notes receivable		7,643,328
Operating lease right-of-use assets		4,494,184
Software and intangible assets, net of accumulated amortization		19,697,358
Goodwill		125,233,376
Total other assets		157,288,394
Total assets	$	560,939,338

LIABILITIES AND SHAREHOLDER'S EQUITY
	June 30, 2023

CURRENT LIABILITIES:
Accounts payable	$	10,194,306
Customer deposits		7,397,989
Sales tax payable		1,134,487
Commissions payable		2,361,356
Accrued warranty obligations		9,465,771
Accrued interest		1,822,987
Current maturities of long-term debt		4,545,182
Current portion of operating lease liabilities		731,418
Current portion of floorplan debt		56,870,323
Other current liabilities		8,900,165
Total current liabilities		103,423,984

The accompanying notes are an integral part of these statements.

- 2 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - CONTINUED

(Unaudited)


NONCURRENT LIABILITIES:
Notes payable, net of current maturities		141,289,168
Floorplan loans, net of current portion		34,943,529
Operating lease liabilities, net of current portion		3,618,098
Other noncurrent liabilities		6,139,312
Total noncurrent liabilities		185,990,107
Total liabilities		289,414,091
SHAREHOLDER'S EQUITY
Controlling interest:
Class A voting common stock, no par; 10,000 shares authorized; 10,000 issued and outstanding on June 30, 2023		10,000
Additional paid-in capital		24,541,593
Retained earnings		245,624,420
Noncontrolling interest		1,349,234
Total equity		271,525,247
Total liabilities and shareholder's equity	$	560,939,338

The accompanying notes are an integral part of these statements.

- 3 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

FOR SIX MONTHS ENDED JUNE 30, 2023

(Unaudited)


	June 30, 2023
SALES:
Home sales	$	248,931,261
Land sales		8,228,217
		257,159,478
COST OF SALES:
Home sales		174,221,851
Land sales		7,190,003
		181,411,854
GROSS PROFIT		75,747,624
RENTAL INCOME		4,768,501
OTHER OPERATING INCOME		420,629
TOTAL INCOME		80,936,754
OPERATING EXPENSES:
Selling, general, and administrative expenses		38,931,986
Captive insurance premiums		2,175,720
Charitable contributions		474,799
Depreciation and amortization		3,867,165
Total operating expenses		45,449,670
OPERATING INCOME		35,487,084
OTHER INCOME (EXPENSE):
Loss on sale of fixed assets		(242,120	)
Gain on consolidation of affiliate		153,001,509
Interest expense		(6,860,084	)
Interest expense - related party		(215,202	)
Investment income		451,095
Total other income		146,135,198
CONSOLIDATED NET INCOME	$	181,622,282
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		39,201
NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS	$	181,583,081

The accompanying notes are an integral part of these statements.

- 4 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY

FOR SIX MONTHS ENDED JUNE 30, 2023

(Unaudited)


	Class A
	Voting		Additional					Total
	Common		Paid-In		Retained			Controlling			Noncontrolling
	Stock		Capital		Earnings			Interest			Interests			Total
BALANCE, January 1, 2023	$	10,000	$	24,370,120	$	65,590,347		$	89,970,467		$	525,641		$	90,496,108

Cash contributed		-		171,473		-			171,473			820,000			991,473
Net income		-		-		181,583,081			181,583,081			39,201			181,622,282
Dividends and distributions		-		-		(1,549,008	)		(1,549,008	)		(35,608	)		(1,584,616	)
BALANCE, June 30, 2023	$	10,000	$	24,541,593	$	245,624,420		$	270,176,013		$	1,349,234		$	271,525,247

The accompanying notes are an integral part of these statements.

- 5 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR SIX MONTHS ENDED JUNE 30, 2023

(Unaudited)


	June 30, 2023
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Net income	$	181,622,282
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on consolidation of affiliate		(153,001,509	)
Investment gains		(49,481	)
Depreciation and amortization expense		3,867,165
Amortization of debt issuance costs		35,986
Loss on sale of fixed asset		242,120
Changes in operating assets and liabilities, net of effect of consolidation of affiliate:
(Increase) decrease in assets:
Accounts receivable		(35,254,616	)
Prepaid expenses and other current assets		(412,092	)
Inventory		43,911,702
Operating right-of-use asset, net		(26,727	)
Increase (decrease) in liabilities:
Customer deposits		2,136,756
Accounts payable		4,025,032
Commissions payable		(1,815,468	)
Accrued warranty obligations		512,361
Other accrued expenses		(173,844	)
Other current liabilities		4,931,100
Other noncurrent liabilities		262,282
Net cash provided by operating activities		50,813,049
Cash flows from investing activities:
Purchases of property and equipment		(18,644,075	)
Proceeds from sale of property and equipment		757,361
Proceeds from sale of investments		610,924
Cash acquired in consolidation of affiliate, net of cash paid		19,601,156
Net decrease in floorplan loans receivable		1,245,314
Additions to software		(134,500	)
Due from affiliated entities, net		(3,495,302	)
Net cash used in investing activities		(59,122	)

The accompanying notes are an integral part of these statements.

- 6 -

REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED

FOR SIX MONTHS ENDED JUNE 30, 2023

(Unaudited)


Cash flows from financing activities:
Principal payments received on notes receivable		79,781
Principal proceeds issued on notes receivable		(80,000	)
Notes payable - payments		(20,930,251	)
Notes payable - proceeds		30,419,689
Floorplan lines of credit - payments		(103,747,034	)
Floorplan lines of credit - proceeds		80,763,383
Member distributions		(1,584,616	)
Member contributions		991,473
Net cash used in financing activities		(14,087,575	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		36,666,352

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		33,552,914

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	70,219,266

SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:

Operating lease right-of-use assets and lease liabilities recognized during the six months ended June 30, 2023	$	907,257

The accompanying notes are an integral part of these statements.

- 7 -

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Regional Holdings Corporation (the Company) operations consist of retail, manufacturing, and leasing of manufactured homes, modular homes, and recreational vehicles primarily in the Southeastern United States. The Company also engages in commercial and recreational real estate investing. As of June 30, 2023, the Company operated 43 home centers in Mississippi (19), Louisiana (8), Alabama (7), Florida (3), South Carolina (3), North Carolina (2), and Texas (1) and a 900+ manufactured housing unit lease portfolio. The Company’s manufacturing division consists of 4 facilities in northwest Alabama.

Retail

The Company’s retail division operates primarily under the Regional Homes and Town & Country Homes brands (Regional Enterprises). In addition to the 43 home centers, it also conducts both governmental and commercial operations. The commercial division of Retail supplies homes to various manufactured home communities, with locations stretching from Kansas to Florida.

In support of the retail operations, the Company owns the commercial property on which several of its home centers operate and two commercial office buildings, including the Company’s headquarters located in Flowood, Mississippi. The Company also provides inventory floorplan financing to various independent dealers who purchase homes from the Company’s manufacturing division. The Company also performs last-mile delivery and setup for some of its home centers.

Manufacturing

The Company’s manufacturing division operates under the Hamilton Homebuilders and Winston Homebuilders brands and constructs factory-built manufactured and modular homes sold to the Company’s retail division, other independent home centers, and manufactured home communities. Hamilton Homebuilders produces a mid-range price point home while Winston Homebuilders produces a high-end product. The retail division of the Company accounted for 76% of production for the six months ended June 30, 2023.

Leasing

Other Operations

The Company engages in recreational real estate investing. These investments are typically held for 0-2 years and are sold to both individual and commercial customers. The Company is also a one-third (1/3) owner in an entity which owns and operates an aircraft used by Company management. The aircraft entity is presented as an equity investment in the consolidated financial statements.

Basis of Accounting and Principles of Consolidation

The accompanying unaudited consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles accepted in the United States of America. The

- 8 -

consolidated financial statements include the accounts of Regional Holdings Corporation and all majority-owned subsidiaries as of June 30, 2023. All significant intercompany transactions and balances have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited financial statements for the Company's audited consolidated financial statements and independent auditor's report as of and for the year ended December 31, 2022.

Cash and Cash Equivalents

The Company considers all checking accounts, undeposited cash and checks, and certificates of deposit with maturities of ninety days or less to be cash and cash equivalents. Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed Federally insured limits. The Company has never experienced any losses related to these balances.

Notes Receivable

The Company has notes receivable predominantly related to New Market Tax Credit (''NMTC'') (See Note 6) and retail. The note receivable related to NMTC is collateralized by a limited liability company membership interest and is stated at the principal amount. Management assesses the credit quality of the notes receivable based on indicators such as collection experience as well as collateralization in relation to the NMTC note receivable. There was no allowance on notes receivable recorded as of June 30, 2023.

Accounts Receivable

The Company’s receivables arise in the normal course of business and are accounted for under the reserve method whereby an allowance for doubtful accounts is utilized to reduce the receivables to the net realizable value. Effective January 1, 2023, the Company adopted Accounting Standard Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which replaced the existing incurred credit loss model with the current expected credit loss model ("CECL"). The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements. The Company's allowance for credit losses reflects management's estimate of credit losses over the remaining expected life of the receivables and is based upon management’s review of outstanding receivables, historical collection information, and existing economic conditions. Receivables are charged to the allowance account when they are deemed to be uncollectible. As of June 30, 2023, the Company had allowance for doubtful accounts of $335,000. On a continuing basis, management analyzes delinquent receivables and, once these receivables are determined to be uncollectible, they are written off through a charge against an existing allowance account or against earnings.

Floor Plan Loans Receivable

- 9 -

allowance is based on management’s evaluation of the collectability of the loan portfolio on an individual loan basis, including the nature of the portfolio, changes in its risk profile, credit concentrations, historical trends and existing economic conditions, as well as the balance of impaired loans. As of June 30, 2023, all floor plan loans receivables not eliminated through divisional or company consolidation were issued to third party borrowers, and the Company had no non- accrual loans, no impaired loans, and no allowance for loan losses. No concessions have been granted on repayment terms.

Inventories

Inventories of new and used manufactured or modular housing and recreational vehicles are valued using the specific cost identification method, not to exceed market values. Inventories are stated at the lower of cost or net realizable value. Cost of inventories is computed by the first-in, first-out method.

Inventories consisted of the following as at June 30, 2023:


	June 30, 2023
Raw materials	$	12,431,373
Work in process		1,443,516
Finished goods		149,574,514
	$	163,449,403

At June 30, 2023 reserves for obsolete inventory were immaterial.

Property and Equipment

Property and equipment are stated at cost. The Company provides for depreciation using the straight-line method over the estimated useful lives of the various classes of property, ranging from 5 to 40 years. Expenditures for renovations and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. At the time of retirement or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.

Intangible Assets

Intangible assets subject to amortization consist primarily of an internally developed enterprise resource planning system (ERP), customer relationships and trade names. Intangible assets are amortized using the straight-line method over the estimated period benefited, which is generally 5 years for ERP and 10 years for customer relationships and trade names.

Goodwill represents the excess of the purchase price of businesses acquired over the fair value of net tangible and identifiable intangible assets acquired. The Company evaluates the recoverability of goodwill by estimating the future cash flows of the business reporting units to which the intangible relates. This evaluation is made annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Management of the Company has determined that no impairment losses exist as of June 30, 2023. At June 30, 2023, there are no accumulated impairment losses related to goodwill.

- 10 -

Impairment of Long-Lived Assets

It is the Company’s policy to evaluate the recoverability of long-lived assets, such as property, plant, and equipment, operating lease right-of-use assets and amortizable intangible assets whenever events and changes in circumstances indicate that the carrying amount of assets may not be recoverable. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon a combination of market and cost approaches, as appropriate. No impairment losses were recorded in the six months ended June 30, 2023.

Investments in Affiliated Entities

Revenue Recognition

The Company recognizes revenue for the transfer of goods or services to customers in an amount that reflects the consideration the Company has received for those goods or services. The Company’s Retail operation recognizes revenues when products are available for customer possession and substantially all proceeds related to the sale are received or upon satisfaction of all contractual obligations. The performance obligations related to these services are considered satisfied at the time the products are available for customer possession or upon the satisfaction of all contractual obligations. The Company's manufacturing division records revenue when the related product has shipped. Revenues from rentals are recorded as they accrue. Land sales are recorded at the time the title and risk of ownership pass.

Revenue is measured based on consideration specified in contracts with customers. The nature of the Company's business gives rise to variable considerations, which are discussed in the following paragraphs.

•

Rebates. The Company offers rebates to certain customers that are based on stocking levels with the customer. The Company records a liability for estimated rebates.

•

Floor plan interest. The Company has agreements with certain customers to reimburse the floor plan interest paid for a limited period of time and not to exceed a predetermined amount. The Company maintains a liability of estimated floor plan interest based on historical experience.

A single customer represented 19% of the Company’s net home sales and 87% of the Company's accounts receivable as of and for the six months ended June 30, 2023.

- 11 -

Customer Deposits

Customer deposits are down payments received from a customer for the purchase of a manufactured or modular home. Once the home is delivered to the customer’s site and the sale is finalized, the deposit is recognized as revenue.

Warranties

The manufacturing division provides a warranty for a period of one year from the date of retail sale that the product complies with agreed upon specifications. Estimated warranty costs are accrued as cost of sales at the time of sale. The Company maintains a liability of estimated warranty costs based on historical experience. Changes in accrued warranty obligations were as follows:


	June 30, 2023
Balance at beginning of period	$	8,953,000
Warranty expense		7,452,000
Cash warranty payments		(6,759,229	)
Balance at end of period	$	9,645,771

Debt Issuance Costs

The Company has incurred debt issuance costs totaling $774,255 related to debt outstanding as of June 30, 2023. These costs were capitalized and are expensed over the term of the related debt agreements. Accumulated amortization totaled $352,561 as at June 30, 2023. Amortization expense of the debt issuance cost totaled $35,986 for the six months ended June 30, 2023. Debt issuance costs are shown as a reduction of the carrying amount of the debt.

Income Taxes

Recently Issued Accounting Pronouncements Pending Adoption

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.

Use of Estimates

- 12 -

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2023:


	June 30, 2023
Land	$	36,825,806
Buildings/Office units		94,806,713
Vehicles and equipment		2,018,379
		133,650,898
Less accumulated depreciation		(21,144,800	)
	$	112,506,098

Depreciation expense for the six months ended June 30, 2023, was $2,774,480.

NOTE 3 - INVESTMENTS IN AFFILIATED ENTITIES

As of December 31, 2022, the Company had a one-third ownership interest in Hamilton Homebuilders, LLC and Affiliates (“Hamilton”). Effective January 1, 2023, the Company gained control of Hamilton when the remaining two-thirds membership interests were redeemed via $10,000,000 cash payment and $20,000,000 promissory notes entered into between Hamilton and the selling members. Prior to the redemption, the Company’s investment in Hamilton was accounted for under the equity method. This transaction was accounted for as a business combination achieved without the transfer of consideration, and accordingly, the acquisition date fair value of the Company’s interest in Hamilton was substituted for the acquisition date fair value of consideration transferred to measure Goodwill. The enterprise value of Hamilton was determined to be $216.9 million based upon an independent appraisal resulting in a gain on consolidation of Hamilton of $153.0 million, which includes a gain of $58.4 million from the remeasurement of the Company’s one-third ownership interest to fair value as of January 1, 2023.

A preliminary summary of the fair value of the assets acquired and liabilities assumed in the transaction is shown below:



Cash	$	29,922,151
Trade receivables		4,214,358
Inventory		22,457,127
Property, plant and equipment		27,336,318
Other assets		7,578,699
Accounts payable and accrued liabilities		(26,701,716	)
Long-term debt		(36,012,105	)
Intangibles		19,900,000
Goodwill		122,146,064
	$	170,840,895

Goodwill is primarily attributable to assembled workforce, expected synergies, and other intangibles that do not qualify for separate recognition. Intangible assets include $16.0 million in customer relationships and $3.9 million associated with trade names and were based on an independent appraisal related to the Company's subsequent events. The fair value of the customer relationships was determined using the

- 13 -

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.

The fair values of assets acquired and liabilities assumed are based on preliminary estimates using currently available information. The final fair values of the assets acquired and liabilities assumed and the resulting effect on the Company’s financial position and results of operations could materially differ from these preliminary estimates.

NOTE 4 - NOTE PAYABLE, CREDIT FACILITIES AND DEBT

The Company’s debt at June 30, 2023, consists of notes payable to banks and other financial institutions as follows:


	June 30, 2023
Revolving lines of credit with interest due monthly; fixed, capped variable, and variable rates ranging from 4.75% to 9.65% at June 30, 2023, based on benchmark interest rate(s) plus or minus applicable spread(s); maturing from May 2024 to January 2027; secured by inventory.	$	116,510,625
Revolving line of credit with interest rates of 5% at June 30, 2023 secured by real estate.		3,093,899
Notes payable with interest payments due quarterly at fixed rates ranging from 5.50% to 6.00%; matures December 31, 2024.		22,155,000
Notes payable with fixed and variable interest rates adjusted in 2026 based on benchmark interest rate(s) plus or minus applicable spread(s); Rates ranging from 2.99% to 5.00%; maturing from March 2026 to February 2036; secured by real estate.		10,731,319
Note payable with an interest rate of 6.5%: interest due monthly; principal matures in March 2026		8,610,000
Note payable with an interest rate of 8.5%: interest due monthly; principal matures in March 2026		1,230,000
Note payable to related party with interest rate of 6.00%; interest due monthly; principal matures December 2029.		8,459,741
Notes payable with fixed and capped variable interest rates ranging from 4.25% to 7.00% based on benchmark interest rate(s) plus applicable spread(s); maturing from June 2024 to June 2031; secured by real estate and manufactured homes leased to customers.		10,701,103
Note payable with an interest rate of 3.25% monthly payments of $23,136; matures January 2026; secured by real estate.		2,854,224
Notes payable with interest rates ranging from 3.70% to 6.00%; maturing from February 2024 to October 2033; secured by real estate.		18,122,297
Revolving line of credit with interest due monthly based on prime; maturing November 2024; secured by real estate.		3,197,554
Notes payable to Romeo Juliet, LLC, interest at 5.41546% on June 30, 2023, secured by real estate, assignment of rents, inventory, accounts receivable, and equipment, due December 31 2026 (Note A's); interest payments are due quarterly through maturity		5,313,750
Notes payable to Romeo Juliet, LLC, interest at 5.41546% on June 30, 2023, secured by real estate, assignment of rents, inventory, accounts receivable, and equipment, due September 30, 2039 (Note B's); interest payments are due quarterly through maturity		2,036,250
Note payable to a bank, interest at 3.85% and 6.75% on June 30, 2023, respectively, secured by a note receivable to the Company, due December 3 1, 2026 (Source Loan); principal and interest payments of $123,513 due quarterly through maturity		5,054,134
Promissory note with an interest rate of 3.84%; principal and all unpaid interest is due on January 27, 2028.		20,000,000
Unamortized debt issuance costs		(421,694	)
Total long-term debt		237,648,202
Less current maturities		61,415,505
Amounts due in more than one year	$	176,232,697

- 14 -

The Company's long-term debt obligations contain certain non-financial and financial covenants that include limiting distributions and requiring minimum levels of cash flow (as defined in the underlying debt agreements). The Company was in compliance with these covenants as of June 30, 2023. Cash outlays for interest amounted to $7,213,144 for the six months ended June 30, 2023.

Approximate maturities of long-term debt for the years subsequent to June 30, 2023, are as follows:


2024	$	61,415,505
2025		56,562,125
2026		17,607,350
2027		47,760,106
2028		2,397,246
Thereafter		52,327,564
	$	238,069,896

On September 4, 2019, Hamilton entered into a New Market Tax Credit ("NMTC") financing transaction to pay off existing debt and partially fund capital improvements. As part of this transaction, Liberty NMTC, LCC (''Liberty'') was formed and entered into a source loan and security agreement with United Bank of Alabama. The proceeds of the source loan were used to fund Liberty's loan to the HHB Investment Fund LLC ("Investment"), an unrelated party. Investment's sole investor, Wells Fargo Community Investment Holdings Inc. ("WFC"), contributed capital to Investment. WFC's contribution which represents its purchase of the tax credits through Investment's subsidiary, Romeo Juliet, LLC ("RJ"). A summary of the proceeds received by RJ follows:


Liberty's note proceeds	$	5,313,750
WFC capital contribution		2,486,250
Professional fees		(450,000	)
	$	7,350,000

Hamilton entered into the following note agreements with RJ:


Note A	$	5,313,750
Note B		2,036,250
	$	7,350,000

There is a put and call agreement between Hamilton and WFC. If WFC does not exercise their put option, Hamilton has the ability to call the ownership in the interest in the Investment for fair market value. It is anticipated that WFC will put their option and Hamilton will own the Investment at the end of the compliance period. However, if WFC does not put their interest, management plans to exercise its option to call. By acquiring the ownership interest, Hamilton will be in a position whereby it can forgive the NMTC notes payable, resulting in the elimination of $7,350,000 in outstanding debt at that point in time and recognize the benefits from the NMTC program. In turn, it is expected that Liberty would forgive the NMTC $5,313,750 note receivable described in Note 6.

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NOTE 5 - INTANGIBLE ASSETS

The components of intangible assets are as follows:


	Customer Relationships & Other			Trade Names			Total
Gross carrying amount	$	17,101,982		$	3,900,000		$	21,001,982
Accumulated amortization		(1,109,624	)		(195,000	)	$	(1,304,624	)
Amortizable Intangibles, net	$	15,992,358		$	3,705,000		$	19,697,358
Weighted average remaining amortization period, in years								9.4

Amortization of intangible assets was $1,092,685 for the six months ended June 30, 2023. Amortization expense of intangible assets over the next five years is estimated to be:


2024	$	2,129,200
2025		2,129,200
2026		2,129,200
2027		2,129,200
2028		2,129,200

NOTE 6 - NOTE RECEIVABLE

In September 2019, Hamilton made a note receivable to HBB Investment Fund, LLC (an unrelated party) linked to the Hamilton's financing obtained through the NMTC program described in Note 4. The note accrues interest at a rate of 6.9% per annum beginning September 4, 2019, through December 31, 2026 (Compliance period) at which point the entire principal balance is due. The balance on June 30, 2023 was $5,313,750.

The interest income on the note receivable was $193,624 for the six months ended June 30, 2023.

NOTE 7 - COMMITMENTS, CONTINGENCIES AND SIGNIFICANT ESTIMATES

The Company warrants its products for a period of one year from the date of retail sale by a dealer. These financial statements include estimated liabilities for the cost of such warranties. Although the estimates are based on management's best judgments, actual cash settlements of warranty claims will likely vary from estimated liabilities accrued.

The Company has pending legal claims incurred in the normal course of business. The Company also has pending legal claims regarding the purchase of the remaining two thirds of Hamilton. The claims, in the opinion of management, can be disposed of without material adverse effect on the financial position or results of operations of the Company.

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company utilizes two captive insurers, Regional Underwriters, Inc. and JC Underwriters, Inc. to insure various aspects of the Company’s operations. A captive insurer is generally defined as an insurance company that is wholly owned and controlled by its insureds to insure the risk of its owners and insureds. The captive insurers and the Company have common owners. For the six months ended June 30, 2023, the Company

- 16 -

paid and expensed insurance premiums totaling $2,175,720 to these related party captives for insurance against uninsured or underinsured properties.

NOTE 9- REPURCHASE AGREEMENTS

The Company has entered into repurchase agreements with lending institutions that provide financing to dealers that market the Company's products. Generally, the agreements provide for the repurchase of the manufactured homes from the lenders in the event of a repossession of a dealer's inventory upon default. The risk of loss from these agreements is significantly reduced by the potential resale value of any products that are subject to repurchase. At June 30, 2023, the total amount under repurchase to lending institutions under these repurchase agreements was $18,600,000. The Company has not recorded a loss reserve for repurchase agreements as of June 30, 2023.

NOTE 10 - SUBSEQUENT EVENTS

On August 25, 2023, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with Skyline Champion Corporation ("Champion") wherein Champion would acquire all of the outstanding equity interests of the entities comprising the retail and manufacturing operations of the Company. The purchase price, as defined in the purchase agreement, was $428.0 million, plus cash acquired, less assumed indebtedness, plus an earnout provision and an aggregate number of shares of Skyline Champion stock equal to approximately $30.0 million.

The Company has evaluated subsequent events through December 28, 2023, the date the financial statements were approved by management and thereby available to be issued and except as discussed above has determined that there are no subsequent events of a material nature requiring adjustment to or disclosure in the accompanying consolidated financial statements.

- 17 -

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements (“pro forma financial statements”) have been prepared based on the historical consolidated financial statements of Skyline Champion Corporation (“Skyline Champion”, the "Company”) to give effect to the following transaction (the “Transaction”):

On August 25, 2023, Champion Home Builders (“CHB”) and Champion Retail Housing (together with CHB, the “Buyers”), subsidiaries of the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Regional Holdings Corporation (“Regional Holdings”), Regional Underwriters, Inc. (“Regional Underwriters”), Heath Jenkins, as beneficial owner of the outstanding equity interests of Regional (collectively, with Regional and Regional Underwriters, the “Sellers”), Dana Jenkins, as beneficial owner of the outstanding equity interests of Helicon Insurance, LLC, and party thereto solely with respect to the sale of Helicon Insurance, LLC (“Dana Jenkins”), and Heath Jenkins, solely in his capacity as the representative of the Sellers (the “Sellers’ Representative”), pursuant to which Buyers have agreed to acquire all of the outstanding equity interests in Regional Enterprises, LLC and related companies (collectively, “Regional Homes”).

On October 13, 2023 (the "Closing Date"), the Company, through the Buyers, paid to Sellers approximately $317 million and assumed debt, primarily related to inventory floor plan liabilities, of approximately $93 million. In addition, the Company issued 379,248 shares of common stock in Skyline Champion, par value $0.0277 per share (the “Skyline Common Stock”), equal to approximately $23 million, to Sellers. The transaction is subject to an earnout provision as well as customary net working capital adjustments. The Company also issued 75,850 shares of Skyline Common Stock, equal to approximately $5 million, to Dana Jenkins (the “D. Jenkins Stock Consideration”) for Helicon Insurance, LLC. The Skyline Champion Common Stock was issued to the Sellers and Dana Jenkins in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act (the “Private Placement”).

The pro forma financial statements have been prepared to reflect the accounting adjustments to Skyline Champion’s historical consolidated financial information to account for the Transaction. The unaudited pro forma condensed combined balance sheet as of September 30, 2023, gives effect as if the Transaction had been completed on September 30, 2023. The unaudited pro forma condensed combined income statements for the six months ended September 30, 2023, and the year ended April 1, 2023, give effect to the Transaction, in each case, as if it had been completed on April 3, 2022.

The pro forma financial statements are provided for illustrative purposes only and are not intended to represent what Skyline Champion’s financial position or results of operations would have been had the Transaction been consummated on the assumed dates, nor do they purport to project the future operating results or the financial position of the Company following the Transaction. The actual financial position and results of operations of Skyline Champion after consummation of the Transaction may differ significantly from the pro forma amounts reflected herein due to a variety of factors. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements. In Skyline Champion’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The pro forma financial statements do not include any pro forma adjustments to reflect certain expected financial benefits of the Transaction, such as revenue and cost synergies, or the anticipated costs to achieve those benefits.

As of the date of this filing, the Company has not completed the detailed valuation study necessary to arrive at the required final estimates of the fair value of the assets acquired and the liabilities assumed and the related allocations of purchase price, nor has it identified all adjustments necessary to conform Regional Homes’ accounting policies to the Company's accounting policies. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.

The condensed combined pro forma financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial information in addition to the following:

Skyline Champion’s audited consolidated financial statements and related notes included in Skyline Champion’s annual report on Form 10-K for the year ended April 1, 2023.

Skyline Champion’s unaudited consolidated financial statements and related notes included in Skyline Champion’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2023.

Regional Holdings Corporation and Subsidiaries audited financial statements and related notes as of December 31, 2022, and for the year ended December 31, 2022, included as Exhibit 99.1 to Skyline Champion’s current report on Form 8-K/A.

Regional Holdings Corporation and Subsidiaries unaudited financial statements and related notes as of June 30, 2023, and for the six months ended June 30, 2023, included as Exhibit 99.2 to Skyline Champion’s current report on Form 8-K/A.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2023


(In thousands)	Historical Skyline Champion			Historical Regional Holdings		Historical Regional Holdings Businesses Not Acquired			Pro Forma Adjustments for Acquisition			Notes	Pro Forma Combined
						(a)
ASSETS
Current assets:
Cash and cash equivalents	$	701,155		$	70,219	$	(949	)	$	(317,191	)	(b)	$	453,234
Trade accounts receivable, net		55,097			49,506		(225	)		—				104,378
Floor plan loans receivable		—			2,059		—			—				2,059
Inventories, net		182,239			163,449		(22,367	)		3,721		(c)		327,042
Other current assets		39,447			5,881		16,514			—				61,842
Total current assets		977,938			291,114		(7,027	)		(313,470	)			948,555
Long-term assets:
Property, plant, and equipment, net		191,766			113,298		(54,545	)		21,568		(d)		272,087
Goodwill		196,574			125,233		—			29,275		(e)		351,082
Amortizable intangible assets, net		40,299			18,905		—			23,895		(f)		83,099
Deferred tax assets		19,798			—		—			840		(g)		20,638
Investments in affiliates		—			—		—			—				—
Other noncurrent assets		242,800			12,388		(363	)		—				254,825
Total assets	$	1,669,175		$	560,938	$	(61,935	)	$	(237,892	)		$	1,930,286
LIABILITIES AND EQUITY
Current liabilities:
Current portion of floorplan loans	$	—		$	56,870	$	—		$	—			$	56,870
Current portion of long-term debt		—			4,545		(3,740	)		—				805
Accounts payable		50,829			10,194		1,070			—				62,093
Other current liabilities		192,322			31,814		358			—				224,494
Total current liabilities		243,151			103,423		(2,312	)		—				344,262
Long-term liabilities:
Long-term debt		12,430			141,289		(40,786	)		(12,793	)	(h)		100,140
Notes payable, net of current portion		—			—		—			—				—
Floorplan loans, net of current portion		—			34,944		—			—				34,944
Deferred tax liabilities		6,417			—		—			—				6,417
Other liabilities		66,984			9,757		(6,139	)		5,876		(i)		76,478
Total long-term liabilities		85,831			185,990		(46,925	)		(6,917	)			217,979

Equity:
Common stock		1,587			10		(10	)		13		(j)		1,600
Additional paid-in capital		530,645			24,542		(24,542	)		27,839		(j)(k)		558,484
Retained earnings		821,628			245,624		13,077			(258,701	)	(k)		821,628
Noncontrolling interest		—			1,349		(1,223	)		(126	)	(k)		—
Accumulated other comprehensive loss		(13,667	)		—		—			—				(13,667	)
Total equity		1,340,193			271,525		(12,698	)		(230,975	)			1,368,045
Total liabilities and equity	$	1,669,175		$	560,938	$	(61,935	)	$	(237,892	)		$	1,930,286

UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023


(In thousands, except per share amounts)	Historical Skyline Champion			Historical Regional Holdings			Historical Regional Holdings Businesses Not Acquired			Pro Forma Adjustments for Acquisition			Notes	Pro Forma Combined
							(a)

Net sales	$	929,005		$	257,159		$	(7,702	)	$	(4,634	)	(l)	$	1,173,828
Cost of sales		682,843			183,148			(7,190	)		(2,427	)	(d)(l)(m)		856,374
Gross profit		246,162			74,011			(512	)		(2,207	)			317,454
Selling, general and administrative expenses		134,893			43,956			(4,350	)		1,405		(d)(n)		175,904
Operating income		111,269			30,055			3,838			(3,612	)			141,550
Interest (income) expense		(19,781	)		7,075			(1,100	)		(1,559	)	(o)		(15,365	)
Other expense (income)		2,065			(158,642	)		157,545			500		(p)		1,468
Income before income taxes and noncontrolling interest		128,985			181,622			(152,607	)		(2,553	)			155,447
Income tax expense		32,047			—			—			6,575		(q)		38,622
Net income before noncontrolling interest		96,938			181,622			(152,607	)		(9,128	)			116,825
Noncontrolling interest		—			1,349			(1,223	)		(126	)			—
Net income attributable to controlling interest	$	96,938		$	180,273		$	(151,384	)	$	(9,002	)		$	116,825

Weighted average number of common shares outstanding:
Basic		57,224									455		(s)		57,679
Diluted		57,695									455				58,150

Net income per share applicable to common shareholders:
Basic	$	1.69												$	2.03
Diluted	$	1.68												$	2.01

UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT

FOR THE YEAR ENDED APRIL 1, 2023


(In thousands, except per share amounts)	Historical Skyline Champion			Historical Regional Holdings			Historical Regional Holdings Businesses Not Acquired			Pro Forma Adjustments for Acquisition			Notes	Pro Forma Combined
							(a)

Net sales	$	2,606,560		$	414,403		$	(12,821	)	$	85,456		(l)(r)	$	3,093,598
Cost of sales		1,787,879			311,167			(11,702	)		52,759		(d)(l)(m)(r)		2,140,103
Gross profit		818,681			103,236			(1,119	)		32,697				953,495
Selling, general and administrative expenses		300,396			67,410			(6,412	)		10,168		(d)(n)(r)		371,562
Operating income		518,285			35,826			5,293			22,529				581,933
Interest (income) expense		(14,977	)		10,439			(1,637	)		(2,728	)	(o)(r)		(8,903	)
Other (income) expense		(634	)		(21,227	)		19,849			319		(p)(r)		(1,693	)
Income before income taxes and noncontrolling interest		533,896			46,614			(12,919	)		24,938				592,529
Income tax expense		132,094			—			—			14,630		(q)		146,724
Net income before noncontrolling interest		401,802			46,614			(12,919	)		10,308				445,805
Noncontrolling interest		—			526			288			—				814
Net income attributable to controlling interest	$	401,802		$	46,088		$	(13,207	)	$	10,308			$	444,991

Weighted average number of common shares outstanding:
Basic		56,987									455		(s)		57,442
Diluted		57,395									455				57,850

Net income per share applicable to common shareholders:
Basic	$	7.05												$	7.76
Diluted	$	7.00												$	7.71

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The accompanying pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X, as amended, including pursuant to SEC Final Rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, release number 33-10786 dated May 20, 2020 (“Article 11”), using the acquisition method of accounting under U.S. GAAP. Transaction accounting adjustments have been made to show the effects of the Transaction on the historical financial statements of Skyline Champion and Regional Homes. The pro forma adjustments are preliminary and based on estimates of the purchase consideration and estimates of fair value and useful lives of the assets acquired and liabilities assumed. Certain reclassifications have been made to the historical financial statements of Regional Homes in order to conform with classifications used by Skyline Champion.

Skyline Champion's fiscal year ends on the Saturday nearest March 31. Regional Homes fiscal year ends December 31. Pursuant to Regulation S-X for companies with different fiscal year ends, the pro forma financial information has been prepared utilizing periods that differ by one quarter. As such, Skyline Champion's historical results for the unaudited pro forma condensed combined financial statements are derived from the Company's unaudited consolidated balance sheet as of September 30, 2023, unaudited consolidated income statement for the six months ended September 30, 2023, and audited consolidated income statement for the year ended April 1, 2023. Regional Homes' historical results are derived from Regional Homes' unaudited consolidated balance sheet as of June 30, 2023, unaudited consolidated income statement for the six months ended June 30, 2023, and audited consolidated income statement for the year ended December 31, 2022.

Note 2. Acquisition of Regional Homes

On August 25, 2023, Champion Home Builders (“CHB”) and Champion Retail Housing (together with CHB, the “Buyers”), subsidiaries of the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Regional Holdings Corporation (“Regional”), Regional Underwriters, Inc. (“Regional Underwriters”), Heath Jenkins, as beneficial owner of the outstanding equity interests of Regional (collectively, with Regional and the Regional Underwriters, the “Sellers”), Dana Jenkins, as beneficial owner of the outstanding equity interests of Helicon Insurance, LLC, and party thereto solely with respect to the sale of Helicon Insurance, LLC (“Dana Jenkins”), and Heath Jenkins, solely in his capacity as the representative of the Sellers (the “Sellers’ Representative”), pursuant to which Buyers agreed to acquire all of the outstanding equity interests in Regional Enterprises, LLC and related companies (collectively, “Regional Homes”).

Note 3. Preliminary Purchase Price Allocation

The allocation of the preliminary estimated purchase price is based upon Skyline Champion’s estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of September 30, 2023, using currently available information. Because the pro forma financial statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on Skyline Champion’s financial position and results of operations may materially differ from the pro forma amounts included in this filing.

The preliminary purchase price allocation is subject to adjustment as the purchase accounting is not finalized. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocations used in the pro forma adjustments.

The following is an allocation of purchase price based upon a preliminary estimate of the fair value of the assets acquired and the liabilities assumed by Skyline Champion in the Transaction, amounts except share and per share in thousands:


Description	Amount
Fair value of consideration transferred
Fair value of Skyline Champion common stock issued as consideration (455,098 shares at $61.20)	$	27,852
Cash consideration		317,191
Estimated earn out consideration		5,876
Total consideration	$	350,919
Preliminary purchase price allocations:
Cash and cash equivalents	$	67,557
Trade accounts receivable, net		49,281
Floor plan loans receivable		2,059
Inventories, net		144,803
Other current assets		22,542
Property, plant, and equipment, net		80,321
Amortizable intangible assets, net		42,800
Deferred tax assets		840
Other noncurrent assets		12,025
Accounts payable		(10,101	)
Other current liabilities		(32,172	)
Long-term debt		(88,515	)
Floorplan loans, net of current portion		(91,814	)
Other liabilities		(3,215	)
Identifiable net assets acquired		196,411
Goodwill		154,508
Total purchase price	$	350,919

Note 4. Pro Forma Adjustments

Adjustments included in the column labeled “Pro Forma Adjustments for Acquisition” in the pro forma balance sheet and income statements are as follows:

Reflects the removal of businesses included in Regional Holdings consolidated financial statements that were not acquired by Skyline Champion per the terms of the Purchase Agreement.

Represents the cash consideration transferred by Skyline Champion for the acquisition of Regional Homes.

Represents the estimated adjustment to step-up Regional Homes inventories to fair value. Such estimates are preliminary and subject to change. Fair value was based on the manufacturing wholesale price. After the Transaction, the stepped-up inventory value will increase cost of sales as the inventory is sold.

Reflects an adjustment of $21.6 million to increase the basis of acquired property, plant and equipment to estimated fair value based on the Company’s preliminary valuation and the related estimated depreciation expense. The preliminary estimated useful lives of the assets range from 3 to 20 years. The pro forma depreciation expense adjustment for the stepped up basis of the acquired property, plant and equipment for the six months ended September 30, 2023 is $0.5 million and $0.3 million, recorded in cost of sales and selling, general and administrative expenses, respectively. The pro forma depreciation expense adjustment for the stepped up basis of the acquired property, plant and equipment for the year ended April 2, 2023 is $1.2 million and $0.7 million recorded in cost of sales and selling, general and administrative expenses, respectively.

To record the preliminary fair value of goodwill resulting from the excess consideration paid over the fair value of net assets acquired as if the Transaction occurred as of September 30, 2023. The amount of goodwill ultimately recognized in purchase accounting as of the Transaction closing date might differ from the amount shown here due to changes in certain asset and liability balances. Goodwill resulting from the Transaction is not amortized and will be assessed for impairment at least annually.

Reflects the adjustment to write up identifiable intangible assets to $42.8 million, consisting of trade names and customer relationships, based on management’s preliminary valuation. Estimated useful lives are based on the time periods during

which the intangibles are expected to result in substantial incremental cash flows. The fair value of customer relationships was determined using the multi-period excess earnings method and the fair value of trade names was determined using the relief-from-royalty method. Such estimates are preliminary and subject to change.


Description	Estimated life in years	Amount (in thousands)
Trade names	10	$	24,900
Customer relationships	10		17,900
Total identifiable intangible assets		$	42,800

Represents an adjustment to deferred tax assets of $0.8 million for the tax effects of recognizing the preliminary purchase price allocation reflected herein, calculated at an estimated statutory rate of 24.7%. These adjustments are based on estimates of the fair value of Regional Homes' assets to be acquired, liabilities assumed and the related purchase price allocations. These estimates are subject to further review by the Company's management, which may result in material adjustments to deferred taxes with an offsetting adjustment to goodwill.

Removal of debt of $12.8 million which was settled upon closing of the Transaction.

Reflects an adjustment to record a $5.9 million liability related to the fair value of the earnout contingent consideration that will be paid to the former owner if the acquired business meets targets specified in the Purchase Agreement. The fair value of the earnout was determined using a Monte-Carlo simulation model which is based on a range of estimated probability scenarios.

Reflects the issuance of $27.9 million of Common Stock by Skyline Champion for the acquisition of Regional Homes.

Reflects the elimination of Regional Homes' historical equity balances of $258.8 million.

To eliminate sales and cost of sales for inventory purchased by Regional Homes from the Company as if the acquisition occurred on April 3, 2022. The amounts are as follows, in thousands:


Description	For the six months ended September 30, 2023		For the year ended April 1, 2023
Reduction of net sales	$	4,634	$	12,929
Reduction of cost of sales		3,522		9,826

To record pro forma cost of sales of $0.6 million and $7.7 million related to the fair value step of Regional Homes' inventory for the six months ended September 30, 2023 and the year ended April 1, 2022, respectively, as if the Transaction occurred on April 3, 2022.

To record the pro forma amortization expense related to the identifiable intangible assets resulting from a valuation of fair value as if the Transaction occurred on April 3, 2022, based on preliminary estimates of the fair values of such assets and their useful lives.


Description	For the six months ended September 30, 2023			For the year ended April 1, 2023
Removal of historical amortization expense	$	(995	)	$	—
Pro forma amortization expense		2,140			4,280
Pro forma adjustment for amortization expense	$	1,145		$	4,280

To remove historical interest expense of $1.6 million and $3.2 million on debt that was settled prior to the Transaction for the six months ended September 30, 2023 and the year ended April 1, 2022, respectively, as if the Transaction occurred on April 3, 2022.

Represents the accrual of additional transaction costs incurred by the Company subsequent to September 30, 2023 of $0.5 million. The remaining transactions costs of $2.1 million are included in the historical income statement of the Company for the six months ended September 30, 2023. These costs will not affect the Company's income statement beyond 12 months after the acquisition date.

Reflects the estimated income tax impact of the historical results of the businesses acquired and the pro forma adjustments from the Transaction at a forecasted blended statutory rate of 24.8%. Because the tax rates used for these pro forma financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Transaction.

Prior to January 1, 2023, Regional Holdings had a one-third membership interest in Hamilton Home Builders, LLC and Affiliates ("Hamilton") which it accounted for using the equity method. On January 1, 2023, Regional Holdings acquired the remaining two-thirds membership interest in Hamilton. As a result of that acquisition, Regional Holdings became the sole member of Hamilton. The equity method investment was held by a Regional Holdings' business not acquired by the Company in the Transaction. The table below presents the pro forma adjustments to the statement of income for the year ended April 1, 2023, as if the acquisition of Hamilton by Regional Holdings had taken place at the beginning of the earliest period presented, net of intercompany eliminations. There were no pro forma adjustment for the six months ended September 30, 2023, because the results of Hamilton were included in the consolidated results of Regional Holdings for that period.


Description	Amount (in thousands)

Net sales	$	98,385
Cost of sales		53,750
Gross profit		44,635
Selling, general and administrative expenses		5,209
Operating income		39,426
Interest expense		508
Other income		(181	)
Income before taxes		39,099
Income tax expense		—
Net income	$	39,099

The unaudited pro forma weighted average number of common shares outstanding is calculated by adding the 455,098 shares issued to the Sellers and the historical weighted average number of common shares outstanding of the Company. The unaudited pro forma weighted average common shares outstanding have been calculated as if the shares had been issued as of April 3, 2022.

Document And Entity Information	Oct. 13, 2023
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Document Period End Date	Oct. 13, 2023
Entity Registrant Name	SKYLINE CHAMPION CORPORATION
Entity Central Index Key	0000090896
Entity Emerging Growth Company	false
Entity File Number	001-04714
Entity Incorporation, State or Country Code	IN
Entity Tax Identification Number	35-1038277
Entity Address, Address Line One	755 West Big Beaver Road, Suite 1000
Entity Address, City or Town	Troy
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48084
City Area Code	(248)
Local Phone Number	614-8211
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	SKY
Security Exchange Name	NYSE
Amendment Description