Item 2. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with Skyline Champion Corporation’s condensed consolidated financial statements and the related notes that appear in Item 1 of this Report.
Overview
Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured offsite construction, company-owned retail locations, and transportation logistics services. The Company is the largest independent publicly traded factory-built solutions provider in North America (based on revenue) and markets its homes under several nationally recognized brand names including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 35 manufacturing facilities throughout the U.S. and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold mainly to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 18 sales centers that sell manufactured homes to consumers primarily in the southern U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.
Industry and Company Outlook
Since July 2020, U.S. and Canadian housing industry demand has been robust. The limited availability of existing homes for sale and the broader need for newly built affordable, single-family housing has continued to drive demand for new homes in these markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the United States, including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time home buyers, and the population of households earning less than $60,000 per year. We have also seen a number of market trends pointing to increased sales of accessory dwelling units and urban-to-rural migration as customers accommodate working-from-home patterns, as well as people seeking rent-to-own single-family options.
The robust demand environment has resulted in backlog of $1,369 million as of October 2, 2021 compared to $390.1 million as of September 26, 2020. Generally higher backlog at our manufacturing facilities creates an opportunity to increase production efficiencies. Although the higher demand brings opportunities, it also has resulted in significant increases in certain material input costs, most significantly forest products for much of fiscal 2022. In addition, we are also experiencing supply disruption, higher freight costs and fluctuating prices for many of our other material inputs. Finding and retaining qualified labor continues to be a challenge for our plants which requires us to review our compensation programs and adjust accordingly. We manage our business to anticipate or quickly react to these supply challenges and cost increases and generally are able to pass along increased costs to our customers. Historically, order cancellation rates have been very low, but the longer lead-time caused by larger backlogs and changing prices could result in cancellations in future periods.
For the six months ended October 2, 2021, approximately 77% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the U.S. Department of Housing and Urban Development ("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the Manufactured Housing Institute ("MHI"), HUD-code industry home shipments were 43,949 and 36,312 units during the five months ended August 31, 2021 and 2020, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 19.5% and 15.6%, for the five months ended August 31, 2021 and 2020, respectively. Annual shipments have generally increased each year since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, manufactured housing’s most recent annual shipment levels still operate at lower levels than the long-term historical average of over 200,000 units.
Acquisitions and Expansions
Over the last several years, demand for the Company’s products, primarily affordable housing in the U.S., has continued to improve. As a result, the Company has focused on operational improvements to make existing manufacturing facilities more profitable as well as executing measured expansion of its manufacturing and retail footprints.
The Company has increased capacity through strategic acquisitions and expansions of its manufacturing operations. The Company is focused on growing in strong housing markets across the U.S.
On June 21, 2021, the Company acquired two idle facilities in Navasota, Texas in order to strengthen its production capabilities in the Texas market. The Company intends to initiate production in one of these facilities by the end of fiscal 2022. On February 28, 2021, the Company acquired ScotBilt. In calendar 2020, ScotBilt shipped over 1,600 homes from its two manufacturing facilities in Georgia providing affordable housing throughout Alabama, Florida, Georgia and the Carolinas. ScotBilt has approximately 400 employees in its two
15
manufacturing facilities. The Company believes ScotBilt is an excellent fit because of the compatible company cultures and because of ScotBilt’s strong presence in the attractive Mid-South region, which helps to balance national distribution and complements the Company’s existing manufacturing footprint. The operations of ScotBilt are included in the financial results of the Company since the date of the acquisition. On January 14, 2021, the Company acquired two idled facilities in Pembroke, North Carolina, which provides an opportunity to further expand its manufacturing footprint in the South and Southeast markets. The Company is currently assessing prospects for initiating production in one or both of these facilities.
The Company's acquisitions and investments are part of a strategy to grow and diversify revenue with a focus on increasing the Company’s HUD and modular homebuilding presence in the U.S. as well as improving the results of operations. These acquisitions and investments are included in the Company's consolidated results for periods subsequent to their respective acquisition dates.
COVID-19 Pandemic
The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. There remains continued uncertainty regarding the extent and duration of the impact that the COVID-19 pandemic will have on the economy, the housing market, and the Company, as well as the Company’s employees, customers, and suppliers.
The Company has prioritized the safety and well-being of its employees and customers and has implemented standards to operate in accordance with social-distancing protocols and public health authority guidelines. Beginning in March 2020, the Company took actions to temporarily idle certain facilities in response to government shutdown orders or reduced demand. By late April 2020, most of the temporarily idled manufacturing facilities had reopened, but at reduced production levels due to employee absenteeism, difficulty hiring new team members, and social distancing protocols. During fiscal 2021, the Company experienced intermittent closures due to COVID-19 outbreaks at the facilities or surrounding communities causing higher than normal absenteeism. In the second half of fiscal 2021, the Company was able to increase daily production rates over the levels achieved in the prior fiscal year period as direct labor staffing levels increased and production efficiencies improved. As of October 2, 2021, availability of labor and certain materials remain subject to disruption and uncertainty. Prices for key raw materials have experienced increased volatility and, overall, manufacturing costs have trended higher than prior periods.
As part of the initial response to the pandemic, the Company offered extended benefits to employees, including increased sick pay and waived premium payments on healthcare benefits for furloughed employees during the first quarter of fiscal 2021. The Company’s U.S. operations incurred $1.9 million of expense related to the extended benefits. Various government programs have been announced to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in the United States and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. CEWS provided a cash subsidy of up to 75% of eligible employees’ remuneration, subject to certain criteria. The Company recognized $2.6 million and $6.2 million, respectively, for payroll subsidies under CEWS during the three and six months ended September 26, 2020. The Company also recognized $0.6 million for payroll subsidies under the CARES Act during the first quarter of fiscal 2021. In addition, the CARES Act allowed for deferring payment of certain payroll taxes. Through October 2, 2021, the Company has deferred $11.8 million of payroll taxes that will be paid beginning in December 2021.
16
UNAUDITED INCOME STATEMENTS FOR THE SECOND QUARTER OF FISCAL 2022 VS. 2021
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
|
|
|
Results of Operations Data:
|
|
|
|
|
|
|
Net sales
|
|
$
|
524,225
|
|
|
$
|
322,366
|
|
Cost of sales
|
|
|
394,898
|
|
|
|
259,573
|
|
Gross profit
|
|
|
129,327
|
|
|
|
62,793
|
|
Selling, general, and administrative expenses
|
|
|
61,340
|
|
|
|
41,373
|
|
Operating income
|
|
|
67,987
|
|
|
|
21,420
|
|
Interest expense, net
|
|
|
845
|
|
|
|
864
|
|
Other income (expense)
|
|
|
11
|
|
|
|
(2,599
|
)
|
Income before income taxes
|
|
|
67,131
|
|
|
|
23,155
|
|
Income tax expense
|
|
|
16,408
|
|
|
|
5,644
|
|
Net income
|
|
$
|
50,723
|
|
|
$
|
17,511
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA:
|
|
|
|
|
|
|
Net income
|
|
$
|
50,723
|
|
|
$
|
17,511
|
|
Income tax expense
|
|
|
16,408
|
|
|
|
5,644
|
|
Interest expense, net
|
|
|
845
|
|
|
|
864
|
|
Depreciation and amortization
|
|
|
5,138
|
|
|
|
4,408
|
|
Equity-based compensation (for awards granted prior to December 31, 2018)
|
|
|
—
|
|
|
|
388
|
|
Other
|
|
|
—
|
|
|
|
122
|
|
Adjusted EBITDA
|
|
$
|
73,114
|
|
|
$
|
28,937
|
|
As a percent of net sales:
|
|
|
|
|
|
|
Gross profit
|
|
|
24.7
|
%
|
|
|
19.5
|
%
|
Selling, general, and administrative expenses
|
|
|
11.7
|
%
|
|
|
12.8
|
%
|
Operating income
|
|
|
13.0
|
%
|
|
|
6.6
|
%
|
Net income
|
|
|
9.7
|
%
|
|
|
5.4
|
%
|
Adjusted EBITDA
|
|
|
13.9
|
%
|
|
|
9.0
|
%
|
NET SALES
The following table summarizes net sales for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Net sales
|
|
$
|
524,225
|
|
|
$
|
322,366
|
|
|
$
|
201,859
|
|
|
|
62.6
|
%
|
U.S. manufacturing and retail net sales
|
|
$
|
471,699
|
|
|
$
|
283,360
|
|
|
$
|
188,339
|
|
|
|
66.5
|
%
|
U.S. homes sold
|
|
|
5,902
|
|
|
|
4,689
|
|
|
|
1,213
|
|
|
|
25.9
|
%
|
U.S. manufacturing and retail average home selling price
|
|
$
|
79.9
|
|
|
$
|
60.4
|
|
|
$
|
19.5
|
|
|
|
32.3
|
%
|
Canadian manufacturing net sales
|
|
$
|
38,501
|
|
|
$
|
24,558
|
|
|
$
|
13,943
|
|
|
|
56.8
|
%
|
Canadian homes sold
|
|
|
358
|
|
|
|
302
|
|
|
|
56
|
|
|
|
18.5
|
%
|
Canadian manufacturing average home selling price
|
|
$
|
107.5
|
|
|
$
|
81.3
|
|
|
$
|
26.2
|
|
|
|
32.2
|
%
|
Corporate/Other net sales
|
|
$
|
14,025
|
|
|
$
|
14,448
|
|
|
$
|
(423
|
)
|
|
|
(2.9
|
%)
|
U.S. manufacturing facilities in operation at end of period
|
|
|
35
|
|
|
|
33
|
|
|
|
|
|
|
|
U.S. retail sales centers in operation at end of period
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
Canadian manufacturing facilities in operation at end of period
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
Net sales for the three months ended October 2, 2021 were $524.2 million, an increase of $201.9 million, or 62.6%, over the three months ended September 26, 2020. The following is a summary of the change by operating segment.
17
U.S. Factory-built Housing:
Net sales for the Company’s U.S. manufacturing and retail operations increased by $188.3 million, or 66.5%, for the three months ended October 2, 2021 compared to the three months ended September 26, 2020. The change was primarily due to an increase in the number of homes sold during the period of 25.9%, an increase in the average home selling price of 32.3%, and the impact of the acquisition of ScotBilt. Demand for our products has increased significantly in recent periods and we have been able to increase production in response to that demand. The average selling price increased during the period due to pricing actions enacted in response to rising material, freight, and labor costs. Generally, we are able to pass the increase in input costs along to our customers.
Canadian Factory-built Housing:
The Canadian Factory-built Housing segment net sales increased by $13.9 million, or 56.8% for the three months ended October 2, 2021 compared to the same period in the prior fiscal year, primarily due to an 18.5% increase in the number of homes sold and a 32.2% increase in average home selling price. The increase in volume was due to an increase in demand and production rates. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $0.6 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended October 2, 2021 as compared to the same period of the prior fiscal year.
Corporate/Other:
Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the three months ended October 2, 2021, net sales decreased $0.4 million, or 2.9%, primarily attributable to lower revenue from the shipment of recreational vehicles.
GROSS PROFIT
The following table summarizes gross profit for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing
|
|
$
|
116,604
|
|
|
$
|
54,546
|
|
|
$
|
62,058
|
|
|
|
113.8
|
%
|
Canadian Factory-built Housing
|
|
|
8,868
|
|
|
|
4,787
|
|
|
|
4,081
|
|
|
|
85.3
|
%
|
Corporate/Other
|
|
|
3,855
|
|
|
|
3,460
|
|
|
|
395
|
|
|
|
11.4
|
%
|
Total gross profit
|
|
$
|
129,327
|
|
|
$
|
62,793
|
|
|
$
|
66,534
|
|
|
|
106.0
|
%
|
Gross profit as a percent of net sales
|
|
|
24.7
|
%
|
|
|
19.5
|
%
|
|
|
|
|
|
|
Gross profit as a percent of sales during the three months ended October 2, 2021 was 24.7% compared to 19.5% during the three months ended September 26, 2020. The following is a summary of the change by operating segment.
U.S. Factory-built Housing:
Gross profit for the U.S. Factory-built Housing segment increased by $62.1 million, or 113.8%, during the three months ended October 2, 2021 compared to the same period in the prior fiscal year. Gross profit was 24.7% as a percent of segment net sales for the three months ended October 2, 2021, compared to 19.2% in the same period of the prior fiscal year. The increase in gross profit is due to the increase in homes sold and operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes.
Canadian Factory-built Housing:
Gross profit for the Canadian Factory-built Housing segment increased by $4.1 million, or 85.3%, during the three months ended October 2, 2021, compared to the same period in the prior fiscal year, primarily due to increased sales volume. Gross profit as a percent of net sales was 23.0% for the three months ended October 2, 2021, compared to 19.5% in the same period of the prior fiscal year. The improvement is due to direct labor and manufacturing efficiencies from the increase in home sales, partially offset by higher material costs.
18
Corporate/Other:
Gross profit for the Corporate/Other segment increased $0.4 million, or 11.4%, during the three months ended October 2, 2021, compared to the same period of the prior fiscal year, as a result of changes in revenue mix.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Selling, general, and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing
|
|
$
|
43,014
|
|
|
$
|
29,601
|
|
|
$
|
13,413
|
|
|
|
45.3
|
%
|
Canadian Factory-built Housing
|
|
|
2,751
|
|
|
|
1,683
|
|
|
|
1,068
|
|
|
|
63.5
|
%
|
Corporate/Other
|
|
|
15,575
|
|
|
|
10,089
|
|
|
|
5,486
|
|
|
|
54.4
|
%
|
Total selling, general, and administrative expenses
|
|
$
|
61,340
|
|
|
$
|
41,373
|
|
|
$
|
19,967
|
|
|
|
48.3
|
%
|
Selling, general, and administrative expense as a percent of net sales
|
|
|
11.7
|
%
|
|
|
12.8
|
%
|
|
|
|
|
|
|
Selling, general, and administrative expenses were $61.3 million for the three months ended October 2, 2021, an increase of $20.0 million, or 48.3%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.
U.S. Factory-built Housing:
Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $13.4 million, or 45.3%, during the three months ended October 2, 2021, as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 9.1% for the three months ended October 2, 2021, compared to 10.4% during the comparable period of the prior fiscal year, primarily due to increased leverage of fixed costs resulting from the increase in sales. The increase in expenses resulted from the following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) higher wage expense from headcount increases due to the growth in housing demand; and (iii) the impact of the acquisition of the ScotBilt operations.
Canadian Factory-built Housing:
Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $1.1 million, or 63.5%, for the three months ended October 2, 2021 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increased to 7.1% for the three months ended October 2, 2021, compared to 6.9% during the comparable period of the prior fiscal year. The increase in expenses resulted from an increase in commissions and incentive compensation as well as wage expense from headcount increases due to the growth in housing demand.
Corporate/Other:
Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $5.5 million, or 54.4%, during the three months ended October 2, 2021, compared to the same period of the prior fiscal year, due to an increase in employee compensation, primarily equity and incentive compensation as well as $2.1 million of costs related to investments made to enhance our customer buying experience and supporting systems.
19
INTEREST EXPENSE, NET
The following table summarizes the components of interest expense, net for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Interest expense
|
|
$
|
993
|
|
|
$
|
974
|
|
|
$
|
19
|
|
|
|
2.0
|
%
|
Less: Interest income
|
|
|
(148
|
)
|
|
|
(110
|
)
|
|
|
(38
|
)
|
|
|
34.5
|
%
|
Interest expense, net
|
|
$
|
845
|
|
|
$
|
864
|
|
|
$
|
(19
|
)
|
|
|
(2.2
|
%)
|
Average outstanding floor plan payable
|
|
$
|
29,300
|
|
|
$
|
27,309
|
|
|
|
|
|
|
|
Average outstanding long-term debt
|
|
$
|
12,430
|
|
|
$
|
77,330
|
|
|
|
|
|
|
|
Interest expense, net was $0.8 million for the three months ended October 2, 2021, remaining consistent with the same period of the prior fiscal year. The Company wrote off $0.3 million of deferred financing fees during the second quarter ended October 2, 2021, which offset the reduction in interest expense from lower average outstanding borrowing balance on the Company's revolving credit facility during the second quarter ended October 2, 2021 versus the same quarter in fiscal 2021.
OTHER EXPENSE (INCOME)
The following table summarizes other income for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Other expense (income)
|
|
$
|
11
|
|
|
$
|
(2,599
|
)
|
|
$
|
2,610
|
|
|
|
(100.4
|
%)
|
Other income decreased $2.6 million, or 100.4%, during the three months ended October 2, 2021, as compared to the same period of the prior fiscal year. The decrease is due to a reduction in the wage subsidies provided by a Canadian government sponsored financial assistance program initially enacted in response to the pandemic.
INCOME TAX EXPENSE
The following table summarizes income tax expense for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
16,408
|
|
|
$
|
5,644
|
|
|
$
|
10,764
|
|
|
|
190.7
|
%
|
Effective tax rate
|
|
|
24.4
|
%
|
|
|
24.4
|
%
|
|
|
|
|
|
|
Income tax expense for the three months ended October 2, 2021 was $16.4 million, representing an effective tax rate of 24.4%, compared to income tax expense of $5.6 million, representing an effective tax rate of 24.4% for the three months ended September 26, 2020.
20
The Company’s effective tax rate for the three months ended October 2, 2021 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits from vested equity compensation. The Company’s effective tax rate for the three months ended September 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits, and results in foreign jurisdictions.
ADJUSTED EBITDA
The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
Net income
|
|
$
|
50,723
|
|
|
$
|
17,511
|
|
|
$
|
33,212
|
|
|
*
|
|
Income tax expense
|
|
|
16,408
|
|
|
|
5,644
|
|
|
|
10,764
|
|
|
*
|
|
Interest expense, net
|
|
|
845
|
|
|
|
864
|
|
|
|
(19
|
)
|
|
|
(2.2
|
%)
|
Depreciation and amortization
|
|
|
5,138
|
|
|
|
4,408
|
|
|
|
730
|
|
|
|
16.6
|
%
|
Equity-based compensation (for awards granted prior to December 31, 2018)
|
|
|
—
|
|
|
|
388
|
|
|
|
(388
|
)
|
|
*
|
|
Other
|
|
|
—
|
|
|
|
122
|
|
|
|
(122
|
)
|
|
*
|
|
Adjusted EBITDA
|
|
$
|
73,114
|
|
|
$
|
28,937
|
|
|
$
|
44,177
|
|
|
*
|
|
* indicates that the calculated percentage is not meaningful
Adjusted EBITDA for the three months ended October 2, 2021 was $73.1 million, an increase of $44.2 million from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in sales volume and gross margin, partially offset by higher SG&A expenses.
UNAUDITED INCOME STATEMENTS FOR THE FIRST HALF OF FISCAL 2022 VS. 2021
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
|
|
|
Results of Operations Data:
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,034,422
|
|
|
$
|
595,651
|
|
Cost of sales
|
|
|
793,565
|
|
|
|
478,855
|
|
Gross profit
|
|
|
240,857
|
|
|
|
116,796
|
|
Selling, general, and administrative expenses
|
|
|
115,363
|
|
|
|
82,180
|
|
Operating income
|
|
|
125,494
|
|
|
|
34,616
|
|
Interest expense, net
|
|
|
1,494
|
|
|
|
1,806
|
|
Other income
|
|
|
(43
|
)
|
|
|
(6,813
|
)
|
Income before income taxes
|
|
|
124,043
|
|
|
|
39,623
|
|
Income tax expense
|
|
|
30,419
|
|
|
|
10,209
|
|
Net income
|
|
$
|
93,624
|
|
|
$
|
29,414
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA:
|
|
|
|
|
|
|
Net income
|
|
$
|
93,624
|
|
|
$
|
29,414
|
|
Income tax expense
|
|
|
30,419
|
|
|
|
10,209
|
|
Interest expense, net
|
|
|
1,494
|
|
|
|
1,806
|
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
8,690
|
|
Equity-based compensation (for awards granted prior to December 31, 2018)
|
|
|
—
|
|
|
|
1,358
|
|
Adjusted EBITDA
|
|
$
|
135,820
|
|
|
$
|
51,477
|
|
As a percent of net sales:
|
|
|
|
|
|
|
Gross profit
|
|
|
23.3
|
%
|
|
|
19.6
|
%
|
Selling, general, and administrative expenses
|
|
|
11.2
|
%
|
|
|
13.8
|
%
|
Operating income
|
|
|
12.1
|
%
|
|
|
5.8
|
%
|
Net income
|
|
|
9.1
|
%
|
|
|
4.9
|
%
|
Adjusted EBITDA
|
|
|
13.1
|
%
|
|
|
8.6
|
%
|
21
NET SALES
The following table summarizes net sales for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,034,422
|
|
|
$
|
595,651
|
|
|
$
|
438,771
|
|
|
|
73.7
|
%
|
U.S. manufacturing and retail net sales
|
|
$
|
929,019
|
|
|
$
|
532,219
|
|
|
$
|
396,800
|
|
|
|
74.6
|
%
|
U.S. homes sold
|
|
|
12,274
|
|
|
|
8,717
|
|
|
|
3,557
|
|
|
|
40.8
|
%
|
U.S. manufacturing and retail average home selling price
|
|
$
|
75.7
|
|
|
$
|
61.1
|
|
|
$
|
14.6
|
|
|
|
23.9
|
%
|
Canadian manufacturing net sales
|
|
$
|
76,332
|
|
|
$
|
39,753
|
|
|
$
|
36,579
|
|
|
|
92.0
|
%
|
Canadian homes sold
|
|
|
743
|
|
|
|
494
|
|
|
|
249
|
|
|
|
50.4
|
%
|
Canadian manufacturing average home selling price
|
|
$
|
102.7
|
|
|
$
|
80.5
|
|
|
$
|
22.2
|
|
|
|
27.6
|
%
|
Corporate/Other net sales
|
|
$
|
29,071
|
|
|
$
|
23,679
|
|
|
$
|
5,392
|
|
|
|
22.8
|
%
|
U.S. manufacturing facilities in operation at end of period
|
|
|
35
|
|
|
|
33
|
|
|
|
|
|
|
|
U.S. retail sales centers in operation at end of period
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
Canadian manufacturing facilities in operation at end of period
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
Net sales for the six months ended October 2, 2021 were $1,034.4 million, an increase of $438.8 million, or 73.7%, over the six months ended September 26, 2020. The following is a summary of the change by operating segment.
U.S. Factory-built Housing:
Net sales for the Company’s U.S. manufacturing and retail operations increased by $396.8 million, or 74.6%, for the six months ended October 2, 2021 compared to the six months ended September 26, 2020. The increase was primarily due to an increase in the number of homes sold during the period of 3,557, an increase in the average selling price of 23.9%, and the impact of the acquisition of ScotBilt. The increase in the number of homes sold was a result of increased production levels at many of the Company’s manufacturing locations in reaction to strong demand. The average selling price increased due to pricing actions enacted in response to rising material and labor costs. Generally, we are able to pass the increase in input costs along to our customers. Net sales in the six months ended September 26, 2020 were more negatively impacted by COVID-19 related plant shutdowns and higher than normal absenteeism.
Canadian Factory-built Housing:
The Canadian Factory-built Housing segment net sales increased by $36.6 million, or 92.0%, for the six months ended October 2, 2021 compared to the same period in the prior fiscal year, primarily due to an increase in homes sold of 249, coupled with a 27.6% increase in average home selling price. The increase in volume was due to an increase in demand and production rates. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. On a constant currency basis, net sales for the Canadian segment were favorably impacted by approximately $6.8 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first six months of fiscal 2022 as compared to the same period of the prior fiscal year. Net sales in the six months ended September 26, 2020 were more negatively impacted by COVID-19 related plant shutdowns and higher than normal absenteeism.
Corporate/Other:
Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the six months ended October 2, 2021, net sales increased $5.4 million, or 22.8%, primarily attributable to an increase in shipments of manufactured homes and recreational vehicles.
22
GROSS PROFIT
The following table summarizes gross profit for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing
|
|
$
|
215,815
|
|
|
$
|
102,956
|
|
|
$
|
112,859
|
|
|
|
109.6
|
%
|
Canadian Factory-built Housing
|
|
|
17,193
|
|
|
|
7,569
|
|
|
|
9,624
|
|
|
|
127.2
|
%
|
Corporate/Other
|
|
|
7,849
|
|
|
|
6,271
|
|
|
|
1,578
|
|
|
|
25.2
|
%
|
Total gross profit
|
|
$
|
240,857
|
|
|
$
|
116,796
|
|
|
$
|
124,061
|
|
|
|
106.2
|
%
|
Gross profit as a percent of net sales
|
|
|
23.3
|
%
|
|
|
19.6
|
%
|
|
|
|
|
|
|
Gross profit as a percent of sales during the six months ended October 2, 2021 was 23.3% compared to 19.6% during the six months ended September 26, 2020. The following is a summary of the change by operating segment.
U.S. Factory-built Housing:
Gross profit for the U.S. Factory-built Housing segment increased by $112.9 million, or 109.6%, during the six months ended October 2, 2021 compared to the same period in the prior fiscal year. Gross profit was 23.2% as a percent of segment net sales for the six months ended October 2, 2021 compared to 19.3% in the same period of the prior fiscal year. The increase in gross profit is due to operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes and a reduction of COVID-19 related sick-pay and health benefits provided in the prior fiscal year, all partially offset by higher material costs.
Canadian Factory-built Housing:
Gross profit for the Canadian Factory-built Housing segment increased by $9.6 million, or 127.2% during the six months ended October 2, 2021 compared to the same period in the prior fiscal year primarily due to increased sales volume. Gross profit as a percent of net sales was 22.5% for the six months ended October 2, 2021, compared to 19.0% in the same period of the prior fiscal year primarily due to operational efficiencies from the increase in home sales, partially offset by higher material and labor costs.
Corporate/Other:
Gross profit for the Corporate/Other segment increased $1.6 million, or 25.2%, during the six months ended October 2, 2021 compared to the same period of the prior fiscal year, primarily due to increased net sales in the Company’s transportation operations.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Factory-built Housing
|
|
$
|
83,769
|
|
|
$
|
57,977
|
|
|
$
|
25,792
|
|
|
|
44.5
|
%
|
Canadian Factory-built Housing
|
|
|
5,696
|
|
|
|
3,289
|
|
|
|
2,407
|
|
|
|
73.2
|
%
|
Corporate/Other
|
|
|
25,898
|
|
|
|
20,914
|
|
|
|
4,984
|
|
|
|
23.8
|
%
|
Total selling, general, and administrative expenses
|
|
$
|
115,363
|
|
|
$
|
82,180
|
|
|
$
|
33,183
|
|
|
|
40.4
|
%
|
Selling, general, and administrative expense as a percent of net sales
|
|
|
11.2
|
%
|
|
|
13.8
|
%
|
|
|
|
|
|
|
Selling, general, and administrative expenses were $115.4 million for the six months ended October 2, 2021, an increase of $33.2 million, or 40.4%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.
23
U.S. Factory-built Housing:
Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $25.8 million, or 44.5%, during the six months ended October 2, 2021 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales decreased to 9.0% for the six months ended October 2, 2021 compared to 10.9% during the comparable period of the prior fiscal year. The increase in expenses resulted from the following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) higher wage expense from headcount increases to support increased production; (iii) an increase in travel expenses compared to the same period in the prior fiscal year; and (iv) the impact of the acquisition of the ScotBilt operations.
Canadian Factory-built Housing:
Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $2.4 million, or 73.2%, for the six months ended October 2, 2021 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 7.5% for the six months ended October 2, 2021 compared to 8.3% during the comparable period of the prior fiscal year. The increase in selling, general, and administrative expenses resulted from an increase in commissions and incentive compensation as well as wage expense from additional headcount to support the increase in production.
Corporate/Other:
Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $5.0 million, or 23.8%, during the six months ended October 2, 2021 as compared to the same period of the prior fiscal year due to an increase in wages, incentive and equity compensation costs as well as $1.9 million for the investment made to enhance our customer buying experience and supporting systems.
INTEREST EXPENSE, NET
The following table summarizes the components of interest expense, net for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
1,801
|
|
|
$
|
2,061
|
|
|
$
|
(260
|
)
|
|
|
(12.6
|
%)
|
Less: Interest income
|
|
|
(307
|
)
|
|
|
(255
|
)
|
|
|
(52
|
)
|
|
|
20.4
|
%
|
Interest expense, net
|
|
$
|
1,494
|
|
|
$
|
1,806
|
|
|
$
|
(312
|
)
|
|
|
(17.3
|
%)
|
Average outstanding floor plan payable
|
|
$
|
28,946
|
|
|
$
|
29,188
|
|
|
|
|
|
|
|
Average outstanding long-term debt
|
|
$
|
25,882
|
|
|
$
|
77,330
|
|
|
|
|
|
|
|
Interest expense, net was $1.5 million for the six months ended October 2, 2021, a decrease of $0.3 million, or 17.3%, compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to a lower average outstanding balance on the Company’s revolving credit facility, partially offset by the write-off of deferred financing fees of $0.3 million in association with the previously existing revolving credit facility.
OTHER EXPENSE (INCOME)
The following table summarizes other income for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income)
|
|
$
|
(43
|
)
|
|
$
|
(6,813
|
)
|
|
$
|
6,770
|
|
|
|
(99.4
|
%)
|
Other income decreased $6.8 million, or 99.4%, during the six months ended October 2, 2021, compared to the same period of the prior fiscal year. The decrease is due to a reduction in the wage subsidies provided by government sponsored financial assistance programs that were
24
enacted in response to the COVID-19 pandemic. The programs included a Canadian wage subsidy benefit of $6.2 million and U.S. federal and state wage subsidy benefit of $0.6 million during the six months ended September 26, 2020.
INCOME TAX EXPENSE
The following table summarizes income tax expense for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
30,419
|
|
|
$
|
10,209
|
|
|
$
|
20,210
|
|
|
|
198.0
|
%
|
Effective tax rate
|
|
|
24.5
|
%
|
|
|
25.8
|
%
|
|
|
|
|
|
|
Income tax expense for the six months ended October 2, 2021 was $30.4 million, representing an effective tax rate of 24.5%, compared to income tax expense of $10.2 million, representing an effective tax rate of 25.8% for the six months ended September 26, 2020.
The Company’s effective tax rate for the six months ended October 2, 2021 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits from vested equity compensation. The Company’s effective tax rate for the six months ended September 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits, and results in foreign jurisdictions.
25
ADJUSTED EBITDA
The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
93,624
|
|
|
$
|
29,414
|
|
|
$
|
64,210
|
|
|
*
|
|
Income tax expense
|
|
|
30,419
|
|
|
|
10,209
|
|
|
|
20,210
|
|
|
*
|
|
Interest expense, net
|
|
|
1,494
|
|
|
|
1,806
|
|
|
|
(312
|
)
|
|
|
(17.3
|
%)
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
8,690
|
|
|
|
1,593
|
|
|
|
18.3
|
%
|
Equity-based compensation (for awards granted prior to December 31, 2018)
|
|
|
—
|
|
|
|
1,358
|
|
|
|
(1,358
|
)
|
|
*
|
|
Adjusted EBITDA
|
|
$
|
135,820
|
|
|
$
|
51,477
|
|
|
$
|
84,343
|
|
|
*
|
|
* Indicates that the calculated percentage is not meaningful
Adjusted EBITDA for the six months ended October 2, 2021 was $135.8 million, an increase of $84.3 million, from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in sales volume and gross margin, partially offset by higher SG&A expenses.
The Company defines Adjusted EBITDA as net income or loss plus; (a) the provision for income taxes; (b) interest expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) equity based compensation for awards granted prior to December 31, 2018; (f) non-cash restructuring charges and impairment of assets; and (g) other non-operating costs including those for the acquisition and integration or disposition of businesses and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP and should not be considered an alternative to, or more meaningful than, net income or loss prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.
In evaluating Adjusted EBITDA, investors should be aware that, in the future, the Company may incur expenses similar to those adjusted for in this presentation. This presentation of Adjusted EBITDA should not be construed as an implication that the Company’s future results will be unaffected by unusual or nonrecurring items.
Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
Adjusted EBITDA:
does not reflect the interest expense on our debt;
excludes impairments; and
does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
Also about Adjusted EBITDA:
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Given these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using non-GAAP financial measures only on a supplemental basis.
26
BACKLOG
Although orders from customers can be cancelled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at October 2, 2021 totaled $1,369 million compared to $390.1 million at September 26, 2020. The increase in backlog was driven by increased demand for single-family homes, which resulted in order levels that significantly outpaced production in both the U.S. and Canada. Our ability to increase production rates to keep pace with orders is limited by individual plant capacity, the availability of and time needed to train new employees, employee attendance and availability of materials, including (most recently) raw material allocations by certain of our suppliers. We may experience greater order cancellations in the future as a result of higher prices and the longer time required to manufacture and deliver our products.
Liquidity and Capital Resources
Sources and Uses of Cash
The following table presents summary cash flow information for the six months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
October 2,
2021
|
|
|
September 26,
2020
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
Operating activities
|
|
$
|
88,887
|
|
|
$
|
63,842
|
|
Investing activities
|
|
|
(15,246
|
)
|
|
|
(1,334
|
)
|
Financing activities
|
|
|
(25,553
|
)
|
|
|
(8,936
|
)
|
Effect of exchange rate changes on cash, cash equivalents
|
|
|
(411
|
)
|
|
|
1,259
|
|
Net increase in cash and cash equivalents
|
|
|
47,677
|
|
|
|
54,831
|
|
Cash and cash equivalents at beginning of period
|
|
|
262,581
|
|
|
|
209,455
|
|
Cash and cash equivalents at end of period
|
|
$
|
310,258
|
|
|
$
|
264,286
|
|
The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements, capital expenditures, and debt payment obligations. The Company does not have any scheduled long-term debt maturities in the next twelve months. On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At October 2, 2021 $169.6 million was available for borrowing under the Amended Credit Agreement. The Company’s revolving credit facility includes (i) a maximum consolidated total net leverage ratio of 3.25 to 1.00, subject to an upward adjustment upon the consummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to 1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.
Cash provided by operating activities was $88.9 million for the six months ended October 2, 2021 compared to $63.8 million for the six months ended September 26, 2020. Cash provided by operating activities increased due to higher net income, partially offset by an increase in inventory from higher material costs and higher stocking levels to mitigate supply chain challenges, an increase in accounts receivable from higher sales volumes, and an increase in prepaid and other assets primarily from the capitalization of cloud computing costs in fiscal 2022.
Cash used in investing activities was $15.2 million for the six months ended October 2, 2021 compared to $1.3 million for the six months ended September 26, 2020. The increase in cash used for investing activities was primarily related to an increase in capital expenditures in the current period which was related to the acquisition of two idle manufacturing facilities in Texas and investments in plant operations which were deferred in the prior-year due to the pandemic. The Company suspended all but critical capital projects in the first half of fiscal 2021 due to COVID-19 concerns. Capital spending in the first half of fiscal 2022 reflects our reversion to normal, planned spending.
Cash used in financing activities was $25.6 million for the six months ended October 2, 2021 compared to $8.9 million for the six months ended September 26, 2020. The increase in cash used for financing was primarily related to the repayment of the Company's previously existing revolving credit facility and payments of deferred financing fees related to the Amended Credit Agreement.
Critical Accounting Policies
For a discussion of our critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements, see Part II, Item 7 of the Fiscal 2021 Annual Report, under the heading “Critical Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal 2021 Annual Report.
27
Recently Issued Accounting Pronouncements
For information on the impact of recently issued accounting pronouncements, see Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements,” to the condensed consolidated financial statements included in this Report.
Forward-Looking Statements
Some of the statements in this Report are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words “will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in our forward-looking statements, including regional, national and international economic, financial, public health and labor conditions, and the following:
The COVID-19 pandemic, which has had, and could continue to have, significant adverse effects on us;
supply-related issues, including prices and availability of materials;
the cyclicality and seasonality of the housing industry and its sensitivity to changes in general economic or other business conditions;
demand fluctuations in the housing industry;
the possible unavailability of additional capital when needed;
competition and competitive pressures;
changes in consumer preferences for our products or our failure to gauge those preferences;
quality problems, including the quality of parts sourced from suppliers and related liability and reputational issues;
data security breaches, cybersecurity attacks, and other information technology disruptions;
the potential disruption of operations caused by the conversion to new information systems;
the extensive regulation affecting the production and sale of factory-built housing and the effects of possible changes in laws with which we must comply;
the potential impact of natural disasters on sales and raw material costs;
the risks associated with mergers and acquisitions, including integration of operations and information systems;
periodic inventory adjustments by, and changes to relationships with, independent retailers;
changes in interest and foreign exchange rates;
insurance coverage and cost issues;
the possibility that all or part of our intangible assets, including goodwill, might become impaired;
the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks; and
other risks described in Part I — Item 1A, "Risk Factors," included in the Fiscal 2021 Annual Report, as well as the risks and information provided from time to time in our other periodic reports filed with the Securities and Exchange Commission.
If any of the risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements proves to be incorrect, then differences may arise between our forward-looking statements and our actual results, and such differences may be material. Investors should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. We assume no obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof, except as required by law.
28