Skyline Champion Announces First Quarter Fiscal 2019 Results
ELKHART, Ind.--(BUSINESS WIRE)--Aug 8, 2018--Skyline Champion Corporation (NYSE:SKY) (“Skyline Champion”), today announced earnings for its fiscal first quarter ended June 30, 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”. Due to the timing of the Combination and the adoption of Champion’s fiscal year reporting period, the first quarter fiscal 2019 results for Skyline Champion include three months of Champion’s results and Skyline’s results for the month of June. Results for the first quarter ended July 1, 2017 of the fiscal year ended March 31, 2018 (“fiscal 2018”) are the results of Champion.
First Quarter Fiscal 2019 Highlights (compared to First Quarter Fiscal 2018)Net sales increased 32% to $322.3 million Total homes sold increased 19% to 4,898 Gross margin expanded by 230 basis points to 17.1% Net loss of $0.9 million, compared to net income of $5.3 million, the year-over-year decline was due to increased SG&A and tax expense associated with the Combination Adjusted EBITDA increased 109% to $22.7 million Adjusted EBITDA margin expanded by 260 basis points to 7.1%
“I am excited to be reporting our results for the first time as Skyline Champion. The business performed well during the quarter driven by strong demand in most of our U.S. markets as well as Canada,” said Keith Anderson, Skyline Champion’s Chief Executive Officer. “I am pleased with our progress on the integration of our business and with the blending of our complementary cultures, providing a great opportunity to expand our role as one of the industry’s leaders. We are making progress toward achieving our targeted synergies.”
“As we look forward and the market remains healthy, we are well positioned with $222 million of backlog at June 2018. In addition, we continue to see positive developments on the financing front, with more competitive retail financing programs for both chattel and land home segments that should help drive improved order rates.”
First Quarter Fiscal 2019 Results
Net sales for the first quarter fiscal 2019 increased by 32% to $322.3 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 first quarter fiscal 2019 increased by 20% to 4,536 with ASPs increasing by 15% to $58,600. Unit volume increased due to added capacity from the Skyline facilities in June 2018, as well as improved operating efficiencies throughout the organization. Home sales prices increased 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 increased by 13%.
Gross profit increased by 53% to $55.2 million compared to the prior-year period. Gross margin was 17.1% for the first quarter fiscal 2019, which was a 230-basis point improvement compared to 14.8% in the first quarter fiscal 2018. Our gross margin expansion was driven by increased volumes of homes sold and an increase in the average selling prices of homes sold. Skyline Champion also drove an increase in gross profit margins by offsetting a rise in material prices and labor costs with operational improvements and product rationalization.
Selling, general and administrative expenses (“SG&A”) in the first quarter fiscal 2019 increased to $45.1 million from $26.8 million in the same period last year, primarily due to an increase in non-cash, equity-based compensation, transaction fees, integration and restructuring costs associated with the Combination. SG&A as a percent of net sales increased to 14.0% from 11.0% in the prior year period.
The net loss for the first quarter fiscal 2019 was $0.9 million, compared to net income of $5.3 million during the same period from the prior year. The decline in net income was driven by an increase in income tax expense as well as SG&A expenses related to the Combination. Skyline Champion’s effective income tax rate for the first quarter fiscal 2019 was impacted by the non-deductibility of certain transaction-related expenses and non-cash equity compensation.
Adjusted EBITDA for the first quarter fiscal 2019 increased by 109% to $22.7 million compared to the first quarter fiscal 2018. The increase was primarily caused by higher sales volumes, improved gross profit and leveraging of fixed costs. The Adjusted EBITDA margin expanded by 260 basis points to 7.1%
As of June 30, 2018, Skyline Champion had $80.9 million of cash and cash equivalents and $30.5 million of unused borrowing capacity under its revolving credit facility.
Conference Call and Webcast Information:
Skyline Champion management will host a conference call today, August 8, 2018, at 8 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 13682191. The replay will be available until 11:59 P.M. Eastern Time on August 21, 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 the following company brand websites:
Modular Buildings www.championcommercial.com
Retail Sales Centers www.titanfactorydirect.com
Transportation Services www.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 and Adjusted EBITDA margin—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 GAAP.
Skyline Champion defines Adjusted EBITDA as net income or loss plus (a) the provision for income taxes, (b) interest expense, net, (c) depreciation and amortization, (d) gain or loss from discontinued operations, (e) foreign currency gains and losses, (f) equity based compensation, (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 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 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 measures under GAAP in the tables below.
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 transaction, 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 Exhibit 99.3 to Skyline Champion’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on July 13, 2018, 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.
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