Skyline Champion Corporation (NYSE:SKY) (“Skyline Champion”),
today announced financial results for its second quarter ended
September 29, 2018 of the fiscal year ending March 30, 2019
(“fiscal 2019”).
On June 1, 2018, Skyline Corporation (“Skyline”) and Champion
Enterprises Holdings, LLC (“Champion”), the parent company of
Champion Home Builders, Inc., completed the previously announced
combination of their operations (the “Combination”). The combined
company operates as Skyline Champion Corporation and is traded on
the New York Stock Exchange under the ticker symbol “SKY”. The
second quarter of fiscal 2019 includes a full quarter of results
for both the Skyline and Champion businesses while the six-month
period ended September 29, 2018 includes only four months of
results from the Skyline operations. Results for the three and six
months ended September 30, 2017 of the fiscal year ended March 31,
2018 (“fiscal 2018”) include only the results of Champion.
Second Quarter Fiscal 2019 Highlights (compared to Second
Quarter Fiscal 2018)
- Net sales increased 37% to $355.4
million
- Total homes sold increased 26% to
5,350
- Gross profit as a percent of sales
expanded by 70 basis points to 16.6%
- Net loss of $77.0 million, compared to
net income of $7.4 million, the year-over-year decline includes
$85.8 million in non-cash, equity-based compensation expense
- EPS was a net loss of $1.42; excluding
non-recurring expenses, Adjusted EPS was net income of $0.23
- Adjusted EBITDA increased 58% to $23.8
million
- Adjusted EBITDA margin expanded by 90
basis points to 6.7%
“The second quarter fiscal 2019 was another strong period
for Skyline Champion as we continued to benefit from a healthy
market and increased demand for our products,” said Keith Anderson,
Skyline Champion’s Chief Executive Officer. “I am encouraged by the
results we are seeing and the progress that we have made toward
achieving synergies from the combined businesses. As we look
forward, demand for manufactured homes remains healthy and Skyline
Champion is strategically adding capacity to meet the needs of the
market.”
Second Quarter Fiscal 2019 Results
Net sales for the second quarter fiscal 2019 increased by 37% to
$355.4 million compared to the prior-year period. The increase in
net sales was driven by an increase in the number of homes sold as
well as an increase in average selling price (“ASP”) per home sold.
The number of U.S. factory-built homes sold by Skyline Champion in
the second quarter fiscal 2019 increased by 29% to 5,038 with U.S.
ASPs increasing by 16% to $60,900. Unit volume increased due to
additional manufacturing capacity as well as plant operating
improvements. Home sales prices increased primarily in order to
offset rising material cost inflation while remaining price
competitive and continuing to offer affordable housing alternatives
to our customers. The number of Canadian factory-built homes sold
declined to 312 homes compared to 345 homes in the prior-year
period with the decrease concentrated in the Alberta and
Saskatchewan provinces where housing demand remains soft. Looking
forward, overall demand for manufactured housing remains strong and
Skyline Champion is well positioned with $252 million in backlog as
of September 2018.
Gross profit increased by 43% to $59.0 million compared to the
prior-year period. Gross profit was 16.6% of net sales for the
second quarter fiscal 2019, a 70-basis point improvement compared
to 15.9% in the second quarter fiscal 2018. Gross profit expansion
was driven by an increase in the average selling price of homes
sold in addition to plant operating improvements which led to
increased output and an increased number of homes sold.
Selling, general and administrative expenses (“SG&A”) in the
second quarter fiscal 2019 increased to $128.1 million from $27.8
million in the same period last year, primarily due to non-cash,
equity-based compensation expense of $85.8 million resulting from
the vesting of restricted shares issued to Champion employees and
directors in connection with the Combination, which was triggered
by the secondary offerings which closed during the second quarter
of fiscal 2019. In addition, SG&A includes the Skyline
operations for the entire second quarter of fiscal 2019 as well as
continued integration and restructuring costs associated with the
Combination.
The net loss for the second quarter fiscal 2019 was $77.0
million, compared to net income of $7.4 million during the same
period from the prior year. The decline in net income was driven by
an increase in SG&A expenses related to the Combination, equity
compensation expense and higher tax expense. Skyline Champion’s
effective income tax rate for the second quarter fiscal 2019 was
impacted by the non-deductibility of certain transaction-related
expenses and non-cash equity compensation.
Adjusted EBITDA for the second quarter fiscal 2019 increased by
58% to $23.8 million compared to the second quarter fiscal 2018.
The increase was primarily driven by higher sales volumes, improved
gross profit and leveraging of fixed costs. The Adjusted EBITDA
margin expanded by 90 basis points to 6.7%.
As of September 29, 2018, Skyline Champion had $102.9 million of
cash and cash equivalents and $32.1 million of unused borrowing
capacity under its revolving credit facility.
Six Months Ended September 29, 2018 Financial
Highlights
For the six months ended September 29, 2018 net sales were
$677.7 million, which represents growth of 34%, or $173.6 million,
compared to the six months ended September 30, 2017.
Gross profit increased $36.8 million or 48% to $114.2 million
compared to $77.4 million for the prior year period. Gross profit
was 16.8% of net sales for the six months ended September 29, 2018,
compared to 15.3% in the six months ended September 30, 2017.
SG&A increased to $173.2 million for the six months ended
September 29, 2018, compared to $54.6 million in the prior year
period, driven by $93.9 million of non-cash, equity compensation
expense, as well as transaction and integration related expenses
and added capacity from the Skyline operations.
The net loss for the six months ended September 29, 2018 was
$77.9 million, compared to net income of $12.7 million for the
prior year period.
Adjusted EBITDA for the six months ended September 29, 2018
increased by 79% to $46.5 million compared $26.0 million for the
six months ended September 30, 2017.
Conference Call and Webcast Information:
Skyline Champion management will host a conference call
tomorrow, November 6, 2018, at 8:30 a.m. Eastern Time, to discuss
Skyline Champion’s financial results.
Investors and other interested parties can listen to a webcast
of the live conference call by logging onto the Investor Relations
section of Skyline Champion’s website at
https://ir.skylinechampion.com/overview/default.aspx. The online
replay will be available on the same website immediately following
the call.
The conference call can also be accessed by dialing (877)
407-4018 (domestic) or (201) 689-8471 (international). A telephonic
replay will be available approximately two hours after the call by
dialing (844) 512-2921, or for international callers, (412)
317-6671. The passcode for the live call and the replay is
13684417. The replay will be available until 11:59 P.M. Eastern
Time on November 20, 2018.
About Skyline Champion Corporation:
Skyline Champion Corporation (NYSE:SKY) was formed in June 2018
as the result of the Combination of Skyline Corporation and the
operating assets of Champion Enterprises Holdings, LLC. The
combined company employs more than 6,800 people and is the largest
independent factory-built housing company in North America. With
more than 65 years of homebuilding experience and 36 manufacturing
facilities throughout the United States and western Canada, Skyline
Champion is well positioned with a leading portfolio of
manufactured and modular homes, park-models and modular buildings
for the multi-family, hospitality, senior and workforce housing
sectors.
In addition to its core home building business, Skyline Champion
operates a factory-direct retail business, Titan Factory Direct,
with 21 retail locations spanning the southern United States, and
Star Fleet Trucking, providing transportation services to the
manufactured housing and other industries from 10 dispatch
locations across the United States.
Skyline Champion builds homes under some of the most well know
brand names in the factory-built housing industry including Skyline
Homes, Champion Home Builders, Athens Park Models, Dutch Housing,
Excel Homes, Homes of Merit, New Era, Redman Homes, Shore Park,
Silvercrest, Titan Homes in the U.S. and Moduline and SRI Homes in
western Canada.
Learn more about our products and services at the following
company brand websites:
Manufactured and Modular
Homeswww.championhomes.comwww.skylinehomes.com
Park Model
RVswww.athensparkmodelrvs.comwww.skylinepm.com
Modular Buildingswww.championcommercial.com
Retail Sales Centerswww.titanfactorydirect.com
Transportation Serviceswww.starfleettrucking.com
Presentation of Non-GAAP Financial Measures
In addition to the results provided in accordance with U.S.
generally accepted accounting principles (“GAAP”) throughout this
press release, Skyline Champion has provided non-GAAP financial
measures—Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
EPS—which present operating results on a basis adjusted for certain
items. Skyline Champion uses these non-GAAP financial measures for
business planning purposes and in measuring its performance
relative to that of its competitors. Skyline Champion believes that
these non-GAAP financial measures are useful financial metrics to
assess its operating performance from period-to-period by excluding
certain items that Skyline Champion believes are not representative
of its core business. These non-GAAP financial measures are not
intended to replace, and should not be considered superior to, the
presentation of Skyline Champion’s financial results in accordance
with U.S. GAAP.
Adjusted EBITDA
Skyline Champion defines Adjusted EBITDA as net income or loss
plus (a) the provision for income taxes, (b) interest expense, net,
(c) depreciation and amortization, (d) gain or loss from
discontinued operations, (e) foreign currency gains and losses, (f)
equity-based compensation, (g) restructuring charges and impairment
of assets, and (h) other non-operating costs including those for
the acquisition and integration or disposition of businesses and
idle facilities. Adjusted EBITDA is not a measure of earnings
calculated in accordance with U.S. GAAP, and should not be
considered an alternative to, or more meaningful than, net income
or loss, net sales, operating income or earnings per share prepared
on a U.S. GAAP basis. Skyline Champion believes that Adjusted
EBITDA is commonly used by investors to evaluate its performance
and that of its competitors. However, Skyline Champion’s use of
Adjusted EBITDA may vary from that of others in our industry.
Adjusted EBITDA is reconciled from the respective measure under
U.S. GAAP in the tables below.
Forward-Looking Statements
Statements in this press release regarding the potential
benefits created by the Combination, including potential synergies,
the future performance of Skyline Champion, market demand and
backlogs, and the availability of financing are intended to be
covered by the safe harbor for "forward-looking statements"
provided by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally can be identified by use
of words such as "believe," "expect," "future," "anticipate,"
"intend," "plan," "foresee," "may," "should," "will," "estimates,"
"potential," "continue," or other similar words or phrases.
Similarly, statements that describe objectives, plans, or goals
also are forward-looking statements. Such forward-looking
statements involve inherent risks and uncertainties, many of which
are difficult to predict and are generally beyond the control of
Skyline Champion. Skyline Champion cautions readers that a number
of important factors could cause actual results to differ
materially from those expressed in, implied, or projected by such
forward-looking statements. Risks and uncertainties include, but
are not limited to: Skyline Champion's inability to realize the
expected benefits from the Combination, general economic
conditions; availability of wholesale and retail financing; the
health of the U.S. housing market as a whole; federal, state, and
local regulations pertaining to the manufactured housing industry;
the cyclical nature of the manufactured housing industry; general
or seasonal weather conditions affecting sales; potential impact of
natural disasters on sales and raw material costs; potential
periodic inventory adjustments by independent retailers; interest
rate levels; the impact of inflation; the impact of high or rising
fuel costs; the cost of labor and raw materials; competitive
pressures on pricing and promotional costs; Skyline Champion's
relationships with its shareholders, customers, and other
stakeholders; catastrophic events impacting insurance costs; the
availability of insurance coverage for various risks to Skyline
Champion; market demographics; and management's ability to attract
and retain executive officers and key personnel and other risks and
uncertainties more fully described in Skyline Champion’s Form 10-Q
for the first quarter fiscal 2019 previously filed with the
Securities and Exchange Commission (SEC), as well as the other
filings that Skyline Champion makes with the SEC.
If any of these risks or uncertainties materializes or if any of
the assumptions underlying such forward-looking statements proves
to be incorrect, the developments and future events concerning
Skyline Champion set forth in this press release may differ
materially from those expressed or implied by these forward-looking
statements. You are cautioned not to place undue reliance on these
statements, which speak only as of the date of this document. We
anticipate that subsequent events and developments will cause our
expectations and beliefs to change. Skyline Champion assumes no
obligation to update such forward-looking statements to reflect
events or circumstances after the date of this document or to
reflect the occurrence of unanticipated events, unless obligated to
do so under the federal securities laws.
SKYLINE CHAMPION
CORPORATIONCONSOLIDATED BALANCE SHEETS(Dollars and
shares in thousands, except per share amounts)
September 29,
2018
March 31,
2018
(unaudited) ASSETS Current assets: Cash and cash
equivalents $ 102,873 $ 113,731 Trade accounts receivable, net
55,165 41,984 Inventories 113,147 98,022 Other current assets
11,738 9,367 Total current assets 282,923
263,104 Property, plant and equipment, net 111,950 67,960
Restricted cash — 22,885 Goodwill 177,485 3,179 Amortizable
intangible assets, net 43,158 1,542 Deferred tax assets 37,112
30,290 Other noncurrent assets 12,784 6,438
Total
assets $ 665,412 $ 395,398
LIABILITIES AND EQUITY
Current liabilities: Floor plan payable $ 29,893 $ 29,825
Short-term portion of debt — 404 Accounts payable 46,021 36,773
Other current liabilities 119,736 100,112 Total
current liabilities 195,650 167,114 Long-term
liabilities: Long-term debt 59,330 58,927 Deferred tax liabilities
3,459 3,294 Other long-term liabilities 20,504 12,766
Total long-term liabilities 83,293 74,987 Contingent
liabilities Equity: Common stock, $0.0277 par value, 115,000 shares
authorized, 56,713 shares issued
as of September 29, 2018 (including 464 shares subject to
restriction)
1,571 — Additional paid-in capital 472,176 — Members’ contributed
capital — 140,076 (Accumulated deficit) retained earnings (77,878 )
22,514 Accumulated other comprehensive loss (9,400 ) (9,293 ) Total
equity 386,469 153,297
Total liabilities and
equity $ 665,412 $ 395,398
SKYLINE CHAMPION
CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)(Dollars and shares in thousands, except per share
amounts)(Unaudited)
Three Months Ended Six
Months Ended September 29,
2018
September 30,
2017
September 29,
2018
September 30,
2017
Net sales $ 355,436 $ 259,963 $ 677,697 $ 504,065 Cost of
sales 296,436 218,636 563,537 426,706
Gross profit 59,000 41,327 114,160 77,359 Selling, general, and
administrative expenses 128,069 27,763 173,157
54,562 Operating (loss) income (69,069 ) 13,564 (58,997 )
22,797 Interest expense, net 827 1,065 1,899 2,165 Other expense
1,307 842 7,720 923 (Loss) income
before income taxes (71,203 ) 11,657 (68,616 ) 19,709 Income tax
expense 5,822 4,249 9,262 7,038 Net
(loss) income $ (77,025 ) $ 7,408 $ (77,878 ) $ 12,671
Comprehensive (loss) income: Net (loss) income $ (77,025 ) $ 7,408
$ (77,878 ) $ 12,671 Foreign currency translation gain (loss)
588 1,382 (107 ) 2,199 Comprehensive
(loss) income $ (76,437 ) $ 8,790 $ (77,985 ) $ 14,870 Net (loss)
income per share: Basic $ (1.42 ) $ 0.16 $ (1.53 ) $ 0.27 Diluted $
(1.42 ) $ 0.16 $ (1.53 ) $ 0.27
SKYLINE CHAMPION
CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars
in thousands)(Unaudited)
Six Months Ended September 29,
2018
September 30,
2017
Cash flows from operating activities Net (loss)
income $ (77,878 ) $ 12,671 Adjustments to reconcile net (loss)
income to net cash provided by operating activities Depreciation
5,275 3,860 Amortization of intangible assets 1,683 238
Equity-based compensation 93,927 300 Deferred income taxes 3,025
2,023 Amortization of deferred financing fees 285 30 Loss on
disposal of property, plant and equipment 3 11 Foreign currency
transaction loss (gain) 33 (1,233) (Increase) decrease in assets
net of business acquired Accounts receivable 398 (11,331)
Inventories 3,852 (8,806) Prepaid expenses (1,028 ) (2,434) Other
assets 504 1,900 Increase (decrease) in liabilities net of business
acquired Accounts payable (586 ) 5,430 Accrued expenses 447 (115)
Other liabilities (922 ) 1,157 Net cash provided by
operating activities 29,018 3,701
Cash flows from
investing activities Additions to property, plant, and
equipment (4,684 ) (5,853) Cash assumed in business acquisition
9,722 — Proceeds from disposal of property, plant and equipment 11
395 Decrease in note receivable 132 120 Net cash
provided by (used in) investing activities 5,181
(5,338)
Cash flows from financing activities Borrowings on
revolving credit facility 46,900 — Payments on term loans and
capital leases (46,898 ) (216) Changes in floor plan financing, net
68 5,771 Payments for deferred financing fees (1,976 ) — Members’
capital distributions (65,277 ) — Stock option exercises 1,615 —
Tax payments for equity-based compensation (2,336 ) —
Net cash (used in) provided by financing activities (67,904
) 5,555 Effect of exchange rate changes on cash, cash
equivalents and restricted cash (38 ) 1,693 Net
increase (decrease) in cash, cash equivalents and restricted cash
during the period (33,743 ) 5,611 Cash, cash equivalents and
restricted cash at beginning of period 136,616
102,692 Cash, cash equivalents and restricted cash at end of period
$ 102,873 $ 108,303
Supplemental disclosures of cash flow
information Cash paid for income taxes, net of refunds $ 5,878
$ 4,298 Cash paid for interest $ 2,572 $ 2,568
SKYLINE CHAMPION
CORPORATIONRECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED
EBITDA(Dollars in thousands)(Unaudited)
Three Months Ended Six Months Ended (Dollars in
thousands) September 29,
2018
September 30,
2017
Change %
Change
September 29,
2018
September 30,
2017
Change %
Change
Net (loss) income $ (77,025 ) $ 7,408 $ (84,433 ) N/M
$ (77,878 ) $ 12,671 $ (90,549 ) N/M Income tax expense 5,822 4,249
1,573 37.0 % 9,262 7,038 2,224 31.6 % Interest expense, net 827
1,065 (238 ) (22.3 %) 1,899 2,165 (266 ) (12.3 %) Depreciation and
amortization 4,047 2,130 1,918 90.1 % 6,958 4,098 2,860 69.8 %
Equity-based compensation
85,839
150 85,689 N/M 93,927 300 93,627 N/M
Foreign currency gain (loss)
(34
) (754 ) 720 (95.5 %) 33 (1,233 ) 1,266 102.7 % Transaction costs
492 804 (312 ) (38.8 %) 6,905 894 6,011 N/M Acquisition integration
costs 2,313 — 2,313 100.0 % 3,502 — 3,502 100.0 % Equity offering
costs 816 — 816 100.0 % 816 — 816 100.0 % Restructuring charges 703
— 703 100.0 % 1,111 — 1,111 100.0 % Other (1 ) 37
(38 ) (102.7) % (1 ) 44 (45 ) (102.3 %)
Adjusted EBITDA $ 23,799 $ 15,089 $ 8,711 57.7 % $ 46,534 $ 25,977
$ 20,557 79.1 %
“N/M” indicates that the calculated
percentage is not meaningful.
SKYLINE CHAMPION
CORPORATIONRECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED
EARNINGS PER SHARE(Dollars and shares in thousands, except per
share amounts)(Unaudited)
Three Months Ended Six
Months Ended (Dollars and shares in thousands, except per
share data) September 29,
2018
September 30,
2017
September 29,
2018
September 30,
2017
(unaudited) (unaudited) Net (loss) income, as
reported $ (77,025 ) $ 7,408 $ (77,878 ) $ 12,671 Adjustments:
Combination related equity-based compensation 85,839 - 93,927 -
Transaction costs 492 804 6,905 894 Acquisition integration costs
2,313 - 3,502 - Equity offering costs 816 - 816 - Restructuring
charges 703 - 1,111
- Adjusted net income 13,138 8,212 28,383 13,565 Less:
Undistributed earnings allocated to participating securities
526 514 1,385 863
Adjusted net income attributable to the Company’s common
shareholders $ 12,612 $ 7,698 $ 26,998 $
12,702 Average common shares outstanding 54,105
44,525 50,747 44,457 Adjusted net
income per share $ 0.23 $ 0.17 $ 0.53 $ 0.29
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181105005996/en/
For Skyline Champion:Investors:Laurie Hough,
248-614-8211investorrelations@championhomes.com
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