~~(Former name, former address and former fiscal year, if changed since last report)~~Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the ~~registrant~~Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the ~~registrant~~Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated ~~filer,~~filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act.~~Act:):

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. [☐

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

AsNumber of ~~November 2, 2018, 56,713,294~~ shares of ~~Skyline Champion Corporation’s Common Stock, $0.0277 par value, were outstanding.~~common stock outstanding as of July 29, 2019: 56,720,715

As previously reported by Skyline Champion Corporation (formerly known as Skyline Corporation), an Indiana corporation (the “Company”), in its Current Report on Form 8-K filed on June 6, 2018, on June 1, 2018, the Company and Champion Enterprises Holdings, LLC (“Champion Holdings”) completed the transactions contemplated by the Share Contribution & Exchange Agreement (the “Exchange Agreement”), dated as of January 5, 2018, by and between the Company and Champion Holdings. Under the Exchange Agreement, (i) Champion Holdings contributed to the Company all of the issued and outstanding equity interests of each of Champion Holdings’ wholly-owned operating subsidiaries, Champion Home Builders, Inc., a Delaware corporation (“CHB”), and CHB International B.V., a Dutch private limited liability company (“CIBV”) (the shares of stock of CHB and CIBV contributed to the Company, the “Contributed Shares”), and (ii) in exchange for the Contributed Shares, the Company issued to the members of Champion Holdings, in the aggregate, 47,752,008 shares of the Company common stock, $0.0277 par value per share (“Skyline Common Stock”) (such issuance, the “Shares Issuance”). Immediately following the Shares Issuance, the members of Champion Holdings collectively held 84.5%, and the Company’s pre-closing shareholders collectively held 15.5%, of the issued and outstanding Skyline Common Stock on a fully-diluted basis. The contribution of the Contributed Shares by Champion Holdings to Skyline, and the Shares Issuance by the Company to the members of Champion Holdings are collectively referred to herein as the “Exchange.”

The Exchange was treated as a purchase of the Company by Champion Holdings for accounting and financial reporting purposes. As a result, the financial results for the six months ended September 29, 2018 comprise the results of only Champion Holdings through June 1, 2018 and the Company, after giving effect to the Exchange, from June 1, 2018 through September 29, 2018. All periods prior to June 1, 2018 are comprised solely of the results of Champion Holdings.

All Company earnings per share and common share outstanding amounts in this Quarterly Report on Form 10-Q have been calculated as if the Shares Issuance took place on April 2, 2017, at the exchange ratio, as defined in the Exchange Agreement.

	September 29, 2018			March 31, 2018			June 29, 2019			March 30, 2019
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	102,873		$	113,731		$	143,647		$	126,634
Trade accounts receivable, net		55,165			41,984			57,692			57,649
Inventories		113,147			98,022			113,190			122,638
Other current assets		11,738			9,367			14,078			11,369
Total current assets		282,923			263,104			328,607			318,290
Long-term assets:
Property, plant and equipment, net		111,950			67,960			110,236			108,587
Restricted cash		—			22,885
Goodwill		177,485			3,179			173,521			173,406
Amortizable intangible assets, net		43,158			1,542			47,421			48,936
Deferred tax assets		37,112			30,290			32,948			34,058
Other noncurrent assets		12,784			6,438			29,758			16,677
Total assets	$	665,412		$	395,398		$	722,491		$	699,954
LIABILITIES AND EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Floor plan payable	$	29,893		$	29,825		$	32,668		$	33,321
Short-term portion of debt		—			404
Accounts payable		46,021			36,773			45,037			43,421
Other current liabilities		119,736			100,112			126,771			129,561
Total current liabilities		195,650			167,114			204,476			206,303
Long-term liabilities:
Long-term debt		59,330			58,927			49,330			54,330
Deferred tax liabilities		3,459			3,294			3,581			3,422
Other long-term liabilities		20,504			12,766
Other								32,936			23,927
Total long-term liabilities		83,293			74,987			85,847			81,679
Contingent liabilities (Note 17)
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			—

Stockholders’ Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 56,657 shares issued as of both June 29, 2019 and March 30, 2019 (including 290 shares subject to restriction)								1,569			1,569
Additional paid-in capital		472,176			—			481,143			479,226
Members’ contributed capital		—			140,076
(Accumulated deficit) retained earnings		(77,878	)		22,514
Accumulated deficit								(40,828	)		(58,208	)
Accumulated other comprehensive loss		(9,400	)		(9,293	)		(9,716	)		(10,615	)
Total equity		386,469			153,297
Total liabilities and equity	$	665,412		$	395,398
Total stockholders’ equity								432,168			411,972
Total liabilities and stockholders’ equity							$	722,491		$	699,954

Three Months Ended

Six Months Ended

September 29,
2018

September 30,
2017

September 29,
2018

September 30,
2017

(unaudited)

(unaudited)

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

Six Months Ended

September 29,
2018

September 30,
2017

(unaudited)

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 (decrease) increase 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

	Three Months Ended
	June 29, 2019			June 30, 2018
Cash flows from operating activities
Net income (loss)	$	17,380		$	(853	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		3,110			2,430
Amortization of intangible assets		1,362			481
Amortization of deferred financing fees		131			159
Fair market value adjustment for asset classified as held for sale		986			—
Equity-based compensation		1,917			8,088
Deferred taxes		1,545			1,251
Gain on disposal of property, plant and equipment		(12	)		(1	)
Foreign currency transaction (gain) loss		(72	)		67
Change in assets and liabilities net of business acquired:
Accounts receivable		55			(178	)
Inventories		9,786			2,648
Accounts payable		1,568			(3,306	)
Prepaids and other assets		(3,706	)		(1,615	)
Accrued expenses and other liabilities		(7,270	)		(4,906	)
Net cash provided by operating activities		26,780			4,265
Cash flows from investing activities
Additions to property, plant, and equipment		(4,526	)		(2,020	)
Cash acquired in business acquisition		—			9,722
Proceeds from disposal of property, plant and equipment		12			1
Decrease in note receivable		—			35
Net cash (used in) provided by investing activities		(4,514	)		7,738
Cash flows from financing activities
Changes in floor plan financing, net		(653	)		(325	)
Borrowings on revolving debt facility		—			46,900
Payments on revolving debt facility		(5,000	)		—
Payments on term-loans and other debt		—			(46,900	)
Payments for deferred financing fees		—			(1,900	)
Members' capital distribution		—			(65,277	)
Net cash used in financing activities		(5,653	)		(67,502	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		400			(226	)
Net increase (decrease) in cash, cash equivalents and restricted cash		17,013			(55,725	)
Cash, cash equivalents and restricted cash at beginning of period		126,634			136,616
Cash, cash equivalents and restricted cash at end of period	$	143,647		$	80,891

Members’ Contributed

Common Stock

Additional Paid in

Retained
Earnings (Accumulated

Accumulated
Other Comprehensive

Capital

Shares

Amount

Capital

Deficit)

Loss

Total

Balance at April 1, 2018

$
140,076

—

$
—

$
—

$
22,514

$
(9,293
)

$
153,297

Members’ capital distributions

(42,763
)

—

—

—

(22,514
)

—

(65,277
)
Exchange of membership interest for shares of
   Skyline Champion Corporation

(97,313
)

56,143

1,555

380,923

—

—

285,165

Equity-based compensation

—

—

—

93,927

—

—

93,927

Common stock issued under equity-based
   compensation plans, net of shares withheld for
   employee taxes

—

570

16

(2,674
)

—

—

(2,658
)
Foreign currency translation adjustments

—

—

—

—

—

(107
)

(107
)
Net loss

—

—

—

—

(77,878
)

—

(77,878
)
Balance at September 29, 2018

$
—

56,713

$
1,571

$
472,176

$
(77,878
)

$
(9,400
)

$
386,469

	For the Three Months Ended June 29, 2019
	Common Stock
	Shares		Amount		Members' Contributed Capital			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Total
Balance at March 30, 2019		56,657	$	1,569	$	—		$	479,226	$	(58,208	)	$	(10,615	)	$	411,972
Net income		—		—		—			—		17,380			—			17,380
Equity-based compensation		—		—		—			1,917		—			—			1,917
Foreign currency translation adjustments		—		—		—			—		—			899			899
Balance at June 29, 2019		56,657	$	1,569	$	—		$	481,143	$	(40,828	)	$	(9,716	)	$	432,168


	For the Three Months Ended June 30, 2018
	Common Stock
	Shares		Amount		Members' Contributed Capital			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Total
Balance at March 31, 2018		—	$	—	$	140,076		$	—	$	22,514		$	(9,293	)	$	153,297
Net loss		—		—					—		(853	)		—			(853	)
Members' capital distributions		—		—		(42,763	)				(22,514	)		—			(65,277	)
Exchange of membership interest for shares of Skyline Champion Corporation		56,143		1,555		(97,313	)		380,923		—			—			285,165
Equity-based compensation		45		1		—			7,931		—			—			7,932
Foreign currency translation adjustments		—		—		—			—		—			(695	)		(695	)
Balance at June 30, 2018		56,188	$	1,556	$	—		$	388,854	$	(853	)	$	(9,988	)	$	379,569

Components of accumulated other comprehensive loss consisted solely of foreign currency translation adjustments.

On June 1, 2018, Skyline Champion Corporation (formerly known as Skyline Corporation), an Indiana corporation (the “Company”) and Champion Enterprises Holdings, LLC (“Champion Holdings”) completed the transactions contemplated by the Share Contribution & Exchange Agreement (the “Exchange Agreement”), dated as of January 5, 2018, by and between the Company and Champion Holdings. Under the Exchange Agreement, (i) Champion Holdings contributed to the Company all of the issued and outstanding equity interests of each of Champion Holdings’ wholly-owned operating subsidiaries (the “Contributed Shares”), and (ii) in exchange for the Contributed Shares, the Company issued to the members of Champion Holdings, in the aggregate, 47,752,008 shares of the Company common stock (“Skyline Common Stock”) (such issuance, the “Shares Issuance”). Immediately following the Shares Issuance, the members of Champion Holdings collectively held 84.5%, and the Company’s pre-closing shareholders collectively held 15.5%, of the issued and outstanding Skyline Common Stock on a fully-diluted basis. The contribution of the Contributed Shares by Champion Holdings to Skyline, and the Shares Issuance by the Company to the members of Champion Holdings are collectively referred to herein as the “Exchange.”

The Exchange was treated as a purchase of the Company by Champion Holdings for accounting and financial reporting purposes. As a result, the financial results for the three months ending June 30, 2018 are comprised of 1) the results of Champion Holdings for the period between April 1, 2018 and May 31, 2018 and 2) the Company, after giving effect to the Exchange, from June 1, 2018 through June 30, 2018.

The accompanying unaudited condensed consolidated financial statements of ~~Skyline Champion Corporation (the “Company”),~~the Company, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after elimination of intercompany balances and transactions. In the opinion of management, these statements include all ~~of the~~ normal recurring adjustments necessary to fairly state the Company’s consolidated results of operations, cash flows and financial position. The Company has evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to the audited consolidated financial statements included ~~as an exhibit to~~in the Company’s ~~Current~~Annual Report on Form ~~8-K/A,~~10-K, which was filed with the SEC on ~~June 14, 2018.~~May 23, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes thereto. Actual results could differ from those estimates. The condensed consolidated statements of comprehensive income (loss) and condensed consolidated statements of cash flows for the interim periods are not necessarily indicative of the results of operations or cash flows for the full year.

The Company’s fiscal year is a 52- or 53-week period that ends on the Saturday nearest to March 31. The Company’s current fiscal year, “fiscal 2020”, will end on March ~~30, 2019. The three months ended September 29, 2018 and September 30, 2017 each included 13 weeks. The six months ended September 29, 2018 and September 30, 2017 each included 26 weeks.~~28, 2020. References to “fiscal 2016” relate to the Company’s fiscal year ended April 2, 2016, references to “fiscal 2017” relate to the Company’s fiscal year ended April 1, 2017, references to “fiscal 2018” refer to the Company’s fiscal year ended March 31, 2018 and references to “fiscal 2019” refer to the Company’s fiscal year ~~ending~~ended March 30, 2019. The three months ended June 29, 2019 and June 30, 2018 each included 13 weeks.

The Company’s operations consist of manufacturing, retail and transportation activities. The Company ~~is a leading producer of factory-built housing in~~operates 33 manufacturing facilities throughout the United States (“U.S.”) and Canada and serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured construction, company-owned retail locations, and transportation logistics services. The Company is the second largest factory-built solutions provider in North America based on revenue and markets its homes under several nationally recognized brand names including Skyline Homes, Champion Homes, Redman Homes, Dutch Housing, Excel Homes, Silvercrest, Titan Homes, Moduline, and SRI Homes. As of September 29, 2018, the Company operates 31 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 primarily to independent retailers and builders/~~developers, including manufactured home community operators.~~developers. The Company’s retail operations consist of 21 sales centers that sell manufactured ~~homes~~houses to consumers primarily in the ~~southern~~Southern U.S. The Company’s transportation business ~~primarily~~ engages independent owners/drivers to transport ~~manufactured homes and~~ recreational vehicles throughout the U.S. and ~~Canada.~~

Pronouncements: In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases ~~(Topic~~(Topic 842)(“ASC 842”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the consolidated balance sheet a liability to make lease payments (the lease liability) and an asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous requirements. This ~~ASU~~ASC 842 is effective for fiscal years beginning after December 31, 2018 ~~or the Company’s fiscal year commencing March 31, 2019. Modified~~and modified retrospective application ~~and early adoption~~ is permitted.

The Company ~~is currently evaluating~~adopted ASC 842 as of March 31, 2019, the first day of fiscal 2020 using the modified retrospective approach and without restating comparative periods. The Company has elected to apply the transition package of three practical expedients which allow companies not to reassess whether agreements contain leases, the classification of leases, and the capitalization of initial direct costs. The Company did not elect the practical expedient which permits the use of hindsight when determining the lease term and assessing right-of-use assets for impairment. As permitted by the standard, the Company elected to: 1) recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and will not recognize any right of use assets or lease liabilities for those leases, and 2) not separate lease and non-lease components.

The primary financial statement impact ~~this~~upon adoption was the recognition, on a discounted basis, of the Company's minimum commitments under non-cancelable operating leases as right of use assets and obligations on the consolidated balance sheets. The adoption of ASC 842 resulted in the recognition of lease-related assets and liabilities of $13.7 million. The standard ~~will~~did not have a material impact on ~~its consolidated financial position,~~the Company's results of operations ~~and~~or cash flows. The Company expects the impact to the Company's consolidated balance sheet will be significant. The Company (i) has formed a cross-functional implementation team; (ii) is engaging a third party to assist with the implementation, and (iii) is implementing a software solution to manage and account for leases under the new standard. The Company plans to adopt the standard by applying the modified retrospective method on the March 31, 2019 adoption date as a cumulative-effect adjustment to the balance sheet, without restatement of comparative periods' financial information, based on transition guidance recently issued by the FASB. In addition, the Company expects to elect the package of practical expedients, exclusive of the lease term hindsight, as defined in the standard.

Recently Issued Accounting Pronouncements Pending Adoption: In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the accounting for goodwill impairments and allows a goodwill impairment charge to be based on the amount of a reporting unit’s carrying value in excess of its fair value. This eliminates the requirement to calculate the implied fair value of goodwill or what is known as “Step 2” under the current guidance. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2019, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

There were no other accounting standards recently issued that are expected to have a material impact on ~~our~~the Company’s financial position or results of operations.

~~On January 5, 2018, Champion Holdings and the Company entered into the Exchange Agreement pursuant to which the two companies agreed to combine their operations.~~ The Exchange was completed on June 1, 2018 and was accounted for as a reverse acquisition under the acquisition method of accounting as provided by the FASB Accounting Standards Codification 805, Business ~~Combinations~~ ~~(“ASC 805”).~~Combinations. Champion Holdings was ~~determined~~deemed to be the acquirer for accounting and financial reporting purposes. The assets acquired and liabilities assumed ~~by Champion Holdings~~ as a result of the Exchange were recorded at their respective fair values and added to the carrying value of Champion Holdings’ existing assets and liabilities. ~~As Champion Holdings is the accounting acquirer, reported financial results for Skyline Champion Corporation~~The Company incurred acquisition-related costs of approximately $6.4 million for the ~~six~~three months ended ~~September 29,~~June 30, 2018 ~~comprise~~which was classified as other expense in the ~~results~~condensed consolidated statements of ~~only Champion Holdings through June 1, 2018 and~~operations. Additionally, the Company ~~after giving effect~~incurred approximately $6.0 million in stock compensation expense related to former Skyline employees during the ~~Exchange, from~~three months ended June 1,30, 2018, ~~through September~~which is recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. These types of costs were not incurred in the three months ended June 29, ~~2018. All fiscal periods prior to June 1, 2018 are comprised solely of the results of Champion Holdings.~~2019.

The purchase price of the acquisition was determined with reference to the value of equity (common stock) of the Company based on the closing price on June 1, 2018 of $33.39 per share. The purchase price has been allocated to the assets acquired and liabilities assumed using their estimated fair values at June 1, 2018, the closing of the Exchange. The purchase price and ~~its~~the allocation ~~are preliminary and~~ have been used to prepare the accompanying condensed consolidated financial statements. The final purchase price and its allocation will be determined when the Company has completed the necessary valuations and calculations. The final allocation could differ materially from the preliminary allocation used in the accompanying condensed consolidated financial statements. The final allocation may include changes in allocations to intangible assets and other changes to the fair value assigned to the assets acquired and liabilities assumed.

(Dollars in thousands)	Allocation			Allocation at March 30, 2019			Changes to Allocation			Final Allocation at June 29, 2019
Cash	$	9,722		$	9,722		$	—		$	9,722
Trade accounts receivable		13,876			13,876			—			13,876
Inventory		19,028			19,028			—			19,028
Assets held for sale					2,086			—			2,086
Property, plant and equipment		44,642			40,220			—			40,220
Deferred tax assets, net		9,733			6,996			38			7,034
Other assets		6,349			6,706			—			6,706
Accounts payable and accrued liabilities		(35,763	)		(36,027	)		—			(36,027	)
Intangibles		43,300			52,218			(153	)		52,065
Goodwill		174,278			170,227			115			170,342
Total preliminary estimated purchase price allocation	$	285,165
Total purchase price allocation				$	285,052		$	—		$	285,052

~~The preliminary estimated goodwill~~Goodwill is primarily attributable to expected synergies from the combination of the companies, including, but not limited to, expected cost synergies through procurement activities and operational improvements through sharing of best practices. Goodwill, which is not deductible for income tax purposes, was allocated to the U.S. Factory-built Housing ~~segment.~~reporting unit.

Cash, trade receivables, other assets, accounts payable, accrued and other liabilities were generally stated at historical carrying values given the short-term nature of these assets and liabilities. Intangible assets consist primarily of ~~provisional~~ amounts recognized for the fair value of customer relationships and trade names and were based on an independent appraisal. Customer-based assets include the Company’s established relationships with its customers and the ability of those customers to generate future economic profits for the Company. The Company estimates that these intangible assets have a weighted average useful life of ten years.Fair value estimates of property, plant, and equipment were based on independent appraisals and broker opinions of value, giving consideration to the highest and best use of the assets. Key assumptions used in the

appraisals were based on a combination of market and cost approaches, as appropriate. ~~As a result of the June 2018 acquisition of Skyline Corporation, level~~Level 3 fair value estimates of ~~$44.6~~$40.2 million related to property, plant and equipment and ~~$43.3~~$52.1 million related to intangible assets were recorded in the accompanying condensed consolidated balance ~~sheets~~sheet as of ~~September~~June 29, ~~2018.~~2019. The Company determined $2.1 million of property acquired in the Exchange met the definition of held for sale at the acquisition date and was classified in other current assets. The fair value less cost to sell of this held for sale property is evaluated each reporting period to determine if it has changed. A loss of $1.0 million was recorded during the three months ended June 29, 2019 related to this held for sale property based on updated market information. Assets held for sale were $1.1 million and $2.1 million as of June 29, 2019 and March 30, 2019, respectively. For further information on acquired assets measured at fair value, see Note 6,5, Goodwill and Intangible Assets.

The Company allocated a portion of the ~~preliminary estimated~~ purchase price to certain realizable deferred tax assets totaling ~~$28.4~~$27.3 million. Deferred tax assets are primarily federal and state net operating loss carryforwards and credits offset by a valuation allowance for certain state net operating loss carryforwards that are not expected to be realized. The deferred tax assets are offset by deferred tax liabilities of ~~$18.7~~$20.3 million resulting from the purchase price allocation step-up in fair value that exceed the historical tax basis.

~~Included in the Company’s results~~The statement of operations for the three ~~and six~~ months ended ~~September 29,~~June 30, 2018 ~~are results from~~includes $22.1 million of net sales attributable to the ~~business~~ acquired ~~as follows:~~

A summary of the results of operations for the Company, on an as reported and on a pro forma basis, are as follows:

	Three Months Ended September 30, 2017				Six Months Ended September 29, 2018						Six Months Ended September 30, 2017				Three Months Ended June 30, 2018
(Dollars in thousands)	Reported		Pro forma		Reported			Pro forma			Reported		Pro forma		Reported			Pro forma
Net sales	$	259,963	$	318,425	$	677,697		$	723,501		$	504,065	$	621,990	$	322,261		$	368,065
Net income (loss)		7,408		8,058		(77,878	)		(62,769	)		12,671		14,247
Net (loss) income																(853	)		14,256

The pro forma results are based on adding the historical results of operations of Champion Holdings and ~~the Company~~Skyline and adjusting ~~primarily~~those historical amounts for the amortization of intangibles created in the Exchange; the increase in depreciation as a result of the step-up in fair value of property, plant and equipment; removing transaction costs directly associated with the Exchange; removing ~~one-time~~ equity-based compensation expense directly resulting from the Exchange; reflecting the financing arrangements entered into in connection with the Exchange, and adjusting those items for income taxes. The pro forma disclosures do not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Exchange or any integration costs. The pro forma data is intended for informational purposes and is not indicative of the future results of operations. The Exchange was completed during the first quarter of fiscal 2019, and therefore, there was no difference between the results of operations on an as reported and pro forma basis for the three months ended September 29, 2018.

The Exchange Agreement provided that Champion Holdings was permitted to pay a capital distribution prior to completion of the Exchange to the extent it had cash in excess of debt and other debt-like items and unpaid Exchange fees and expenses. Prior to the completion of the Exchange, Champion Holdings made a capital distribution to its members equal to an aggregate of $65.3 million (of which $22.5 million was reflected as a reduction to retained earnings ~~(accumulated deficit)~~ and $42.8 million was reflected as a reduction to members’ contributed capital).

~~On April 1, 2018, the Company adopted ASU 2016-18,~~ ~~Restricted Cash~~. The standard requires that changes in restricted cash be reflected with changes in cash and cash equivalents on the statement of cash flows and that a reconciliation between cash and cash equivalents presented on the balance sheet and cash, cash equivalents and restricted cash presented on the statement of cash flows be provided. The provisions of the standard were applied retrospectively, and the effects of adoption were not significant.

~~A reconciliation of cash, cash equivalents and restricted cash was as follows:~~

The components of ~~inventories,~~net inventory, including ~~inventories~~inventory for the Company’s manufacturing and retail operations, were as follows:

(Dollars in thousands)	September 29, 2018		March 31, 2018		June 29, 2019		March 30, 2019
	(unaudited)
Raw materials	$	47,194	$	37,852	$	46,660	$	48,531
Work in process		14,371		10,004		13,549		13,973
Finished goods and other		51,582		50,166		52,981		60,134
Total inventories	$	113,147	$	98,022	$	113,190	$	122,638

At ~~September~~both June 29, ~~2018~~2019 and March ~~31, 2018,~~30, 2019, reserves for obsolete inventory were ~~$3.6 million and $3.5 million, respectively.~~$4.1 million.

Property, plant and equipment are stated at cost. Depreciation is calculated primarily on the straight-line method, generally over the following estimated useful lives: land improvements – 3 to 10 years; buildings and improvements – 8 to 25 years; and vehicles and machinery and equipment – 3 to 8 years. Depreciation expense ~~including amortization of assets under capital lease,~~ for the three ~~and six~~ months ended ~~September~~June 29, 2019 and June 30, 2018 was ~~$2.8~~$3.1 million and ~~$5.3~~$2.4 million, ~~respectively, and for the three and six months ended September 30, 2017 was $2.0 million and $3.9 million,~~ respectively.

(Dollars in thousands)	September 29, 2018		March 31, 2018		June 29, 2019			March 30, 2019
	(unaudited)
Land and improvements	$	34,927	$	22,071	$	34,412		$	34,264
Buildings and improvements		85,665		58,179		84,958			83,973
Machinery and equipment		38,912		31,924		43,195			42,476
Construction in progress		2,735		919		6,668			3,619
Property, plant and equipment, at cost		162,239		113,093		169,233			164,332
Less accumulated depreciation		50,289		45,133
Less: accumulated depreciation						(58,997	)		(55,745	)
Property, plant, and equipment, net	$	111,950	$	67,960	$	110,236		$	108,587

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At ~~September~~June 29, ~~2018~~2019 and March ~~31, 2018,~~30, 2019, the Company had goodwill of ~~$177.5~~$173.5 million and ~~$3.2~~$173.4 million, respectively. The ~~increase~~change during the ~~six~~three months ended ~~September~~June 29, ~~2018~~2019 was a result of ~~goodwill~~the finalization of the allocation of net assets recognized in connection with the Exchange.

(Dollars in thousands)	September 29, 2018									March 31, 2018									June 29, 2019									March 30, 2019
	Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total
	(unaudited)																		Customer Relationships			Trade Names			Total			Customer Relationships			Trade Names			Total
Gross carrying amount	$	40,118		$	13,158		$	53,276		$	5,739		$	4,268		$	10,007		$	48,740		$	13,218		$	61,958		$	48,782		$	13,173		$	61,955
Accumulated amortization		(6,749	)		(3,369	)		(10,118	)		(5,610	)		(2,855	)		(8,465	)		(10,251	)		(4,286	)		(14,537	)		(9,052	)		(3,967	)		(13,019	)
Amortizable intangibles, net	$	33,369		$	9,789		$	43,158		$	129		$	1,413		$	1,542		$	38,489		$	8,932		$	47,421		$	39,730		$	9,206		$	48,936
Weighted average amortization period, in years		9.7			9.1			9.5			4.3			5.5			5.4

~~During the six months ended September 29, 2018, the~~The Company recognized finite-lived intangibles for customer relationships of ~~$34.4~~$43.1 million and trade names of ~~$8.9~~$9.0 million as a result of the allocation of the ~~preliminary estimated~~ purchase price from the Exchange. The fair value of the customer relationship intangible asset was estimated using the multi-period excess earnings method of the income approach. The ~~final determination~~fair value of the customer relationship intangible asset ~~will depend~~was determined based on ~~changes to the~~estimates and assumptions ~~used for~~of projected cash flows attributable to the acquired customer relationships, the annual attrition rate of existing customer relationships, the contributory asset charges attributable to the assets that support the customer relationships, such as net working capital, property, plant and equipment, trade name, and workforce, the economic life and the discount rate as determined at the time of the final valuation. The fair value of the trade name intangible asset was estimated using the relief-from-royalty method of the income approach. The ~~final determination~~fair value of the trade names intangible asset ~~will depend~~was determined based on ~~changes to~~estimates and assumptions used for the expected life of the intangible asset, the royalty rate and the discount rate that reflects the level of risk associated with the future cash flows as determined at the time of the final valuation. ~~Amortization~~During the three months ended June 29, 2019 and June 30, 2018, amortization of intangible assets ~~for the three and six months ended September 29, 2018~~ was ~~$1.2~~$1.4 million and ~~$1.7~~$0.5 million, ~~respectively, and for the three and six months ended September 30, 2017 was $0.1 million and $0.2 million,~~ respectively.

	Three Months Ended						Six Months Ended						Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017			June 29, 2019			June 30, 2018
	(unaudited)						(unaudited)
Balance at the beginning of the period	$	21,898		$	15,309		$	15,430		$	14,534		$	23,346		$	15,430
Warranty assumed in the Exchange		—			—			6,259			—			—			7,109
Warranty expense		9,448			5,343			16,667			11,616			10,530			7,219
Cash warranty payments		(8,475	)		(5,584	)		(15,485	)		(11,082	)		(9,886	)		(7,010	)
Balance at end of period		22,871			15,068			22,871			15,068			23,990			22,748
Less noncurrent portion in other long-term liabilities		5,700			2,600			5,700			2,600
Less: noncurrent portion in other long-term liabilities														(4,960	)		(5,700	)
Total current portion	$	17,171		$	12,468		$	17,171		$	12,468		$	19,030		$	17,048

(Dollars in thousands)	September 29, 2018		March 31, 2018		June 29, 2019		March 30, 2019
	(unaudited)
Revolving credit facility	$	46,900	$	—
Revolving credit facility maturing in 2023					$	36,900	$	41,900
Obligations under industrial revenue bonds due 2029		12,430		12,430		12,430		12,430
Capital lease obligations and other debt		—		4
Term loans due March 2020		—		46,897
Total debt		59,330		59,331		49,330		54,330
Less current portion		—		404		—		—
Total long-term debt	$	59,330	$	58,927	$	49,330	$	54,330

On June 5, 2018, the Company entered into a credit agreement (the ~~“New Credit~~“Credit Agreement”) with a syndicate of banks. The ~~New~~ Credit Agreement provides for a revolving credit facility of up to $100.0 million, including a letter of credit sub-facility of not less than $45.0 million. Initial borrowings under the ~~New~~ Credit Agreement were used to repay the Company’s existing $46.9 million term loans (“Term Loans”) and replace the Company’s existing cash collateralized stand-alone letter of credit facility. The revolving credit facility allows the Company to draw down, repay and re-draw loans on the available funds during the term of the Credit Agreement. During the three months ended June 29, 2019, the Company repaid $5.0 million of amounts previously drawn on the revolving credit facility.

The ~~New~~ Credit Agreement matures on June 5, 2023 and has no scheduled amortization. The interest rate under the ~~New~~ Credit Agreement adjusts based on the first lien net leverage of the Company. From June 5, 2018 through December 31, 2018, the annual interest rate is the London Interbank Offered Rate (“LIBOR”) plus 1.75% or an alternative base rate (“ABR”) described in the New Credit Agreement plus 0.75%, at the election of the Company. Thereafter, the interest rate adjusts based on the first lien net leverageCompany from a high of LIBOR plus 2.25% and ABR plus 1.25% when the first lien net leverage is equal to or greater than 2.00:1.00, to a low of LIBOR plus 1.50% and ABR plus 0.50% when the first lien net leverage is below 0.50:1.00. In addition, the Company is obligated to pay ~~a commitment~~an unused line fee ranging between 0.40% and 0.25% (depending on the first lien net leverage) in respect of unused commitments under the ~~New~~ Credit Agreement. ~~For the period between~~At June ~~5, 2018 and September~~ 29, ~~2018, the weighted average interest rate on borrowings under the New Credit Agreement was 4.0%. At September 29, 2018~~2019 the interest rate on borrowings under the ~~New~~ Credit Agreement was ~~3.9%~~3.92%.

Prior to entering into the New Credit Agreement, the Company had outstanding Term Loans of $46.9 million under a prior credit agreement with lenders that primarily included the Company’s equity holders and certain other affiliates. The weighted average interest rate on the Term Loans, priced using LIBOR plus an applicable margin, was 7.4% for the period outstanding during the six months ended September At June 29, ~~2018 and was 6.6% during the six months ended September 30, 2017.~~

Also, prior to entering into the New Credit Agreement, the Company provided letters of credit issued by a commercial bank under a separate stand-alone facility collateralized with restricted cash of 101% of the issued letters of credit. At September 29, 2018,2019, letters of credit issued under the ~~stand-alone facility totaled $21.0 million. Subsequent to entering into the New~~ Credit Agreement ~~the Company is no longer required to back those letters of credit with restricted cash, rather they are supported by a $45.0 million sub-facility~~totaled $28.8 million. Total available borrowings under the ~~New~~ Credit ~~Agreement.~~Agreement as of June 29, 2019 were $34.3 million.

Obligations under industrial revenue bonds are supported by letters of credit and bear interest based on a municipal bond index rate. The weighted-average interest rate at ~~September~~June 29, ~~2018,~~2019, including related costs and fees, was ~~3.9%~~3.83%. ~~For the three and six months ended September 29, 2018,~~At March 30, 2019, the weighted average interest rate ~~including related costs and fees,~~ was ~~3.7% and 3.5%, respectively. For both the three and six months ended September 30, 2017, the weighted average interest rate, including related costs and fees, was 2.4%~~3.62%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029.

The ~~New~~ Credit Agreement contains covenants that restrict the amount of additional debt, liens and certain payments, including equity buybacks, investments, dispositions, mergers and consolidations, among other restrictions as defined. The Company was in compliance with all covenants of the ~~New~~ Credit Agreement as of ~~September~~June 29, ~~2018.~~2019.

The Company’s retail operations utilize floor plan financing to fund the acquisition of manufactured homes for display or resale. At ~~September~~June 29, ~~2018~~2019 and March ~~31, 2018,~~30, 2019, the Company had outstanding borrowings on floor plan financing agreements of ~~$29.9~~$32.7 million and ~~$29.8~~$33.3 million, respectively. Total ~~available borrowings~~credit line capacity provided under the agreements was $47.0 million as of ~~September~~June 29, ~~2018 were $47.0 million.~~2019. Borrowings are secured by the homes and are required to be repaid when the Company sells the home to a customer. ~~For all periods presented the weighted average interest rate on floor plan payables was 6.0%.~~

~~In May 2014, the FASB issued an amendment on revenue recognition. The amendment created Topic 606,~~ ~~Revenue from Contracts with Customers,~~ ~~(“ASC 606”) and supersedes the revenue recognition requirements in ASC Topic 605,~~ ~~Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendment supersedes the cost guidance in Subtopic 605-35,~~ ~~Revenue Recognition - Construction-Type and Production-Type Contracts, and created new Subtopic 340-40,~~ ~~Other Assets and Deferred Costs - Contracts with Customers~~. Under ASC 606 an entity recognizes revenue in a manner that reflects the transfer of promised goods or services to customers in an amount which the entity expects to be entitled in exchange for those goods or services.

On April 1, 2018, the Company adopted ASC 606 using the modified retrospective method as applied to customer contracts that were not completed as of March 31, 2018. As a result, financial information for reporting periods beginning after March 31, 2018, are presented in accordance with ASC 606 while prior reporting periods are not adjusted and continue to be reported in accordance with the Company’s revenue recognition policies prior to the adoption of ASC 606. There was not a material impact to revenues as a result of applying ASC 606 for the three and six months ended September 29, 2018 and the post-adoption effects to the Company’s business processes, systems or internal controls were not significant.

The Company’s revenue is recognized when performance obligations under the terms of a contract are satisfied which generally occurs with the transfer of control of products. The Company enters into contracts with its customers to provide manufactured homes, modular homes, park models, commercial structures and transportation services. Generally, the Company’s contracts do not provide for a specified quantity of products and may be terminated by the Company’s customers at any time. Historically, terminations of these contracts have been minimal. The Company receives signed sales quotes from its customers, which provide the terms for a specific home, including price. The Company also has agreements with certain customers that provide for certain variable considerations such as volume discounts that are deducted from the contract price and accrued at the time of sale. In certain situations, the Company may receive payment in advance of completion of its contractual obligations. In these situations, the arising contract liability is classified within customer deposits and receipts in excess of revenues. Following the receipt of the customer deposit, the Company typically completes its performance obligation within a twelve-month period.

For sales to independent retailers and builders/developers, revenue is recognized at the point in time when wholesale floor plan financing or retailer credit approval has been received, the home has shipped and title has been transferred, which occurs when the Company has satisfied its contractual obligations and the control of its products has been transferred. The Company does not have an enforceable right to payment prior to shipment. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for those products. The Company’s customers pay for products received in accordance with payment terms that are customary within the industry. As is customary in

the factory-built housing industry, a significant portion of the Company’s sales to independent retailers are financed under floor plan financing programs with certain third-party lenders. Floor plan financing arrangements are generally identified prior to shipment of products and payment for sales financed under floor plan programs is generally received 5 to 10 business days from the date of invoice.

For retail sales to consumers from Company-owned retail sales centers, for which substantially all sales are of Company manufactured products, revenue is recognized when the home has been delivered, set up and accepted by the consumer, title has transferred and, depending on the nature of the transaction, either funds have been received from the finance company or directly from the home buyer.

The Company recognizes commercial revenue and related cost of sales for long-term construction contracts (“Commercial”) over time as performance obligations are satisfied using the percentage-of-completion method (input method). Management estimates the stage of completion on each construction project based on progress and costs incurred. Unbilled revenue on long-term construction contracts are classified as a contract asset in accounts receivable and receipts in excess of billings are included in other current liabilities. At September 29, 2018 and March 31, 2018, uncollected billings related to long-term construction contracts totaled $3.4 million and $5.0 million, respectively. At September 29, 2018, there was no unbilled revenue for long-term contracts. At March 31, 2018, unbilled revenue for long-term construction contracts was $0.3 million.

Revenue for the Company’s transportation operations is recognized when a shipment has been delivered to its final destination. Amounts billed to customers related to shipping and handling costs are included in net sales. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue producing transaction that are collected by the Company from a customer are excluded from net sales. The Company expenses sales commissions when incurred. Sales commissions are recorded in selling, general, and administrative expenses.

The following tables disaggregate the Company’s revenue by sales category for the three ~~and six~~ months ended ~~September~~June 29, 2019 and June 30, 2018:

	Three Months Ended September 29, 2018								Three Months Ended June 29, 2019
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-built Housing		Corporate/ Other		Total		U.S. Factory-Built Housing		Canadian Factory-built Housing		Corporate/ Other		Total
	(unaudited)
Manufacturing and retail	$	302,017	$	25,401	$	—	$	327,418	$	331,605	$	23,700	$	—	$	355,305
Commercial		4,598		—		—		4,598		—		—		—		—
Transportation		—		—		23,420		23,420		—		—		16,583		16,583
Total	$	306,615	$	25,401	$	23,420	$	355,436	$	331,605	$	23,700	$	16,583	$	371,888

									Three Months Ended June 30, 2018
(Dollars in thousands)									U.S. Factory-Built Housing		Canadian Factory-built Housing		Corporate/ Other		Total
Manufacturing and retail									$	260,786	$	27,354	$	—	$	288,140
Commercial										5,338		—		—		5,338
Transportation										—		—		28,783		28,783
Total									$	266,124	$	27,354	$	28,783	$	322,261

~~During~~The Company has operating leases for land, manufacturing and office facilities, and equipment. The Company's lease terms may include options to extend or terminate the ~~three and six months ended September 29, 2018,~~lease when it is reasonably certain that the Company ~~incurred expenses of $0.5 million and $6.9 million, respectively, related to legal, accounting and advisory services attributable to~~will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictive covenants. Operating lease expense is recognized on a straight-line basis over the Exchange. The Company also incurred expenses during the three and six months ended September 29, 2018 of $0.8 million for legal and advisory services related to two public offerings for the Company’s common stock. During the three and six months ended September 30, 2017, the Company incurred expenses of $0.8 million related to legal, accounting and advisory services attributable to the Exchange. The Company also incurred $0.1 million of expenses related to a prior acquisition and the disposition of the Company’s former business unitlease terms. Lease expense included in the ~~United Kingdom during~~accompanying condensed consolidated statement of operations is shown below:

Operating lease assets and obligations included in the ~~six months ended September 30, 2017.~~accompanying condensed consolidated balance sheet are shown below:

The weighted average lease term and discount rate for operating leases are shown below:

The discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments.

For the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017,~~2018, the Company recorded ~~$5.8~~$6.6 million and ~~$4.2~~$3.4 million of income tax expense and had an effective tax rate of ~~(8.2%)~~27.6% and 36.5%, respectively. For the six months ended September 29, 2018 and September 30, 2017, the Company recorded $9.3 million and $7.0 million of income tax expense and had an effective tax rate of (13.5%) and 35.7%133.0%, respectively. The ~~change~~decrease in the effective tax rate for the three ~~and six~~ months ended ~~September~~June 29, ~~2018,~~2019, compared with the same ~~periods~~period of ~~2017,~~2018, was primarily due to costs related to the Exchange for which no tax benefit ~~can~~could be ~~recognized which included non-deductible equity-based compensation.~~recognized.

The Company’s effective tax rate for the three ~~and six~~ months ended ~~September~~June 29, ~~2018~~2019 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 and results in foreign jurisdictions. The Company’s effective tax rate for the three months ended June 30, 2018 differed from the federal statutory rate primarily due to the effect of non-deductible expenses, state and local income taxes, one-time charges related to the Exchange and results in foreign jurisdictions and non-taxable entities. The Company’s effective tax rate for the three and six months ended September 30, 2017 differed from the federal statutory rate of 35% primarily due to the effect of non-deductible expenses, state and local income taxes and results in foreign jurisdictions and non-taxable entities.

The Company has not completed its accounting for the income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) which was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on all offshore earnings that were previously tax deferred and created new taxes on certain foreign sourced earnings. As discussed in SEC Staff Accounting Bulletin No. 118, the accounting for the Tax Act should be completed within one year from the Tax Act enactment. During the three ~~and six~~ months ended ~~September~~June 29, ~~2018,~~2019 the Company made no material adjustments to the provisional amounts recorded at March 31, 2018. Adjustments to the provisional amounts recorded at March 31, 2018 will be reflected upon the completion of the accounting for the Tax Act.

Company’s uncertain tax position did not change. During the ~~six~~three months ended ~~September 29,~~June 30, 2018, the Company’s uncertain tax ~~positions~~position decreased by $0.4 million due to ~~the~~ expiration of certain statutes of limitations. ~~There was no change in the Company’s uncertain tax positions during the three months ended September 29, 2018.~~ The Company estimates ~~that the expected change~~no material changes to ~~the total amount of~~ uncertain tax benefits in the next twelve ~~months will be a decrease of $0.2 million due to the expiration of certain statutes of limitations.~~months. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense. Net interest ~~expense~~and penalties for the periods presented herein ~~was~~were not significant.

Champion Holdings granted awards to its officers, management employees and certain members of the Board of Managers under an equity-classified management incentive plan (the “MIP”). In accordance with the provisions of the MIP, as modified on June 1, 2018, the unvested units of Champion Holdings granted under the MIP were exchanged for unregistered, time-vesting restricted shares and performance-vesting restricted shares of the Company subject to stock restriction agreements (the “SRAs”). The time-vesting restricted shares generally vest 20% per year over a five-year period, upon a change of control, or upon the occurrence of a follow-on public offering as defined in the SRAs. A portion of the performance-vesting restricted shares vested upon a follow-on public offering as defined in the SRAs. The remaining performance-vesting restricted shares vested based on meeting specified per share volume weighted average price targets subsequent to a follow-on public offering of the Company or upon a change of control as defined in the SRAs. During the three months ended September 29, 2018, a significant portion of the outstanding restricted shares vested in conjunction with certain follow-on public offerings.

On September 26, 2018, the Company’s shareholders approved the Company’s 2018 Equity Incentive Plan (the “Equity Plan”) which provides for grants of options, stock appreciation rights, restricted and unrestricted stock and stock units, performance awards, and other awards convertible into or otherwise based on shares of the Company’s common stock. The full text of the Equity Plan was filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 26, 2018. Prior to the approval of the Equity Plan, the Company maintained the Skyline Corporation 2015 Stock Incentive Plan, which allowed for the grant of stock options and other equity awards.

Equity-based compensation expense of $85.8 million and $93.9 million was recognized during the three and six months ended September 29, 2018, respectively. Equity-based compensation expense of $0.2 million and $0.3 million was recognized during the three and six months ended September 30, 2017, respectively. Equity-based compensation expense was included in selling, general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income (loss). As of September 29, 2018, the Company had 464,000 unvested time-vesting restricted shares issued to employees with a weighted average grant date fair value of $32.03 per share and an average remaining service period of 12 months. No other unvested shares were outstanding. Compensation expense for unvested shares is recognized over the vesting period.

Basic net income (loss) per share (“EPS”) attributable to the Company was computed ~~using the two-class method~~ by dividing net income (loss) attributable to the Company ~~after deducting undistributed earnings allocated to participating securities,~~ by the average number of common shares outstanding during the period. ~~The~~Certain of the Company’s time-vesting ~~and performance-vesting~~ restricted ~~shares~~share awards are considered participating securities. Diluted earnings per common share is computed based on the more dilutive ~~of:~~of (i) the two-class method, assuming the participating securities are not exercised or converted; or (ii) the summation of average common shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued. During the three ~~and six~~ months ended ~~September~~June 29, ~~2018 and September 30, 2017, diluted earnings per share~~2019, the two-class method was more dilutive ~~under~~and was not applicable to the ~~two-class method. Securities that could potentially dilute basic EPS in~~June 30, 2018 computation given the ~~future that were antidilutive are described Note 13.~~net loss recorded for the three months ended June 30, 2018. The number of shares used to calculate earnings per share prior to the Exchange was determined based on the exchange ratio, as defined in the ~~Exchange.~~Exchange Agreement.

The following table sets forth the computation of basic and diluted earnings per common share:

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)

Numerator:

Net (loss) income:

$
(77,025
)

$
7,408

$
(77,878
)

$
12,671

Less: Undistributed earnings allocated to participating securities

—

464

—

806

Net (loss) income attributable to the Company's common shareholders

$
(77,025
)

$
6,944

$
(77,878
)

$
11,865

Denominator:

Average common shares outstanding

54,105

44,525

50,747

44,457

Basic net (loss) income per share

$
(1.42
)

$
0.16

$
(1.53
)

$
0.27

Diluted net (loss) income per share

$
(1.42
)

$
0.16

$
(1.53
)

$
0.27

	Three Months Ended
(Dollars and shares in thousands, except per share data)	June 29, 2019			June 30, 2018
Numerator:
Net income (loss)	$	17,380		$	(853	)
Undistributed earnings allocated to participating securities		(89	)		—
Net income (loss) attributable to the Company's common shareholders	$	17,291		$	(853	)
Denominator:
Basic weighted average shares outstanding		56,368			47,462
Dilutive securities		267			—
Diluted weighted average shares outstanding		56,635			47,462
Basic net income (loss) per share	$	0.31		$	(0.02	)
Diluted net income (loss) per share	$	0.31		$	(0.02	)

Prior to the Exchange, the Company was party to a Management Advisory Services Agreement (“Services Agreement”) with Centerbridge Advisors, LLC; MAK Management L.P.; and Sankaty Advisors, LLC (collectively, the “Managers”), affiliates of which collectively owned a majority of the units of Champion Holdings and the Company’s common stock (the “Principal Shareholders”), whereby the Principal Shareholders provided management, consulting, financial and other advisory services to Champion ~~Holdings in exchange for an annual management~~Holdings. Management fee ~~totaling $1.5 million plus reimbursable expenses. Management fees~~expense during ~~fiscal 2019,~~the three months ended June 30, 2018, recognized prior to the Exchange, ~~were~~was $0.3 million. The ~~Service~~Services Agreement was terminated in connection with the Exchange. ~~Management fee expense was $0.4 million and $0.8 million for the three and six months ended September 30, 2017, respectively.~~The Management fee expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of ~~comprehensive income (loss).~~operation.

Financial results for the Company's reportable segments have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the Chief Executive Officer, evaluates the performance of the Company’s segment primarily based on net sales, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and operating assets.

The Company operates in two reportable segments: (i) U.S. Factory-built Housing, which includes ~~wholesale~~manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, corporate costs directly incurred for all segments and intersegment eliminations. Segments are generally determined by geography. Segment data includes intersegment revenues and corporate office costs that are directly and exclusively incurred for each segment. ~~The Company evaluates the performance of its segments and allocates resources to them primarily based on earnings before interest, taxes, depreciation and amortization (“EBITDA”).~~ Total assets for Corporate/Other primarily include cash and certain deferred tax items not specifically allocated to another segment.

	Three Months Ended						Six Months Ended						Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017			June 29, 2019			June 30, 2018
	(unaudited)						(unaudited)
Net sales:
U.S. Factory-built Housing	$	306,615		$	205,963		$	572,739		$	399,139		$	331,605		$	266,124
Canadian Factory-built Housing		25,401			26,653			52,755			49,056			23,700			27,354
Corporate/Other		23,420			27,347			52,203			55,870			16,583			28,783
Consolidated net sales	$	355,436		$	259,963		$	677,697		$	504,065		$	371,888		$	322,261
Operating income:
U.S. Factory-built Housing EBITDA	$	26,687		$	14,817		$	49,603		$	25,804		$	36,145		$	22,916
Canadian Factory-built Housing EBITDA		3,035			3,781			6,555			6,639			3,055			3,521
Corporate/Other EBITDA		(94,744	)		(2,904	)		(108,197	)		(5,548	)		(10,408	)		(13,454	)
Depreciation		(2,845	)		(2,018	)		(5,275	)		(3,860	)		(3,110	)		(2,430	)
Amortization		(1,202	)		(112	)		(1,683	)		(238	)		(1,362	)		(481	)
Consolidated operating (loss) income	$	(69,069	)	$	13,564		$	(58,997	)	$	22,797
Consolidated operating income													$	24,320		$	10,072
Depreciation:
U.S. Factory-built Housing	$	2,415		$	1,651		$	4,460		$	3,153		$	2,638		$	2,045
Canadian Factory-built Housing		227			235			458			444			242			231
Corporate/Other		203			132			357			263			230			154
Consolidated depreciation	$	2,845		$	2,018		$	5,275		$	3,860		$	3,110		$	2,430
Amortization of intangible assets:
U.S. Factory-built Housing	$	1,142		$	49		$	1,562		$	117		$	1,362		$	420
Canadian Factory-built Housing		60			63			121			121			—			61
Corporate/Other		—			—			—			—			—			—
Consolidated amortization of intangible assets	$	1,202		$	112		$	1,683		$	238		$	1,362		$	481
Capital expenditures:
U.S. Factory-built Housing	$	2,176		$	1,464		$	3,456		$	5,020		$	3,358		$	1,281
Canadian Factory-built Housing		204			57			414			400			111			210
Corporate/Other		285			375			814			433			1,057			529
Consolidated capital expenditures	$	2,665		$	1,896		$	4,684		$	5,853		$	4,526		$	2,020

(Dollars in thousands)							September 29, 2018			March 31, 2018			June 29, 2019			March 30, 2019
							(unaudited)
Total Assets:
U.S Factory-built Housing (1)							$	471,833		$	190,323
U.S. Factory-built Housing (1)													$	491,518		$	488,878
Canadian Factory-built Housing (1)								56,484			54,449			60,350			59,260
Corporate/Other (1)								137,095			150,626			170,623			151,816
Consolidated total assets							$	665,412		$	395,398		$	722,491		$	699,954

AsThe Company is ~~customary in the manufactured housing industry, a significant portion~~contingently liable under terms of ~~the Company’s sales to independent retailers are made pursuant to~~ repurchase agreements with lending institutions that provide wholesale floor plan financing to retailers. ~~The Company enters into two types~~These arrangements, which are customary in the manufactured housing industry, provide for the repurchase of repurchase agreements, (i) those that allow repurchase up to 24 months after the sale of a home to the retailer, and (ii) those that allow for repurchase until the home is sold by the retailer. For those homesproducts sold to retailers ~~with an unlimited repurchase period,~~in the ~~Company’s risk~~event of loss upon repurchase declines due to required monthly principal payments by the retailer. After 24 or 30 months from the date of the Company’s sale of the home, the risk of loss on these homes is low, and by the 46~~th.~~ ~~month, most programs require that the home be paid in full, at which time the Company no longer has risk of loss. During the repurchase period, generally upon~~ default by the retailer ~~and repossession~~on their agreement to pay the financial institution. The risk of loss from these agreements is spread over numerous retailers. The repurchase price is generally determined by the ~~financial institution,~~original sales price of the product and pre-defined curtailment arrangements. The Company accounts for the guarantees under its repurchase agreements with the retailers’ financing institutions by estimating and deferring a portion of the related product sale that represents the estimated fair value of the repurchase obligation. The estimated fair value takes into account the estimate of the loss the Company will incur upon resale of any repurchases. This estimate is ~~obligated to~~based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting the Company’s retailers. The reserve for estimated losses under repurchase ~~the homes from the lender. Before including the reduction from~~agreements was $0.9 million at June 29, 2019 and $1.0 million at March 30, 2019. Excluding the resale value of the homes, the contingent repurchase obligation as of ~~September~~June 29, ~~2018~~2019 was estimated to be approximately ~~$190.5~~$166.9 million. ~~Losses under repurchase obligations represent the difference between the repurchase price and net proceeds from the resale of the homes, less accrued rebates, which will not be paid.~~ Losses incurred on homes repurchased were immaterial during each of the three ~~and six~~ months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017. The total reserve for estimated losses under~~2018.

In addition to the repurchase agreements, ~~was $0.8 million at September 29, 2018 and $0.7 million at March 31, 2018.~~

~~The Company guarantees a portion of its customers’ floor plan obligations beyond~~ the ~~customary repurchase arrangements discussed above. The~~ Company has agreed to guarantee from 3% to 50% of certain retailers’ outstanding loans to a floor plan lender. At ~~September~~June 29, ~~2018,~~2019, those guarantees totaled ~~$0.8~~$0.6 million of which ~~$0.8~~$0.5 million was outstanding.

At ~~September~~June 29, ~~2018,~~2019, the Company was contingently obligated for approximately ~~$21.0~~$28.8 million under letters of credit, primarily consisting of $12.6 million to support long-term debt, ~~$7.9~~$15.7 million to support the casualty insurance program, $0.2 million to support repurchase obligations, and $0.3 million to support bonding agreements. The letters of credit are backed by a sub-facility under the New Credit Agreement. The Company was also contingently obligated for ~~$29.3~~$23.9 million under surety bonds, generally to support performance on long-term construction contracts and license and service bonding requirements.

In the normal course of business, the Company’s former subsidiaries that operated in the United Kingdom historically provided certain guarantees to two customers. Those guarantees provide contractual liability for proven construction defects up to 12 years from the date of delivery of certain products. The guarantees remain a contingent liability of the Company which declines over time through October 2027. As of the date of this report, nothe Company expects few, if any, claims ~~have been~~to be reported under the terms of the guarantees.

The Company has agreed to indemnify counterparties in the ordinary course of its business in agreements to acquire and sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. As of the date of this filing, the Company believes the ultimate liability with respect to these contingent obligations will not have, either individually or in the aggregate, a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

The following should be read in conjunction with Skyline Champion Corporation’s condensed consolidated financial statements and the related notes that appear in Item I of this Report.

On June 1, 2018, Skyline Champion Corporation ~~(prior~~(the “Company”) was formed by Skyline Corporation (“Skyline”) and Champion Enterprises Holdings, LLC (“Champion”) combining their operations pursuant to the Share Contribution & Exchange ~~(as~~Agreement (the “Exchange Agreement”), dated as of January 5, 2018, by and between Skyline and Champion Holdings, as described ~~below) “Champion Holdings” and subsequent to the Exchange the “Company”)~~in further detail below. Champion Holdings was formed as a Delaware limited liability company in 2010. Skyline was originally incorporated in Indiana in 1959.

The Company is a leading producer of factory-built housing in the ~~United States~~U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured construction, company-owned retail locations, and transportation logistics services. The Company is the ~~second~~ 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 ~~Homes, Redman Homes,~~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.~~Homes in western Canada. The Company operates 3133 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 primarily to independent retailers and builders/developers, including manufactured home community operators. The Company’s retail operations consist of 21 sales centers that sell manufactured homes to consumers primarily in the ~~Southern~~southern U.S. The Company’s transportation business ~~primarily~~ engages independent owners/drivers to transport manufactured homes and recreational vehicles throughout the U.S. and Canada.

Over the last several years, market 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 footprint.

In response to the increasing demand for factory-built housing in the U.S., the Company has increased capacity through strategic acquisitions and expansions of its manufacturing footprint. The Company is focused on growing in strong HUD-markets across the U.S. as well as further expanding into the Northeast and Midwest U.S. modular housing markets. ~~In October 2017,~~During June 2019, the Company ~~entered into a long-term lease for two factory-built~~began production at its newest manufactured housing ~~plants~~facility in Leesville, ~~Louisiana that provide~~Louisiana. During fiscal 2019, the Company completed its expansion of its Corona, California facility by adding a second production line and expanded its Leola, Pennsylvania campus by adding an ~~opportunity for further growth.~~additional plant. Production at the Leola facility began in April 2019. The Exchange added eight plants to the Company’s manufacturing footprint in fiscal 2019 (described in more detail below). In April 2017, the Company completed the purchase of a factory-built housing plant in Mansfield, Texas, from Skyline Corporation. In September 2016, the Company, through a series of transactions, completed the purchase of the assets of Innovative Building Systems, LLC and Subsidiaries (“IBS” or “IBS Acquisition”), which included five modular manufacturing facilities and two retail sales centers in the Northeast and Midwest U.S.Texas. In January 2017, the Company restarted operations at the Liverpool, Pennsylvania location, which was one of five modular manufacturing facilities acquired through a series of transactions with Innovative Building Systems, LLC and its subsidiaries. (“IBS” or the ~~acquired modular facilities from IBS.~~“IBS Acquisition”). The other ~~former~~facilities acquired from IBS ~~facilities remain idle. In addition to these strategic acquisitions, during fiscal 2017,~~are idle and provide the Company leased and opened a manufacturing facility in Benton, Kentucky as well as reopened a previously idled facility in Topeka, Indiana. The Topeka facility began operations in February 2017. Production at the Benton facility began in August 2016.with opportunity to add capacity.

The Company has also focused on expansion of its company-owned retail operations, opening three additional retail sales centers during fiscal 2018 and five during fiscal ~~2017 and three during fiscal 2016.~~2017. Management believes retail expansion provides an opportunity to increase the Company’s presence in market segments that are not currently served through ~~our~~its independent retail network, while also providing for expansion and increased utilization of ~~our~~ existing manufacturing operations.

These 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 consolidated results for periods subsequent to their respective acquisition dates.

On January 5, 2018, Champion Holdings and ~~the Company~~Skyline entered into ~~the~~an Exchange Agreement pursuant to which the two companies agreed to combine their operations. The Exchange was completed on June 1, 2018 and was accounted for as a reverse acquisition under the acquisition method of accounting as provided by FASB Accounting Standards Codification 805, Business Combinations (“ASC 805”). Champion Holdings was determined to be the acquirer for accounting and financial reporting purposes. The assets acquired and liabilities assumed by Champion Holdings as a result of the Exchange were recorded at their respective fair values and added to the carrying value of Champion Holdings existing assets and liabilities. As Champion Holdings is the accounting acquirer, ~~reported~~the Company’s financial results for ~~Skyline Champion Corporation for~~ the ~~six~~three months ~~ended September 29,~~ending June 30, 2018 ~~comprise~~are comprised of 1) the results of ~~only~~ Champion Holdings ~~through June~~for the period between April 1, 2018 and May 31, 2018 and 2) the Company, after giving effect to the Exchange, from June 1, 2018 through ~~September 29,~~June 30, 2018. ~~All fiscal periods prior to June 1, 2018 are comprised solely of the results of Champion Holdings.~~

For the ~~six~~three months ended ~~September~~June 29, ~~2018,~~2019, approximately ~~76%~~77% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the Federal HUD-code construction standard in the U.S. ~~During the six months ended September 1, 2018,~~The industry reports U.S. HUD-code shipments on a one month lag. Industry shipments of HUD-code homes were ~~50,014 a 9.4% improvement over 45,718~~24,210 during the three months ended May 31, 2019 compared to 25,861 units shipped in same period of the prior year. The Company’s HUD market share during ~~that period~~those periods was ~~14.8%~~17.0% versus ~~13.4%~~13.0% in the comparable period of the prior year. ~~Sales~~Industry sales of HUD-code homes have ~~been increasing steadily~~increased since 2009, when 50,000 HUD-code homes were sold. Fewer factory-built homes were sold in 2009 than in any year since 1959. While HUD-code factory-built home shipments have improved modestly over the past few years, the industry continues to operate at relatively low levels compared to historical shipment statistics. For instance, the long-term average for manufactured home shipments since 1960 is ~~224,000~~approximately 222,000 units per year.

The industry reports U.S. modular market shipments quarterly and three months in arrears. Industry shipments of modular homes in the U.S. of 3,080 during the ~~Company’s fiscal 2018 totaled 14,287~~first quarter of calendar year 2019 was 12.4% lower than the 3,514 units ~~reflecting a slight increase from shipments~~shipped in the comparable period of ~~2017.~~the prior year. The Company’s modular market share during these periods was 14.6% and 11.8%, respectively. Modular home sales across the industry have generally been stable since 2009. ~~During~~For the ~~six~~three months ended ~~September~~June 29, ~~2018,~~2019, approximately ~~19%~~16% of the Company’s U.S. manufacturing sales were modular. ~~The Company’s modular home presence has improved due to the IBS Acquisition.~~

Champion Holdings was headquartered in Troy, Michigan and was formed in 2010 as a Delaware limited liability company. Champion Holdings’ predecessor began operations in 1953. Subsequent to the Exchange, the Company is headquartered in Elkhart, Indiana.

In addition to the analysis of historical results of operations, this Management’s Discussion and Analysis of Financial Condition and Results of Operations includes unaudited supplemental pro forma results of operations for the six months ended September 29, 2018 and the three and six months ended September 30, 2017. The unaudited pro forma statements of comprehensive income (loss) reflect pro forma adjustments to the results of the Company to give effect to the Exchange and the related financing transactions (the “Financing”) as if they had occurred on April 2, 2017, the beginning of the earliest period presented.

The unaudited pro forma condensed combined financial information of the Company combines the accounting periods of Champion Holdings and Skyline Corporation following the Exchange. Champion Holdings and Skyline Corporation had different fiscal year ends. Regulation S-X, Rule 11-02(c)(3) allows the combination of financial information for companies if their fiscal years end within 93 days of each other. Skyline Corporation’s historical results, included in the pro forma financial information below, include the three and six months ended September 29, 2018 and September 3, 2017, respectively, which are derived from Skyline Corporation’s unaudited consolidated income statements. Champion Holdings’ historical results are derived from Champion Holdings’ unaudited consolidated statements of comprehensive income (loss) for the three and six months ended September 29, 2018 and September 30, 2017, respectively.

~~Three Months Ended September 29, 2018 vs. Three Months Ended September 30, 2017~~UNAUDITED RESULTS OF OPERATIONS FOR Q1 FISCAL YEAR 2020 VS. 2019

	Historical						Pro Forma
	Three Months Ended						Three Months Ended			Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			September 30, 2017			June 29, 2019			June 30, 2018
	(unaudited)						(unaudited)
Statements of Comprehensive Income (Loss) Data:
Results of Operations Data:
Net sales	$	355,436		$	259,963		$	318,425		$	371,888		$	322,261
Cost of sales		296,436			218,636			269,601			295,853			267,101
Gross profit		59,000			41,327			48,824			76,035			55,160
Selling, general and administrative expenses		128,069			27,763			35,277			51,715			45,088
Operating (loss) income		(69,069	)		13,564			13,547
Operating income											24,320			10,072
Interest expense, net		827			1,065			974			309			1,072
Other expense		1,307			842			38			—			6,413
(Loss) income before income taxes		(71,203	)		11,657			12,535
Income before income taxes											24,011			2,587
Income tax expense		5,822			4,249			4,477			6,631			3,440
Net (loss) income	$	(77,025	)	$	7,408		$	8,058
Net income (loss)										$	17,380		$	(853	)
Reconciliation of Adjusted EBITDA:
Net (loss) income	$	(77,025	)	$	7,408		$	8,058
Net income (loss)										$	17,380		$	(853	)
Income tax expense		5,822			4,249			4,477			6,631			3,440
Interest expense, net		827			1,065			974			309			1,072
Depreciation and amortization		4,047			2,130			3,877			4,472			2,911
Equity-based compensation		85,839			150			218
Foreign currency transaction gain		(34	)		(754	)		(139	)
Equity-based compensation (for awards granted prior to December 31, 2018)											1,107			8,088
Foreign currency transaction (gain) loss											(72	)		67
Transaction costs		492			804			—			—			6,413
Acquisition integration costs		2,313			—			38			1,038			1,189
Equity offering costs		816			—			—
Restructuring charges		703			—			—
Loss on sale of non-operating facilities		—			—			60
Other		(1	)		37			(1	)
Fair market value adjustment for asset classified as held for sale											986			—
Restructuring costs											234			408
Adjusted EBITDA	$	23,799		$	15,089		$	17,562		$	32,085		$	22,735
As a percent of net sales:
Gross profit		16.6	%		15.9	%		15.3	%		20.4	%		17.1	%
Selling, general and administrative expenses		36.0	%		10.7	%		11.1	%		13.9	%		14.0	%
Operating (loss) income		(19.4	%)		5.2	%		4.3	%
Net (loss) income		(21.7	%)		2.8	%		2.5	%
Operating income											6.5	%		3.1	%
Net income (loss)											4.7	%		(0.3	%)
Adjusted EBITDA		6.7	%		5.8	%		5.5	%		8.6	%		7.1	%

The following table summarizes net sales for the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended										Three Months Ended
(Dollars in thousands)	September 29, 2018		September 30, 2017		Change			% Change			June 29, 2019		June 30, 2018		Change			% Change
	(unaudited)
Net sales	$	355,436	$	259,963	$	95,473			36.7	%	$	371,888	$	322,261	$	49,627			15.4	%
U.S. manufacturing and retail net sales	$	306,615	$	205,963	$	100,652			48.9	%	$	331,605	$	266,124	$	65,481			24.6	%
U.S. homes sold		5,038		3,911		1,127			28.8	%		5,448		4,536		912			20.1	%
U.S. manufacturing and retail average home selling price	$	60.9	$	52.7	$	8.2			15.6	%	$	60.9	$	58.6	$	2.3			3.9	%
Canadian manufacturing net sales	$	25,401	$	26,653	$	(1,252	)		(4.7	%)	$	23,700	$	27,354	$	(3,654	)		(13.4	%)
Canadian homes sold		312		345		(33	)		(9.6	%)		285		362		(77	)		(21.3	%)
Canadian manufacturing average home selling price	$	81.4	$	77.3	$	4.1			5.3	%	$	83.2	$	75.6	$	8			10.1	%
Corporate/Other net sales	$	23,420	$	27,347	$	(3,927	)		(14.4	%)	$	16,583	$	28,783	$	(12,200	)		(42.4	%)
U.S. manufacturing facilities in operation at end of period		31		23		8			34.8	%		33		31		2			6.5	%
U.S. retail sales centers in operation at end of period		21		19		2			10.5	%		21		21		—			—	%
Canadian manufacturing facilities in operation at end of period		5		5		—			—	%		5		5		—			—	%

Net sales for the three months ended ~~September~~June 29, ~~2018~~2019 were ~~$355.4~~$371.9 million, an increase of ~~$95.5~~$49.6 million, or ~~36.7%~~15.4% over the three months ended ~~September~~June 30, ~~2017.~~2018. The following is a summary of the change by operating segment.

The U.S. Factory-built Housing segment accounted for the ~~majority of the overall growth in~~Company’s net sales growth for the three months ended ~~September~~June 29, ~~2018~~2019 compared to the same period in the prior year. Sales of homes for the Company’s U.S. manufacturing and retail operations increased by ~~$100.7~~$65.5 million, or ~~48.9%~~24.6%. The number of homes sold during the three months ended ~~September~~June 29, ~~2018~~2019 increased by ~~1,127~~912 units, or ~~28.8%~~20.1%. ~~The net~~Net sales ~~increase was attributable~~increased by $50.6 million due to ~~several factors including: (i)~~ the inclusion of ~~net sales of $68.1 million for~~ the Skyline ~~operations; (ii)~~operations for all three months in the first quarter of fiscal 2020 compared to the same period of the prior year which only included one month of Skyline operations. The remainder of the increase was due to a ~~15.6%~~combination of factors which included additional manufacturing capacity, plant operating improvements, and an increase in the average home selling price which was driven primarily by product mix. Product mix fluctuations result from consumer preferences regarding the types and styles of homes selected for purchase, as ~~a result of increased market demand, product mix~~well as opting for home upgrade packages and pricing actions to offset the impact of rising material and labor costs; (iii) additional retail sales centers in operation during the period; and (iv) increased output at the Company’s existing facilities as a result of plant operating improvements.regional housing dynamics.

The Company’s U.S. HUD market share for the ~~three months ended September 1, 2018~~reporting period grew to ~~16.7%~~17.0% from ~~13.7%~~13.0% in the same period of the prior year, primarily due to the inclusion of the Skyline operations for the period subsequent to the Exchange. However, the U.S. HUD ~~units shipped~~market softened during the ~~three months ended September 1, 2018, increased 7.8% from~~reported period as shipments of factory-built HUD homes were 6.4% less than the same period inof the prior year.

The Canadian Factory-built Housing segment net sales decreased ~~$1.3~~by $3.7 million, or ~~4.7%~~13.4% for the three months ended ~~September~~June 29, ~~2018~~2019 compared to the same period in the prior year, primarily due to a 21.3% decrease in ~~units~~number of homes sold, ~~of 33 units~~ offset ~~in part~~ by a ~~5.3%~~10.1% increase in average home selling price which ~~were primarily the~~was a result of pricing actions taken by the Company and shifts in product mix. The number of homes sold decreased due to ~~offset~~ the ~~impact of rising material and labor costs consistent with those experienced~~decline in manufactured housing demand in the ~~U.S. In addition,~~British Columbia and Alberta provinces versus the same period in the prior year. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $1.0 million as the Canadian dollar weakened compared to the U.S. ~~average exchange rate decreased 3.1%~~dollar during the ~~three months ended September 29, 2018~~first quarter of fiscal 2020 as compared to the same period of the prior ~~year which had the effect of decreasing Canadian sales as denominated in U.S. dollars by $0.8 million.~~

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 for homes at September 29, 2018 totaled $252 million compared to $217 million at September 30, 2017. The increase is partially a result of including the former Skyline operations at September 29, 2018 as well as growth of our core product backlog.year.

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the three months ended ~~September~~June 29, ~~2018,~~2019, net sales decreased ~~$3.9~~$12.2 million, or ~~14.4%~~42.4%. The decrease was primarily attributable to lower net sales in ~~our~~the Company’s transportation business ~~in part~~primarily as a result of lower shipments associated with reduced RV demand in the U.S.

The following table summarizes gross profit for the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended												Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			Change			% Change			June 29, 2019			June 30, 2018			Change			% Change
	(unaudited)
Gross profit:
U.S Factory-built Housing	$	50,706		$	32,572		$	18,134			55.7	%
U.S. Factory-built Housing													$	68,315		$	45,322		$	22,993			50.7	%
Canadian Factory-built Housing		4,588			5,051			(463	)		(9.2	%)		4,626			5,355			(729	)		(13.6	%)
Corporate/Other		3,706			3,704			2			0.1	%		3,094			4,483			(1,389	)		(31.0	%)
Total gross profit	$	59,000		$	41,327		$	17,673			42.8	%	$	76,035		$	55,160		$	20,875			37.8	%
Gross profit as a percent of net sales		16.6	%		15.9	%								20.4	%		17.1	%

Gross profit as a percent of sales during the three months ended ~~September~~June 29, ~~2018~~2019 was ~~16.6%~~20.4% compared to ~~15.9%~~17.1% during ~~the~~ three months ended ~~September~~June 30, ~~2017.~~2018. The following is a summary of the change by operating segment.

Gross profit for the U.S. Factory-built Housing segment increased by ~~$18.1~~$23.0 million, or ~~55.7%~~50.7%, during the three months ended ~~September~~June 29, ~~2018~~2019 compared to the same period in the prior ~~year~~year. The increase in gross profit is due to the increase in sales volumes and improved ~~to 16.5%~~margins. Gross profit was 20.6% as a percent of segment net sales ~~from 15.8%. Material prices and labor costs were higher during~~for the three months ended ~~September~~June 29, ~~2018, however,~~2019 compared to 17.0% in the ~~Company has been able~~same period of the prior year. Gross profit expansion was driven by an increase in the refinement of product offerings, favorable lumber and oriented strand board (“OSB”) pricing, plant operating improvements, in addition to procurement and operational synergies related to the Exchange, partially offset the margin effect of those increases with price adjustments, operational improvements and product rationalization. The Company continues to standardize product design and material purchases which allow for more efficient production for its supply chain and helps to mitigate material commodityby labor inflation.

The Company also continues to focus on better understanding its cost structure and discontinuing models and options that customers do not value. As a result of these efforts, the U.S. manufacturing plants have been able to increase output which allows for better leverage of fixed costs.

Gross profit for the Canadian Factory-built Housing segment decreased ~~$0.5~~$0.7 million, or ~~9.2%~~13.6%, during the three months ended ~~September~~June 29, ~~2018~~2019 compared to the same period in the prior year, ~~and declined~~primarily due to ~~18.1% as a percent of segment net~~lower sales ~~from 19.0%. The decline in gross~~volume. Gross profit ~~margin~~ as a percent of net sales ~~is primarily~~was 19.5% for the three months ended June 29, 2019, compared to 19.6% in the same period of the prior year. Gross margin has remained stable despite the decline in net sales due to ~~higher average labor~~product mix, lower material commodity pricing, and ~~benefits.~~efforts to reduce fixed expenses during slower economic market cycles.

~~The change in~~Gross profit for the Corporate/Other ~~gross profit~~segment decreased $1.4 million, or 31.0%, during the three months ended ~~September~~June 29, ~~2018~~2019 compared to the same period in the prior ~~year was negligible.~~year. However, Corporate/Other gross profit improved as a percent of segment net sales to ~~15.8%~~18.7% from ~~13.5%~~15.6%. ~~Although our~~Gross margins for the Company’s transportation business ~~volume was lower, margins~~ improved as a percent of sales due in part ~~due~~ to less ~~brokering~~brokered business to other providers at lower ~~margins.~~margins in response to the decline in revenue caused by the drop in market demand for RVs.

Selling, ~~General~~general and ~~Administrative Expenses:~~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 ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended											Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			Change		% Change			June 29, 2019			June 30, 2018			Change			% Change
	(unaudited)
Selling, general and administrative expenses:
U.S Factory-built Housing	$	26,494		$	19,456		$	7,038		36.2	%
U.S. Factory-built Housing												$	36,171		$	24,511		$	11,660			47.6	%
Canadian Factory-built Housing		1,840			1,566			274		17.5	%		1,813			2,126			(313	)		(14.7	%)
Corporate/Other		99,735			6,741			92,994	N/M				13,731			18,451			(4,720	)		(25.6	%)
Total selling, general and administrative expenses	$	128,069		$	27,763		$	100,306		361.3	%	$	51,715		$	45,088		$	6,627			14.7	%
Selling, general and administrative expense as a percent of net sales		36.0	%		10.7	%							13.9	%		14.0	%

Selling, general and administrative expenses were ~~$128.1~~$51.7 million for the three months ended ~~September~~June 29, ~~2018,~~2019, an increase of ~~$100.3~~$6.6 million compared to the ~~three months ended September 30, 2017.~~same period in the prior year. The following is a summary of the change by operating segment.

Selling, general and administrative expenses for the U.S. Factory-built Housing segment increased ~~$7.0~~$11.7 million, or ~~36.2%~~47.6%, during the three months ended ~~September~~June 29, ~~2018~~2019 as compared to the same period in the prior year. Selling, general and administrative expenses, as a percent of segment net sales, was 10.9% for the three months ended ~~September 30, 2017.~~June 29, 2019 compared to 9.2% during the comparable period in the prior year. The ~~increase was primarily~~inclusion of three months of Skyline operations for the first quarter of fiscal 2020 versus one month for the same period of the prior year as well as intangible amortization related to the ~~inclusion~~Exchange increased selling, general and administrative expenses by $5.7 million. The Company recorded ramp up costs for capacity expansion of ~~$4.1~~$1.3 million during the three months ended June 29, 2019. The remainder of the increase in selling, general and administrative expenses ~~for the Skyline operations and $1.9 million~~was a combination of factors which include (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of ~~profitability. Although total selling, general~~profitability and; (ii) an increase in salaries and ~~administrative expenses were higher, such expenses as a percent of segment net sales was 8.6% for the three months ended September 29, 2018 compared~~benefits to ~~9.4% during the three months ended September 30, 2017.~~maintain competitive compensation packages to retain and recruit team members.

Selling, general and administrative expenses for the Canadian Factory-built Housing segment ~~increased~~decreased $0.3 million, or ~~17.5%~~14.7%, during the three months ended ~~September~~June 29, ~~2018~~2019 as compared to ~~the three months ended September 30, 2017. The increase was primarily related to a $0.4 million benefit included in~~ the same period of the prior ~~year for foreign currency translation on intercompany notes that were retired at the end of fiscal 2018.~~year. The decrease is due to an effort to reduce fixed expenses during slower economic market cycles. As a percent of segment net sales, selling, general and administrative expenses for the Canadian segment was ~~7.2%~~7.6% for the three months ended ~~September~~June 29, ~~2018~~2019 compared to ~~5.9%~~7.8% for the ~~three months ended September 30, 2017 due to decrease~~same period in ~~sales volume.~~the prior year.

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 $93.0~~decreased $4.7 million during the three months ended ~~September~~June 29, ~~2018~~2019 as compared to the same period of the prior year. The decrease is mainly related to $6.0 million in stock compensation expense awarded to former Skyline employees during the period ended June 30, 2018. This decrease was partially offset by a fair market value adjustment charge of $1.0 million related to property acquired in the Exchange and recurring stock based compensation expense of $1.0 million recorded during the three months ended September 30, 2017. The increase is primarily due to $85.8 million of non-cash, equity-based compensation expense, $2.3 million of integration costs for the Skyline operations and $0.7 million for restructuring costs. The equity-based compensation expense resulted from the vesting of restricted shares issued to Champion employees and directors in connection with the Exchange and were triggered by the secondary offerings of the Company’s stock (“Offerings”).June 29, 2019.

The following table summarizes the components of interest expense, net for the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended													Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017				Change			% Change			June 29, 2019			June 30, 2018			Change			% Change
	(unaudited)
Interest expense	$	1,197		$	1,273			$	(76	)		(6.0	%)	$	1,271		$	1,503		$	(232	)		(15.4	%)
Interest income		(370	)		(208	)	��		(162	)		77.9	%		(962	)		(431	)		(531	)		123.2	%
Interest expense, net	$	827		$	1,065			$	(238	)		(22.3	%)	$	309		$	1,072		$	(763	)		(71.2	%)
Average outstanding floor plan payable	$	28,745		$	22,165									$	32,811		$	30,069
Average outstanding long-term debt	$	59,422		$	59,602									$	53,080		$	59,331

Interest expense, net was ~~$0.2~~$0.3 million ~~lower~~ for the three months ended ~~September~~June 29, ~~2018~~2019, a decrease of $0.8 million compared to the same period ofin the prior year. The decrease was ~~a result of a reduction~~primarily related to higher interest expense and an increase in interest income. Interest expense decreased $0.1 million as a result of a decrease in the average interest rate on borrowings outstanding under the New Credit Agreement offset in part by an increase in the weighted average interest rate on our obligations under industrial revenue bonds and higher average borrowings on floor plan payables. Floor plan payables are used to finance retail inventory at company-owned retail sales centers and the increase in outstanding borrowings is consistent with the expanded retail footprint for the U.S. retail operations discussed above. Interest income ~~was higher~~recognized during the period as a result of higher average cash balances invested in short term facilities. In addition, the Company incurred reduced interest expense due to: i) a lower weighted average interest rate on its revolving credit facility of 4.0% as compared to 7.4% on the term loans under a previously outstanding credit agreement and ii) an average lower outstanding balance on its credit facility as compared to the same period in the prior year.

The following table summarizes other expense for the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended									Three Months Ended
(Dollars in thousands)	September 29, 2018		September 30, 2017		Change		% Change			June 29, 2019		June 30, 2018		Change			% Change
	(unaudited)
Other expense	$	1,307	$	842	$	465		55.2	%	$	—	$	6,413	$	(6,413	)		(100.0	%)

Other expense for the three months ended ~~September 29,~~June 30, 2018 ~~primarily consisted of $0.5 million of expenses for~~related to legal, accounting, and advisory services attributable to the Exchange and $0.8 million of expenses for legal, accounting, and advisory services related to the Offerings. During the three months ended September 30, 2017, the Company incurred $0.8 million of expenses related toassociated with the Exchange.

The following table summarizes income tax expense for the three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

	Three Months Ended											Three Months Ended
(Dollars in thousands)	September 29, 2018			September 30, 2017			Change		% Change			June 29, 2019			June 30, 2018			Change		% Change
	(unaudited)
Income tax expense	$	5,822		$	4,249		$	1,573		37.0	%	$	6,631		$	3,440		$	3,191		92.8	%
Effective tax rate		(8.2	%)		36.5	%							27.6	%		133.0	%

Income tax expense for the three months ended ~~September~~June 29, ~~2018~~2019 was ~~$5.8~~$6.6 million, representing an effective tax rate of ~~(8.2%)~~27.6%, compared to income tax expense of ~~$4.2~~$3.4 million, representing an effective tax rate of ~~36.5%~~133.0%, for the three months ended ~~September~~June 30, 2017. The change in the effective tax rate was primarily due to costs related to the Exchange and equity-based compensation for which no tax benefit can be recognized. Absent these non-deductible discrete items incurred in the fiscal second quarter, the Company’s effective tax rate would have been 31.5%. The change in rate was also partially offset by a reduction in the federal tax rate from 35% to 21% due to the Tax Cuts and Jobs Act (“Tax Act”), which was enacted in December 2017.2018.

The Company’s effective tax rate for the three months ended ~~September~~June 29, ~~2018~~2019 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, ~~one-time charges related to the Exchange~~ and results in foreign ~~jurisdictions and non-taxable entities.~~jurisdictions. The Company’s effective tax rate for the three months ended ~~September~~June 30, ~~2017~~2018 differed from the federal statutory rate of ~~35%~~21.0% primarily due ~~to the effect of non-deductible expenses, state and local income taxes and results of operations in foreign jurisdictions and non-taxable entities.~~

~~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 September 29, 2018 and September 30, 2017:

Historical

Pro Forma

Three Months Ended

Three Months Ended

(Dollars in thousands)

September 29,
2018

September 30,
2017

Change

%
Change

September 29,
2018⁽¹⁾

September 30,
2017

Change

%
Change

(unaudited)

(unaudited)

Net (loss) income

$
(77,025
)

$
7,408

$
(84,433
)

N/M

$
(77,025
)

$
8,058

$
(85,083
)

N/M

Income tax expense

5,822

4,249

1,573

37.0
%

5,822

4,477

1,345

30.0
%
Interest expense, net

827

1,065

(238
)

(22.3
%)

827

974

(147
)

(15.1
%)
Depreciation and amortization

4,047

2,130

1,917

90.0
%

4,047

3,877

170

4.4
%
Equity-based compensation

85,839

150

85,689

N/M

85,839

218

85,621

N/M

Foreign currency gain

(34
)

(754
)

720

95.5
%

(34
)

(139
)

105

75.5
%
Transaction costs

492

804

(312
)

(38.8
%)

492

—

492

100.0
%
Acquisition integration costs

2,313

—

2,313

100.0
%

2,313

38

2,275

N/M

Equity offering costs

816

—

816

100.0
%

816

—

816

100.0
%
Restructuring charges

703

—

703

100.0
%

703

—

703

100.0
%
Loss on sale of non-operating facilities

—

—

—

—
%

—

60

(60
)

(100.0
%)
Other

(1
)

37

(38
)

(102.7
%)

(1
)

(1
)

—

—
%
Adjusted EBITDA

$
23,799

$
15,089

$
8,710

57.7
%

$
23,799

$
17,562

$
6,237

35.5
%

~~(1) Adjusted EBITDA for the three months ended September 29, 2018 is on an as reported basis.~~

Adjusted EBITDA for the three months ended September 29, 2018 was $23.8 million, an increase of $8.7 million over the three months ended September 30, 2017. The increase is primarily a result of an increase in operating income of $8.0 million after adjusting for the effect of increased depreciation and amortization, integration, restructuring costs and non-cash equity-based compensation incurred in connection with the Exchange and integration of Skyline. The increase in operating income is primarily due to the improvement in sales volumes and gross profit margins as a percent of net sales, partially offset by higher selling, general and administrative costs as a result of growth.

Adjusted EBITDA is presented as a supplemental measure of the Company’s financial performance to clarify and enhance an understanding of the historical results of the Company’s business. The Company’s management believes that the presentation of Adjusted EBITDA enhances an investor’s understanding of the Company’s financial performance and that Adjusted EBITDA is a useful financial metric to assess the Company’s operating performance from period-to-period by excluding certain items that the Company believes are not representative of its core business. The Company uses Adjusted EBITDA for business planning purposes and in measuring its performance relative to that of its competitors. See Adjusted EBITDA below for additional information.

Historical

Pro Forma

Six Months Ended

Six Months Ended

(Dollars in thousands)

September 29,
2018

September 30,
2017

September 29,
2018

September 30,
2017

(unaudited)

(unaudited)

Statements of Comprehensive Income (Loss) Data:

Net sales

$
677,697

$
504,065

$
723,501

$
621,990

Cost of sales

563,537

426,706

601,638

530,578

Gross profit

114,160

77,359

121,863

91,412

Selling, general and administrative expenses

173,157

54,562

169,959

67,750

Operating (loss) income

(58,997
)

22,797

(48,096
)

23,662

Interest expense, net

1,899

2,165

1,784

2,007

Other expense

7,720

923

1,307

83

(Loss) income before income taxes

(68,616
)

19,709

(51,187
)

21,572

Income tax expense

9,262

7,038

11,582

7,325

Net (loss) income

$
(77,878
)

$
12,671

$
(62,769
)

$
14,247

Reconciliation of Adjusted EBITDA:

Net (loss) income

$
(77,878
)

$
12,671

$
(62,769
)

$
14,247

Income tax expense

9,262

7,038

11,582

7,325

Interest expense, net

1,899

2,165

1,784

2,007

Depreciation and amortization

6,958

4,098

8,123

7,592

Equity-based compensation

93,927

300

86,040

422

Foreign currency loss (gain)

33

(1,233
)

33

(228
)
Transaction costs

6,905

894

492

—

Acquisition integration costs

3,502

—

3,502

38

Equity offering costs

816

—

816

—

Elkhart and Mansfield plant closures

—

—

—

1,132

Restructuring charges

1,111

—

1,111

—

Loss on sale of non-operating facilities

—

—

—

(1,220
)
Other

(1
)

44

(1
)

59

Adjusted EBITDA

$
46,534

$
25,977

$
50,713

$
31,374

As a percent of net sales:

Gross profit

16.8
%

15.3
%

16.8
%

14.7
%
Selling, general and administrative expenses

25.6
%

10.8
%

23.5
%

10.9
%
Operating (loss) income

(8.7
%)

4.5
%

(6.6
%)

3.8
%
Net (loss) income

(11.5
%)

2.5
%

(8.7
%)

2.3
%
Adjusted EBITDA

6.9
%

5.2
%

7.0
%

5.0
%

~~Net Sales:~~ ~~The following table summarizes net sales for the six months ended September 29, 2018 and September 30, 2017:~~

Six Months Ended

(Dollars in thousands)

September 29,
2018

September 30,
2017

Change

%
Change

(unaudited)

Net Sales

$
677,697

$
504,065

$
173,632

34.4
%
U.S. manufacturing and retail net sales

$
572,739

$
399,139

$
173,600

43.5
%
U.S. homes sold

9,587

7,659

1,928

25.2
%
U.S. manufacturing and retail average home selling price

$
59.7

$
52.1

$
7.6

14.6
%
Canadian manufacturing net sales

$
52,755

$
49,056

$
3,699

7.5
%
Canadian homes sold

674

665

9

1.4
%
Canadian manufacturing average home selling price

$
78.3

$
73.8

$
4.5

6.1
%
Corporate/Other net sales

$
52,203

$
55,870

$
(3,667
)

(6.6
%)
U.S. manufacturing facilities in operation at end of period

31

23

8

34.8
%
U.S. retail sales centers in operation at end of period

21

19

2

10.5
%
Canadian manufacturing facilities in operation at end of period

5

5

—

—
%

Net sales for the six months ended September 29, 2018 were $677.7 million, an increase of $173.6 million, or 34.4% over the six months ended September 30, 2017. The following is a summary of the change by operating segment.

The U.S. Factory-built Housing segment accounted for the majority of the overall growth in net sales for the six months ended September 29, 2018 compared to the same period in the prior year. Sales of homes for the Company’s U.S. manufacturing and retail operations increased by $173.6 million, or 43.5%. The number of homes sold during the six months ended September 29, 2018 increased by 1,928 units, or 25.2%. The net sales increase was attributable to several factors including: (i) the inclusion of net sales of $90.1 million for the Skyline operations for the period following the completion of the Exchange; (ii) a 14.6% increase in the average home selling price as a result of increased market demand, product mix and pricing actions to offset the impact of rising material and labor costs; (iii) additional retail sales centers in operation during the period; and (iv) increased output at the Company’s existing facilities as a result of plant operating improvements.

The Company’s U.S. HUD market share for the six months ended September 1, 2018 grew to 14.8% from 13.4% in the same period of the prior year due to the inclusion of the Skyline operations for the period subsequent to the Exchange. The U.S. HUD market grew during the six months ended September 1, 2018, as shipments of factory-built HUD homes were 9.4% higher than the same period of the prior year.

The Canadian Factory-built Housing segment sales increased $3.7 million, or 7.5% for the six months ended September 29, 2018 compared to the same period in the prior year, primarily due to an increase in the average home selling price of 6.1% in response to increased material and labor costs. The Canadian to U.S. average exchange rate increased slightly to $0.77 during the six months ended September 29, 2018 as compared to the same period of the prior year, but had little effect on the change in sales.

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the six months ended September 29, 2018, net sales decreased $3.7 million, or 6.6%. The decrease in net sales for Corporate/Other was a result of the decrease in our transportation business as a result of lower RV demand in the U.S.

Pro forma net sales for the first half of fiscal 2019 were $723.5 million compared to $622.0 million, an increase of 16.3%. The increase was attributable to a number of factors including: (i) increased manufacturing capacity; (ii) plant operating improvements which led to increased output; (iii) additional retail sales centers in operation during the period; and (iv) an increase in the average home selling price as a result of increased market demand and pricing actions to offset the impact of rising material and labor costs.

~~Gross Profit:~~ ~~The following table summarizes gross profit for the six months ended September 29, 2018 and September 30, 2017:~~

Gross profit as a percent of sales during the six months ended September 29, 2018 was 16.8% compared to 15.3% during the six months ended September 30, 2017. The following is a summary of the change by operating segment.

Gross profit for the U.S. Factory-built Housing segment increased by $35.7 million, or 59.1% during the six months ended September 29, 2018 compared to the same period in the prior year and improved to 16.8% as a percent of segment net sales from 15.1%. Although material prices and labor costs have been increasing in recent periods, the Company has been able to offset the margin effect of those increases with price adjustments, operational improvements and product rationalization. The Company continues to standardize product design and material purchases which allow for more efficient production for its supply chain and help to mitigate material commodity inflation. The Company also continues to focus on better understanding its cost structure and discontinuing models and options that customers do not value. As a result of these efforts, the U.S. manufacturing plants have been able to increase output which allows for better leverage of fixed costs.

Gross profit for the Canadian Factory-built Housing segment increased $0.6 million, or 6.4%, during the six months ended September 29, 2018 compared to the same period in the prior year and declined to 18.8% as a percent of segment net sales from 19.0%. The reduction in gross profit margin as a percent of net sales is primarily due to increasing direct and indirect labor costs.

Corporate/Other gross profit increased $0.5 million or 6.8%, during the six months ended September 29, 2018 compared to the same period in the prior year and improved as a percent of segment net sales to 15.7% from 13.7%. Although our transportation business volume was lower, margins improved in part due to less brokering business to other providers at lower margins.

Pro forma gross profit increased $30.5 million during the six months ended September 29, 2018 compared to the same period of the prior year and improved as a percent of net sales to 16.8% from 14.7%. The increase in gross profit as a percent of net sales is consistent with the operational improvements and product rationalization actions taken by the Company. The continued standardization of product design and material purchases has allowed for more efficient production for the Company and its supply chain and helped to mitigate the effects of commodity and labor inflation occurring in the market place.

~~Selling, General and Administrative Expenses:~~ ~~The following table summarizes selling, general and administrative expenses for the six months ended September 29, 2018 and September 30, 2017:~~

Selling, general and administrative expenses were $173.2 million for the six months ended September 29, 2018, an increase of $118.6 million compared to the six months ended September 30, 2017. The following is a summary of the change by operating segment.

Selling, general and administrative expenses for the U.S. Factory-built Housing segment increased $13.2 million, or 34.9%, during the six months ended September 29, 2018 as compared to the six months ended September 30, 2017. The increase was due partly to the inclusion of $5.4 million of expenses for the Skyline operations. The increase, excluding the addition of the Skyline operations, was the result of: (i) $4.7 million of higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) an increase in salaries and benefits, generally a result of increased compensation and administrative headcount to facilitate expanding capacity; and (iii) other administrative expenses of Skyline for the period subsequent to the completion of the Exchange. Although total selling, general and administrative expenses were higher, such expenses as a percent of segment net sales, for the six months ended September 29, 2018, were 8.9% compared to 9.5% during the six months ended September 30, 2017.

Selling, general and administrative expenses for the Canadian Factory-built Housing segment increased $0.7 million, or 21.4%, during the six months ended September 29, 2018 as compared to the six months ended September 30, 2017. As a percent of segment net sales, selling, general and administrative expenses for the Canadian segment were 7.5% for the six months ended September 29, 2018 compared to 6.7% for the six months ended September 30, 2017. The increase is a result of including a $0.6 million benefit in the prior year for foreign currency translation on intercompany notes that were retired at the end of fiscal 2018.

Pro forma selling, general and administrative expenses were $169.9 million for the six months ended September 29, 2018 compared to $67.8 million for the six months ended September 30, 2017. The increase was primarily the result of $86.0 million of non-cash, equity-based compensation expense and an increase in salaries and benefits, sales-based and incentive compensation and other administrative costs discussed above. The increase is also a result of the $3.5 million of integration and $1.1 million of restructuring costs incurred in connection with the integration of the Skyline operations, and a $1.2 million gain on the sale of facilities included in the six months ended September 30, 2017.

~~Interest Expense, Net:~~ ~~The following table summarizes the components of interest expense, net for the six months ended September 29, 2018 and September 30, 2017:~~

Interest expense, net was $0.3 million lower for the six months ended September 29, 2018 compared to the same period of the prior year. Interest expense increased $0.2 million as a result of the increase in average outstanding borrowings on floor plan financing arrangements. Floor plan payables are used to finance retail inventory at company-owned retail sales centers and the increase in outstanding borrowings is consistent with the expanded retail footprint for the U.S. retail operations discussed above. Interest income increased $0.5 million as a result of an increase in interest generated from a higher average cash balances on hand and the increase in average cash invested in short-term facilities.

Pro forma interest expense, net was $1.8 million for the six months ended September 29, 2018, a decrease of $0.2 million from the same period of the prior year. The overall decrease is primarily attributable to additional interest income earned from higher average cash balances.

~~Other Expense:~~ ~~The following table summarizes other expense for the six months ended September 29, 2018 and September 30, 2017:~~

Other expense for the six months ended September 29, 2018 primarily consists of $6.9 million of expenses for legal, accounting and advisory services related to the Exchange. The Company also incurred $0.8 million of expenses for legal, accounting and advisory services related to the Offerings. During the six months ended September 30, 2017, the Company incurred $0.8 million of expenses attributable to the Exchange and $0.1 million related to a prior acquisition and the disposition of a former business unit in the United Kingdom.

Other expense for the six months ended September 29, 2018 consists of $0.5 million of legal, accounting and advisory services related to the Exchange and $0.8 million of legal, accounting and advisory services related to the Offerings. Other expense for the six months ended September 30, 2017 included $0.1 million of expenses related to the IBS Acquisition and the disposition of a former business unit in the United Kingdom.

~~Income Tax Expense:~~ ~~The following table summarizes income tax expense for the six months ended September 29, 2018 and September 30, 2017:~~

Income tax expense for the six months ended September 29, 2018 was $9.3 million, representing an effective tax rate of (13.5%), compared to income tax expense of $7.0 million, representing an effective tax rate of 35.7%, for the six months ended September 30, 2017. The change in the effective tax rate was primarily due to costs related to the Exchange and equity-based compensation for which no tax benefit can be recognized. Absent these non-deductible discrete items incurred, the Company’s effective tax rate would have been 31.5%. The effective tax rate was also impacted by a reduction in the federal tax rate from 35% to 21% due to the Tax Act, which was enacted in December 2017.

~~The Company’s effective tax rate for the six months ended September 29, 2018 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, one-time charges related to the Exchange and results of operations in foreign jurisdictions and non-taxable entities. The ~~Company’s~~current quarter’s effective tax rate ~~for~~is more representative of the six months ended September 30, 2017 differed from the federal statutory rate of 35% primarily due to the effect of non-deductible expenses, state and local income taxes and results in foreign jurisdictions and non-taxable entities.

~~During the six months ended September 29, 2018, the Company had pro forma income tax expense of $11.6 million and an~~Company’s ongoing expected effective tax rate of (22.6%), compared to income tax expense of $7.3 million and an effective tax rate of 34.0% during the same period of the prior year. Prior to the completion of the Exchange, Skyline recognized no income tax expense or benefit as a result of historical operating loss carryforwards which had a full valuation allowance. A portion of the valuation allowance was reversed upon completion of the Exchange, however, that reversal did not have an impact on the pro forma results of operations. The pro forma income tax effects are a result of the income tax effects of the Company discussed above plus the tax impact of the pro forma adjustments. The increase in expense for the six months ended September 29, 2018 is primarily a result of the non-deductibility of certain expenses for tax purposes.rate.

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~~three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~2018:

Historical

Pro Forma

Six Months Ended

Six Months Ended

(Dollars in thousands)

September 29,
2018

September 30,
2017

Change

%
Change

September 29,
2018

September 30,
2017

Change

%
Change

(unaudited)

(unaudited)

Net (loss) income

$
(77,878
)

$
12,671

$
(90,549
)

N/M

$
(62,769
)

$
14,247

$
(77,016
)

N/M

Income tax expense

9,262

7,038

2,224

31.6
%

11,582

7,325

4,257

58.1
%
Interest expense, net

1,899

2,165

(266
)

(12.3
%)

1,784

2,007

(223
)

(11.1
%)
Depreciation and amortization

6,958

4,098

2,860

69.8
%

8,123

7,592

531

7.0
%
Equity-based compensation

93,927

300

93,627

N/M

86,040

422

85,618

N/M

Foreign currency loss (gain)

33

(1,233
)

1,266

102.7
%

33

(228
)

261

114.5
%
Transaction costs

6,905

894

6,011

N/M

492

—

492

100.0
%
Acquisition integration costs

3,502

—

3,502

100.0
%

3,502

38

3,464

N/M

Equity offering costs

816

—

816

100.0
%

816

—

816

100.0
%
Elkhart and Mansfield plant closures

—

—

—

—
%

—

1,132

(1,132
)

(100.0
%)
Restructuring charges

1,111

—

1,111

100.0
%

1,111

—

1,111

100.0
%
Loss on sale of non-operating facilities

—

—

—

—
%

—

(1,220
)

1,220

100.0
%
Other

(1
)

44

(45
)

(102.3
%)

(1
)

59

(60
)

(101.7
%)
Adjusted EBITDA

$
46,534

$
25,977

$
20,557

79.1
%

$
50,713

$
31,374

$
19,339

61.6
%

	Three Months Ended
(Dollars in thousands)	June 29, 2019			June 30, 2018			Change			% Change
Net income (loss)	$	17,380		$	(853	)	$	18,233			*
Income tax expense		6,631			3,440			3,191			92.8	%
Interest expense, net		309			1,072			(763	)		(71.2	%)
Depreciation and amortization		4,472			2,911			1,561			53.6	%
Equity-based compensation (for awards granted prior to December 31, 2018)		1,107			8,088			(6,981	)		(86.3	%)
Foreign currency transaction (gain) loss		(72	)		67			(139	)		(207.5	%)
Transaction costs		—			6,413			(6,413	)		(100.0	%)
Acquisition integration costs		1,038			1,189			(151	)		(12.7	%)
Fair market value adjustment for asset classified as held for sale		986			—			986		*
Restructuring costs		234			408			(174	)		(42.6	%)
Adjusted EBITDA	$	32,085		$	22,735		$	9,350			41.1	%

~~“N/M”~~* indicates that the calculated percentage is not ~~meaningful.~~meaningful

Adjusted EBITDA for the ~~six~~three months ended ~~September~~June 29, ~~2018~~2019 was ~~$46.5~~$32.1 million, an increase of ~~$20.6~~$9.4 million ~~over~~from the ~~six months ended September 30, 2017.~~same period of the prior year. The increase is primarily a result of ~~an increase in~~increased operating income ~~of $19.0 million~~ after adjusting for the effect of increased depreciation and amortization, transaction-related expenses, integration costs, restructuring costs and non-cash equity-based compensation incurred in connection with the ~~Exchange and integration of Skyline.~~Exchange. The increase in operating income is primarily due to ~~the~~an increase in sales volume and an improvement in ~~sales volumes and~~ gross profit margins ~~as a percent of net sales,~~ partially offset by higher selling, general and administrative ~~costs as a result of growth.~~

Pro forma Adjusted EBITDA for the six months ended September 29, 2018 was $50.7 million, an increase of $19.3 million over the six months ended September 30, 2017. The increase is primarily a result of an increase in operating income of $19.1 million after adjusting for the effect of increased depreciation and amortization, integration and restructuring costs incurred in connection with the integration of Skyline.

Adjusted EBITDA is presented as a supplemental measure of the Company’s financial performance to clarify and enhance an understanding of the historical results of the Company’s business. The Company’s management believes that the presentation of Adjusted EBITDA enhances an investor’s understanding of the Company’s financial performance and that Adjusted EBITDA is a useful financial metric to assess the Company’s operating performance from period-to-period by excluding certain items that the Company believes are not representative of its core business. The Company uses Adjusted EBITDA for business planning purposes and in measuring its performance relative to that of its competitors.costs. See Adjusted EBITDA definition below for additional ~~information.~~

~~The following table presents summary cash flow information for~~this metric in evaluating the ~~six months ended September 29, 2018 and September 30, 2017:~~

Our primary sources of liquidity are net cash provided by operating activities and available borrowings under our revolving credit facility. At September 29, 2018, we had $102.9 million of cash and cash equivalents and $32.1 million of unused borrowing capacity under the revolving credit facility, net of the required letter of credit sub-facility. The Company believes that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements needed to operate the business for the next year. In the event that those sources of cash are inadequate and one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.

Cash and cash equivalents decreased by $33.7 million during the six months ended September 29, 2018. The decrease was primarily a result of distributions to Champion Holdings’ members prior to the completion of the Exchange partially offset by cash generated by operating activities and cash assumed in the business acquisition.

Although net income decreased $90.5 million during the six months ended September 29, 2018 compared to the same period of the prior year, cash generated from operating activities was $25.3 million higher. The increase was primarily the result of net cash flows generated by operations after adjusting for $96.5 million of higher non-cash effects of depreciation, amortization and equity-based compensation resulting from the Exchange and cash provided from changes in working capital items which was $16.9 million more than last year.

Cash provided by investing activities was $10.5 million higher during the six months ended September 29, 2018 as a result of cash received from the Exchange of $9.7 million and $1.2 million less capital expenditures for the purchase of property, plant and equipment than during the prior year. The Company purchased the Mansfield, Texas plant during the six months ended September 30, 2017 for $2.2 million.

Cash used for financing activities was $73.5 million higher during the six months ended September 29, 2018, primarily as a result of distributions to Champion Holdings’ members of $65.3 million prior to completion of the Exchange and $2.0 million of payments made for deferred financing fees. The Company also borrowed $46.9 million under the New Credit Agreement during the six months ended September 29, 2018 and used the proceeds to repay the existing Term Loans.

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) foreign currency gains and losses, (f) equity-based compensation awards granted prior to December 31, 2018, (g) restructuring charges, ~~and~~(h) impairment of assets, and ~~(h)~~(i) other non-operating costs including those for the acquisition and integration or disposition of businesses and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. The Company believes that Adjusted EBITDA is commonly used by investors to evaluate its performance and that of its competitors. However, the Company’s use of Adjusted EBITDA may vary from that of others in its industry.

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 inference 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:

Because of 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.

Although orders from customers can be cancelled at any time without penalty, and ~~Critical Accounting Estimates~~unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders for homes at June 29, 2019 totaled $153.0 million compared to $221.8 million at June 30, 2018. The current quarter’s U.S. backlog was impacted by demand softening due to retail inventory destocking in certain markets. Backlog at June 30, 2018 was higher than normal in part due to longer backlogs created by the Federal Emergency Management Agency orders produced through February 2018. In addition, backlog for the Canadian operations was lower in the current year first quarter due to continued softness in the western Canada housing markets.

The ~~preparation~~following table presents summary cash flow information for the three months ended June 29, 2019 and June 30, 2018:

The Company’s primary sources of ~~financial statements in conformity with U.S. GAAP requires management to make estimates~~liquidity are cash flows from operations, existing cash balances and ~~assumptions that affect the reported amounts~~borrowings under available credit facilities. The Company has $34.3 million of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Assumptions and estimates of future earningsunused borrowing capacity under its revolving credit facility. Cash balances and cash flow from operations for the next year are expected to be adequate to fund capital expenditures. The level of cash availability is projected to be in excess of cash needed to operate the business for the next year. In the event operating cash flow is inadequate and one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.

Cash provided by operating activities was $26.8 million during the three months ended June 29, 2019 compared to $4.3 million during the three months ended June 30, 2018. Cash was generated by operating income (before non-cash charges) from higher operating margins, lower finished goods inventory and improved working capital management compared to the prior year. Additionally, there were no transaction expenses incurred for the Skyline acquisition in the first quarter of fiscal 2020 compared to of $6.4 million in the same period of the prior year, which contributed to the positive increase in cash provided by operating activities compared to the prior period.

Cash used in investing activities was $4.5 million for the ~~periodic analyses~~three months ended June 29, 2019 which was related to capital expenditures. The expenditures for capital items are part of the ~~recoverability~~Company’s focus on efficiency initiatives as well as the expansion of ~~goodwill, intangible assets,~~production capacity with the investment in the new Leesville, Louisiana manufacturing facility. Cash provided by investing activities was $7.7 million during the three months ended June 30, 2018 as a result of cash acquired in the Exchange of $9.7 million, offset by capital expenditures of $2.0 million.

Cash used in financing activities was $5.7 million for the three months ended June 29, 2019, primarily related to the $5.0 million repayment on the revolving credit facility. Cash used in financing activities for the three months ended June 30, 2018 was $67.5 million, primarily as a result of distributions to Champion Holdings’ members of $65.3 million prior to completion of the Exchange and $2.0 million of additional payments made for deferred ~~tax assets~~financing fees. The Company also borrowed $46.9 million under the revolving credit agreement during the three months ended June 30, 2018 and ~~property, plant and equipment. Historical experience and trends are used~~utilized the proceeds to ~~estimate reserves, including reserves for self-insured risks, warranty costs and product liability claims.~~repay term loans.

For a discussion of our ~~significant~~critical accounting policies that management believes affect its more significant judgments and ~~critical accounting~~ estimates used in the preparation of our Consolidated Financial Statements, see ~~“Management’s Discussion and Analysis~~Part II, Item 7 of ~~Financial Condition and Results of Operations – Critical Accounting Policies,” attached as Exhibit 99.1 to~~ the Company’s ~~Current~~Annual Report on Form ~~8-K filed with~~10-K for fiscal 2019 (the “Fiscal 2019 Annual Report”), under the ~~SEC on July 13, 2018, and Note 2, “Summary of Significant~~heading "Critical Accounting ~~Policies,” to the consolidated financial statements attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on June 14, 2018.~~Policies." There have been no significant changes in our significant accounting policies or critical accounting estimates during the ~~six~~three months ended ~~September~~June 29, ~~2018,~~2019, with the exception of ~~revenue recognition. See~~adoption of the new lease standard described in Note 10, ~~“Revenue Recognition,~~“Leases,” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Report”).

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.

Some of the statements in this Report are not historical in nature 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,” “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 important factors, many of which are beyond our control, that could cause actual results to differ materially from those in forward-looking statements including regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

The forward-looking statements in this Report are made as of the date hereof, and we do not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.

~~The~~For a discussion of the Company’s ~~obligations~~interest rate and foreign exchange risks, see Part II, Item 7A of the Fiscal 2019 Annual Report, under the ~~New Credit Agreement, industrial revenue bonds~~heading "Quantitative and ~~floor plan financing agreements are currently subject to variable rates of interest. A 100-basis point increase~~Qualitative Disclosures about Market Risk." There were no significant changes in the ~~underlying interest rates would result in an additional annual interest expense of approximately $0.9 million, assuming average related debt of $89.2 million, which was~~Company’s market risk during the amount of outstanding borrowings under the facilities at September 29, 2018. The Company’s approach to interest rate risk is to balance borrowings between fixed rate and variable rate debt as management deems appropriate.

~~The Company is exposed to foreign exchange risk with its factory-built housing operations in Canada. The Canadian operations had net sales of $68.5 million Canadian dollars for the six~~three months ended ~~September~~June 29, 2018. Assuming future Canadian net sales are equal to those in the first six months of fiscal 2019, a change of 1.0% in exchange rates between the U.S. and Canadian dollars would change quarterly consolidated net sales by $0.7 million. Net income of the Canadian operations would also be affected by changes in exchange rates. The Company also has foreign exchange risk for cash balances maintained in Canadian dollars that are subject to fluctuating values when exchanged into U.S. dollars. The Company does not financially hedge its investment in the Canadian operations or in Canadian denominated bank deposits.2019.

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the ~~Company’s Chief Executive Officer~~CEO and ~~Chief Financial Officer, has~~CFO, evaluated the effectiveness of the ~~Company’s~~company’s disclosure controls and procedures ~~(as defined in~~(pursuant to Rules 13a-15(e) ~~and~~or 15d-15(e) ~~under~~of the ~~Securities~~ Exchange ~~Act of 1934, as amended) as of September~~Act) at June 29, ~~2018.~~2019. Based onupon this evaluation, ~~our Chief Executive Officer~~the CEO and ~~Chief Financial Officer have~~CFO concluded that the Company’s disclosure controls and procedures were ~~not~~ effective as of ~~September~~June 29, ~~2018, due to the material weakness~~2019.

Changes in ~~internal controls over financial reporting described below, which has not been remediated.~~

Notwithstanding the material weakness in internal controls over financial reporting, the Chief Executive Officer and Chief Financial Officer have concluded that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

~~On June 1, 2018, Champion Holdings completed a strategic business combination with Skyline to form Skyline Champion Corporation. The~~ internal control over financial reporting ~~of Champion Holdings (and its subsidiaries), including that portion of disclosure controls and procedures that relates to~~

There have been no changes in our internal control over financial reporting ~~was excluded from~~during the ~~evaluation of~~three months ended June 29, 2019 that have materially affected, or are reasonably likely to materially affect, the effectiveness of the Company’s disclosure controls and procedures as of the period end covered by this report. The total assets of Champion Holdings represented approximately 53.3% of Skyline Champion Corporation’s consolidated assets as of September 29, 2018.

As described in the Skyline Corporation’s Annual Report on Form 10-K for the year ended May 31, 2017, management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2017 and the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the deficiencies in the Company’s controls related to raw material inventories described below constituted a material weakness and that the Company did not maintain effectiveCompany’ internal control over financial reporting.

~~Accuracy and Valuation of Inventory –~~ As of May 31, 2017, the Company’s internal controls over the accuracy and valuation of raw materials inventories did not operate with sufficient precision to prevent or detect the potential occurrence of material misstatement in compiling the raw material inventory listing from the physical inventory counts or in the valuation of raw materials at cost under the first-in, first-out method.

~~Planned remediation of material weakness~~ – The Company has been engaged in, and will continue to implement, remedial activities to address the control deficiency described above. To remediate the material weakness described above, the Company is establishing policies and procedures for the review, approval and application of generally accepted accounting principles pertaining to the accuracy and valuation of inventory, including implementing more robust inventory count procedures, count testing, analytical procedures and price testing.

As the Company continues to evaluate and improve the effectiveness of internal control over financial reporting, the Company may determine to take additional measures to address its material weakness or determine to modify the remediation efforts described above. Until the remediation efforts discussed above, including any additional remediation efforts that the Company identifies as necessary, are implemented, tested and deemed to be operating effectively, the material weakness described above will continue to exist.

We intend to describe changes in internal controls made as a result of the Exchange in our Annual Report on Form 10-K for the fiscal year ending March 30, 2019, which will include our initial assessment of internal controls over financial reporting for the combined business.

We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial or contractual disputes, product liability claims and other matters. For additional information on legal proceedings, see Note ~~17,~~15, “Commitments, Contingencies and Legal Proceedings – Legal Proceedings,” to the condensed consolidated financial statements included in this Report.

~~The factory-built housing industry is cyclical, is affected by seasonality and is sensitive to changes in general economic or other business conditions.~~

The factory-built housing industry is affected by seasonality. Sales during the period from March to November are typically higher than in other months. As a result, the Company’s sales and operating results sometimes fluctuate and may continue to fluctuate in the future.

The factory-built housing industry is also sensitive to changes in economic conditions and other factors, such as employment rates, job growth, population growth, consumer confidence, consumer income, availability of financing, interest rate levels and an oversupply of homes for sale. Changes in any of these conditions generally, or in the markets where the Company operates, could reduce demand and constrain pricing for new factory-built homes in these areas or result in customer cancellations of pending shipments. Reductions in the number of homes shipped by the Company or constraints on the prices it can charge, could result in a decrease in the Company’s net sales and earnings, which could adversely affect the Company’s financial condition.

~~The Company is subject to demand fluctuations in the housing industry. Reductions in demand could adversely affect the Company’s business, results of operations, and financial condition.~~

Demand for the Company’s homes is subject to fluctuations in the housing market generally. In a housing market downturn, the Company’s sales and results of operations could be adversely affected; it may have significant inventory impairments and other write-offs; its gross margins may decline significantly from historical levels; and it may incur losses from operations. The Company cannot predict the continuation of the current housing recovery, nor can it provide assurance that should the recovery not continue its response will be successful.

Future increases in interest rates, more stringent credit standards, tightening of financing terms, or other increases in the effective costs of owning a factory-built home (including those related to regulation or other government actions) could limit the purchasing power of the Company’s potential customers and could adversely affect the Company’s business and financial results.

A large majority of the Company’s customers finance their home purchases through third-party lenders. While interest rates have increased moderately, they have been near historical lows for several years, which has made purchasing new factory-built homes more affordable. Increases in interest rates or decreases in the availability of consumer financing could adversely affect the market for homes. Potential customers may be less willing or able to pay the increased monthly costs or to obtain financing. Lenders may increase the qualifications needed for financing or adjust their terms to address any increased credit risk. These factors could adversely affect the sales or pricing of the Company’s factory-built homes. These developments have historically had, and may once again have, an adverse effect on the overall demand for factory-built housing and its competitiveness with other forms of housing, and could adversely affect the Company’s results of operations and financial condition.

The liquidity provided by Government-Sponsored Enterprises (“GSEs”) and the Federal Housing Administration (“FHA”) is also critical in insuring or purchasing home mortgages and creating or insuring investment securities that are either sold to investors or held in their portfolios. The impact of the federal government’s conservatorship of GSEs on the short-term and long-term demand for new housing as well as any potential restructuring of the GSEs remains unclear. Any limitations or restrictions on the availability of financing by these agencies could adversely affect interest rates, financing, and the Company’s sales of new homes.

The Dodd-Frank Act established the Consumer Financial Protection Bureau (“CFPB”) to regulate consumer financial products and services. Since 2014, the CFPB has promulgated rules concerning consumer credit transactions secured by a dwelling, which include real property mortgages and chattel loans (financed without land) secured by factory-built homes. The rules have caused some lenders to curtail underwriting such loans, and some investors are reluctant to own or participate in owning such loans because of the uncertainty of potential litigation and other costs. Consequently, such regulatory developments could cause some prospective buyers of factory-built homes to be unable to secure the financing necessary to complete purchases. In addition, compliance with the law and ongoing rule implementation has caused

lenders to incur additional costs to implement new processes, procedures, controls, and infrastructure required to comply with the regulations. Compliance may constrain lenders’ ability to profitably price certain loans. Failure to comply with these regulations, changes in these or other regulations, or the imposition of additional regulations, could affect the Company’s earnings, limit its access to capital, and have a material adverse effect on its business and results of operations.

The CFPB rules amending the Truth in Lending Act and Real Estate Settlement Procedures Act expand the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protection Act (“HOEPA”), revise and expand the tests for coverage under HOEPA, and impose additional restrictions on mortgages that are covered by HOEPA. As a result, certain factory-built home loans are now subject to HOEPA limits on interest rates and fees. Loans with rates or fees in excess of the limits are deemed “high cost mortgages” and provide additional protections for borrowers, including with respect to determining the value of the home. Most loans for the purchase of factory-built homes have been written at rates and fees that would not appear to be considered high cost mortgages under the rule. Although some lenders may continue to offer loans that are now deemed high cost mortgages, the rate and fee limits appear to have deterred some lenders from offering loans to certain borrowers and may continue to make them reluctant to enter into loans subject to the provisions of HOEPA. As a result, some prospective buyers of factory-built homes may be unable to secure financing necessary to complete factory-built home purchases.

~~The availability of wholesale financing for retailers is limited due to a limited number of floor plan lenders and reduced lending limits.~~

Factory-built housing retailers generally finance their inventory purchases with wholesale floor plan financing provided by lending institutions. The availability of wholesale financing is significantly affected by the number of floor plan lenders and their lending limits. Limited availability of floor plan lending negatively affects the inventory levels of the Company’s independent retailers, the number of retail sales center locations and related wholesale demand, and adversely affects the availability of and access to capital on an ongoing basis. As a result, if the availability of wholesale financing is reduced, the Company could experience sales declines or a higher level of customer defaults and its operating results and cash flows could suffer.

~~The Company has contingent repurchase obligations related to wholesale financing provided to industry retailers.~~

As is customary in the factory-built housing industry, a significant portion of the Company’s manufacturing sales to independent retailers are financed under floor plan agreements with financing companies. In connection with the floor plan financing programs, the Company generally has separate agreements with the financing companies that require the Company to repurchase homes upon default by the retailer and repossession of the homes by the financing companies. These repurchase agreements are applicable for various periods of time, generally up to 24 months after the sale of the home to the retailer. However, certain homes are subject to repurchase until the home is sold by the retailer. The Company’s contingent repurchase obligation as of September 29, 2018, was estimated to be approximately $190.5 million, without reduction for the resale value of the homes. The Company may be required to honor contingent repurchase obligations in the future and may incur additional expense and reduced cash flows because of these repurchase agreements.

If the Company is unable to establish or maintain relationships with independent distributors who sell its homes, the Company’s sales could decline and its operating results and cash flows could suffer.

Although the Company maintains its own factory direct retail business in select markets, it conducts a majority of its business through independent distributors. For example, approximately 85% of the Company’s shipments of homes in fiscal 2018 were made to independent distributors throughout the United States and western Canada. The Company may not be able to establish relationships with new independent distributors or maintain good relationships with independent distributors that sell its homes. Even if the Company does establish and maintain relationships with independent distributors, these customers are not obligated to sell the Company’s homes exclusively and may choose to sell competitors’ homes instead. The independent distributors with whom the Company has relationships can cancel these relationships on short notice. In addition, these customers may not remain financially solvent, as they are subject to similar industry, economic, demographic and seasonal trends that the Company faces. If the Company does not establish and maintain relationships with solvent independent distributors in the markets it serves, sales in those markets could decline, and if the Company cannot effect offsetting expansion of its factory-direct retail business, the Company’s operating results and cash flows could suffer.

~~Prices of certain materials can fluctuate and availability of certain materials may be limited at times.~~

Prices of certain materials used in the construction of homes, such as lumber, insulation, steel, drywall, oil-based products and fuel, can fluctuate significantly due to changes in demand and supply. Additionally, availability of certain materials such as drywall and insulation may be

limited at times, resulting in higher prices or the need to find alternative suppliers. The Company may attempt to pass the higher material costs on to customers, but it is not certain that it will be able to achieve this without affecting demand. Limited availability of materials may also adversely affect the Company’s production capabilities and results of operations.

For some of the components used in production, the Company depends on a small group of suppliers and the loss of any of these suppliers could affect the Company’s ability to obtain components in a timely manner or at competitive prices, which would decrease its sales and profit margins. Some components are sourced from foreign sources and delays in obtaining these components could result in increased costs and decreased sales and profit margins.

The Company depends on timely and sufficient delivery of components from its suppliers. Most components are readily available from a variety of sources. However, a few key components are currently produced by only a small group of quality suppliers that have the capacity to supply large quantities. If the Company cannot obtain an adequate supply of these key components its sales could decline and its operating results and cash flows could suffer.

~~The Company’s results of operations can be adversely affected by labor shortages and turnover.~~

The homebuilding industry has from time to time experienced labor shortages and other labor-related issues. A number of factors may adversely affect the labor force available to the Company and its subcontractors in one or more of its markets, including high employment levels, construction market conditions, and government regulation, which include laws and regulations related to workers’ health and safety, wage and hour practices, and immigration. The Company’s direct labor has historically experienced high turnover rates, which can lead to increased spending on training and retention and, as a result, increased costs of production. An overall labor shortage or a lack of skilled labor could cause significant increases in costs or delays in construction of homes, which could have a material adverse effect upon the Company’s net sales and results of operations.

Industry conditions and future operating results could limit the Company’s sources of capital. If the Company is unable to locate suitable sources of capital when needed, it may be unable to maintain or expand its business.

The Company depends on its cash balances, cash flows from operations, and its revolving credit facility (the “Credit Facility”) to finance its operating requirements, capital expenditures, and other needs. If the Company’s cash balances, cash flows from operations, and availability under the Credit Facility are insufficient to finance its operations and alternative capital is not available, the Company may not be able to expand its business and make acquisitions, or it may need to curtail or limit its existing operations.

Factory-built housing operates in the highly competitive housing industry, and, if other home builders are more successful or offer better value to the Company’s customers, the Company’s business could decline.

The Company operates in a very competitive environment and faces competition from a number of other home builders in each market in which it operates. The Company competes with large national and regional home building companies and with smaller local home builders for financing, raw materials, and skilled management and labor resources. Some of the Company’s manufacturing competitors have captive retail distribution systems and consumer finance and insurance operations. In addition, there are independent factory-built housing retail locations that sell competitors’ products in most areas where the Company’s homes are sold and in most areas where it has retail operations. Because barriers to entry to the industry at both the manufacturing and retail levels are low, the Company believes that it is relatively easy for new competitors to enter its markets. In addition, the Company’s products compete within the housing industry more broadly with other forms of low to moderate-cost housing, including site-built homes, panelized homes, apartments, townhouses, condominiums, and repossessed homes. The Company also competes with resale homes, also referred to as “previously owned” or “existing” homes, as well as rental housing.

An oversupply of homes available for sale or the heavy discounting of home prices by the Company’s competitors could adversely affect demand for the Company’s homes and the results of its operations. An increase in competitive conditions could have any of the following impacts on the Company: delivering fewer homes; sale of fewer homes or higher cancellations by the Company’s home buyers; an increase in selling incentives or reduction of prices; and realization of lower gross margins due to lower selling prices or an inability to increase selling prices to offset increased costs of the homes delivered. If the Company is unable to compete effectively in its markets, its business could decline disproportionately to that of its competitors. As a result, its sales could decline and its operating results and cash flows could suffer.

~~Changes in consumer preferences for the Company’s products or its failure to gauge those preferences could lead to reduced sales.~~

The Company cannot be certain that historical consumer preferences for factory-built homes in general, and for its products in particular, will remain unchanged. The Company’s ability to remain competitive depends heavily on its ability to provide a continuing and timely introduction of innovative product offerings. The Company believes that the introduction of new features, designs, and models will be critical to the future success of its operations. Managing frequent product introductions poses inherent risks. Delays in the introduction or market acceptance of new models, designs, or product features could have a material adverse effect on the Company’s business. Products may not be accepted for a number of reasons, including changes in consumer preferences or the Company’s failure to properly gauge consumer preferences. Further, the Company cannot be certain that new product introductions will not reduce net sales from existing models and adversely affect its results of operations. In addition, the Company’s net sales may be adversely affected if its new models and products are not introduced to the market on time or are not successful when introduced. Finally, the Company’s competitors’ new products may obtain better market acceptance.

~~When the Company introduces new products into the marketplace, it may incur expenses that it did not anticipate, which, in turn, can result in reduced earnings.~~

The introduction of new models, floor plans, and features are critical to the Company’s future success, however, the Company may incur unexpected expenses when it makes such introductions. For example, it may experience unexpected engineering or design flaws that may cause increased warranty costs. The costs resulting from these types of problems could be substantial and could have a significant adverse effect on the Company’s earnings. Estimated warranty costs are provided at the time of product sale to reflect the Company’s best estimate of the amounts necessary to settle future and existing claims on products. An increase in actual warranty claims costs as compared to the Company’s estimates could result in increased warranty reserves and expense which could have an adverse impact on the Company’s earnings.

~~The Company’s products and services may experience quality problems from time to time that can result in decreased sales and gross margin and could harm the Company’s reputation.~~

The Company’s products contain thousands of parts, many of which are supplied by a network of approved vendors. Product defects may occur, including components purchased from material vendors. The Company cannot assure that all such defects will be detected prior to the distribution of its products. In addition, although the Company endeavors to compel suppliers to maintain appropriate levels of insurance coverage, it cannot assure that if a defect in a vendor-supplied part were to occur that the vendor would have the ability to financially rectify the defect. Failure to detect defects in the Company’s products, including vendor-supplied parts, could result in lost revenue, increased warranty and related costs, and could harm the Company’s reputation.

~~If the factory-built housing industry is not able to secure favorable local zoning ordinances, the Company’s sales could decline and its operating results and cash flows could suffer.~~

Limitations on the number of sites available for placement of factory-built homes or on the operation of factory-built housing communities could reduce the demand for factory-built homes and, as a result, the Company’s sales. Factory-built housing communities and individual home placements are subject to local zoning ordinances and other local regulations relating to utility service and construction of roadways. In the past, some property owners have resisted the adoption of zoning ordinances permitting the use of factory-built homes in residential areas, which the Company believes has restricted the growth of the industry. Factory-built homes may not receive widespread acceptance and localities may not adopt zoning ordinances permitting the development of factory-built home communities. If the factory-built housing industry is unable to secure favorable local zoning ordinances, the Company’s sales could decline and its operating results and cash flows could suffer.

~~The Company may not be able to manage its business effectively if it cannot retain current management team members or if it is unable to attract and motivate key personnel.~~

The Company may not be able to attract or motivate qualified management and operations personnel in the future. If the Company is not able to attract and motivate necessary personnel to accomplish its business objectives, it will experience constraints that will significantly impede the achievement of its objectives. Transitions in the Company’s senior management team may result in operational disruptions, and its business may be harmed as a result. The Company may also have difficulty attracting experienced personnel and may be required to expend significant financial resources in its employee recruitment efforts.

~~Product liability claims and litigation and warranty claims that arise in the ordinary course of business may be costly, which could adversely affect the Company’s business.~~

As a home builder, the Company is subject to construction defect and home warranty claims arising in the ordinary course of business. These claims are common in the home building industry and can be costly. In addition, the costs of insuring against construction defect and product liability claims are high. There can be no assurance that this coverage will not be restricted and become more costly. If the limits or coverages of the Company’s current and former insurance programs prove inadequate, or the Company is not able to obtain adequate, or reasonably priced insurance against these types of claims in the future, or the amounts currently provided for future warranty or insurance claims are inadequate, the Company may experience losses that could negatively impact its financial results.

The Company records expenses and liabilities based on the estimated costs required to cover its self-insured liability under its insurance policies, and estimated costs of potential claims and claim adjustment expenses that are above its coverage limits or that are not covered by its insurance policies. These estimated costs are based on an analysis of the Company’s historical claims and industry data, and include an estimate of claims incurred but not yet reported. Due to the degree of judgment required and the potential for variability in the underlying assumptions when deriving estimated liabilities, the Company’s actual future costs could differ from those estimated, and the difference could be material to its consolidated financial statements.

~~Security breaches and other disruptions could compromise the Company’s information and expose it to liability, which would cause its business and reputation to suffer.~~

In the ordinary course of the Company’s business, it collects and stores sensitive data, including intellectual property, its proprietary business information and that of its suppliers and business partners, as well as personally identifiable information of its customers and employees. The Company also has outsourced elements of its information technology structure, and as a result, it is managing independent vendor relationships with third parties who may or could have access to the Company’s confidential information. Similarly, the Company’s business partners and other third party providers possess certain of its sensitive data. The secure maintenance of this information is critical to the Company’s operations and business strategy. Despite its security measures, the Company’s information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. The Company, its partners, vendors, and other third party providers could be susceptible to third party attacks on the Company’s, and their, information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups. Any such breach could compromise the Company’s networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt the Company’s operations, and damage its reputation, any of which could adversely affect the Company’s business.

~~The Company is subject to extensive regulation affecting the production and sale of factory-built housing, which could adversely affect its profitability.~~

The Company is subject to a variety of federal, state, and local laws and regulations affecting the production and sale of factory-built housing. The Company’s failure to comply with such laws and regulations could expose it to a wide variety of sanctions, including closing one or more manufacturing facilities. Regulatory matters affecting the Company’s operations are under regular review by governmental bodies and the Company cannot predict what effect, if any, new laws and regulations would have on it or the factory-built housing industry. Failure to comply with applicable laws or regulations or the passage in the future of new and more stringent laws, may adversely affect the Company’s financial condition or results of operations.

~~The cost of operations could be adversely impacted by increased costs of healthcare benefits provided to employees.~~

In 2010, the Affordable Care Act, was passed into law. As enacted, the health reform law changes, among other things, certain aspects of health insurance. The Affordable Care Act, coupled with the uncertainty in the insurance markets associated with the future of the Act, could increase the Company’s healthcare costs, which could adversely impact the Company’s earnings.

A prolonged delay by Congress and the President to approve budgets or continuing appropriation resolutions to facilitate the operations of the federal government could delay the completion of home sales or cause cancellations, and thereby negatively impact the Company’s deliveries and revenues.

Congress and the President may not timely approve budgets or appropriation legislation to facilitate the operations of the federal government. As a result, many federal agencies have historically and may again cease or curtail some activities. The affected activities include Internal Revenue Service (“IRS”) verification of loan applicants’ tax return information, the funding of orders by the Federal Emergency Management Agency (“FEMA”) as part of FEMA’s disaster relief efforts, and approvals by the FHA and other government agencies to fund or insure mortgage loans under programs that these agencies operate. As many of the Company’s home buyers use these programs to obtain financing to purchase its homes, and many lenders require ongoing coordination with these and other governmental entities to originate home loans, a prolonged delay in the performance of their activities could prevent prospective qualified buyers of its homes from obtaining the loans they need to complete such purchases, which could lead to delays or cancellations of home sales. These and other affected governmental bodies could cause interruptions in various aspects of the Company’s business and investments. Depending on the length of disruption, such factors could have a material adverse impact on the Company’s results of operations and financial condition.

~~Increases in the after-tax costs of owning a factory-built home could prevent potential customers from buying the Company’s products and adversely affect its business or financial results.~~

Significant expenses of owning a factory-built home, including mortgage interest expenses and real estate taxes, generally were, under prior tax law, deductible expenses for an individual’s federal, and in some cases state, income taxes, subject to certain limitations. The tax reform law (H.R. 1), commonly referred to as the “Tax Cuts and Jobs Act” (the “Tax Act”), was signed into law in December 2017. The Tax Act includes provisions that would impose limitations with respect to these income tax deductions. Increases in property tax rates or fees on developers by local governmental authorities, as experienced in response to reduced federal and state funding or to fund local initiatives, such as funding schools or road improvements, or increases in insurance premiums can adversely affect the ability of potential customers to obtain financing or their desire to purchase new homes, and can have an adverse impact on the Company’s business and financial results.

~~The transportation industry is subject to government regulation, and regulatory changes could have a material adverse effect on the Company’s operating results or financial condition.~~

The Company’s Star Fleet Trucking subsidiary provides transportation services. The transportation industry is subject to legislative or regulatory changes, including potential limits on carbon emissions under climate change legislation and Department of Transportation regulations regarding, among other things, driver breaks, classification of independent drivers, “restart” rules, and the use of electronic logging devices that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and cost of providing, transportation services. The Company may become subject to new or more restrictive regulations relating to fuel emissions or limits on vehicle weight and size. Future laws and regulations may be more stringent and require changes in operating practices, influence the demand for transportation services or increase the cost of providing transportation services, any of which could adversely affect the Company’s business and results of operations.

~~Natural disasters and severe weather conditions could delay deliveries, increase costs, and decrease demand for new factory-built homes in affected areas.~~

The Company’s operations are located in many areas that are subject to natural disasters and severe weather. The occurrence of natural disasters or severe weather conditions can delay factory-built home deliveries, increase costs by damaging inventories, reduce the availability of materials, and negatively impact the demand for new factory-built homes in affected areas. Furthermore, if the Company’s insurance does not fully cover business interruptions or losses resulting from these events, the Company’s earnings, liquidity, or capital resources could be adversely affected.

~~Changes in foreign exchange rates could adversely affect the value of the Company’s investments in Canada and cause foreign exchange losses related to intercompany loans.~~

~~The Company has substantial investments in businesses in Canada. Unfavorable changes in foreign exchange rates could adversely affect the value of the Company’s investments in these businesses.~~

Certain of the Company’s shareholders beneficially own a substantial amount of the Company’s common stock and have substantial control over the Company and their interests may conflict with or differ from your interests as a shareholder.

Affiliates of Bain Capital Credit, L.P., Centerbridge Partners, L.P. and MAK Capital (collectively, the “Principal Shareholders”) each beneficially owned more than 11.7% of the Company’s shares of common stock as of September 29, 2018 and six directors of the Company were designated by the Principal Shareholders pursuant to the investor rights agreement between the Company and the Principal Shareholders. Although we are no longer a “controlled company” under the New York Stock Exchange (“NYSE”) rules, the Principal Shareholders are still able to exert a significant degree of influence over the Company’s management and affairs and over matters requiring shareholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets and other significant business or corporate transactions.

The Principal Shareholders may have interests that are different from other shareholders and may vote in a way that is adverse to the interests of other shareholders. In addition, this concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of the Company, which could cause the market price of the Company’s common stock to decline or prevent our shareholders from realizing a premium over the market price for their shares.

Additionally, each of the Principal Shareholders is in the business of making investments in companies and may acquire and hold, and in a few instances have acquired and held, interests in businesses that compete directly or indirectly with the Company. One or more of the Principal Shareholders may also pursue acquisition opportunities that may be complementary to the Company’s business and, as a result, those acquisition opportunities may not be available to the Company.

Upon the completion of the secondary offering of our common stock on September 25, 2018, the Company is no longer a “controlled company” under NYSE rules. However, the Company will continue to qualify for, and may rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to our shareholders during a one-year transition period.

Following the completion of the secondary offering of our common stock on September 25, 2018, the Principal Shareholders ceased to control a majority of the voting power of our common stock. As a result, the Company is no longer a “controlled company” within the meaning of the NYSE corporate governance standards.

Consequently, the NYSE rules will require that the Company (i) have a majority of independent directors on its board of directors within one year after the date the Company no longer qualified as a “controlled company”; (ii) (A) have at least a majority of independent directors on each of the compensation and nominating and governance committees within 90 days after the date the Company no longer qualified as a “controlled company” and (B) have compensation and nominating and governance committees composed entirely of independent directors within one year of such date; and (iii) perform an annual performance evaluation of the compensation and nominating and governance committees.

During this transition period, we will continue to qualify for and may continue to utilize the available exemptions from certain corporate governance requirements as permitted by NYSE rules. Accordingly, during the transition period, you may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements, which could make our common stock less attractive to some investors or otherwise harm our stock price.

Anti-takeover provisions in the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws could prohibit a change of control that the Company’s shareholders may favor and could negatively affect the Company’s stock price.

In addition to the ~~Principal Shareholders’ beneficial ownership of a substantial percentage of~~other information set forth in this Report, you should carefully consider the Company’s common stock, the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws contain provisions that could make it more difficult and expensive for a third party to acquire control of the Company, even if a change of control would be beneficial to the interests of the Company’s shareholders. These provisions could discourage potential takeover attempts and could adversely affect the market price of the Company’s common stock. These provisions may also prevent or frustrate attempts by the Company’s shareholders to replace or remove the Company’s management. For example, the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws:

These provisions make it more difficult for shareholders or potential acquirers to acquire the Company without negotiation and could discourage potential takeover attempts and could adversely affect the market price of the Company’s common stock.

~~The integration of Skyline and Champion Holdings may not be successful or the anticipated benefits from their combination may not be realized~~factors described in ~~their entirety.~~

After the consummation of the Exchange contemplated by the Exchange Agreement, the Company’s management must integrate the operations, as well as financial and other systems of Skyline and Champion Holdings. The Company’s management will be required to devote a great deal of time and attention to the process of integrating the operations while carrying on the ongoing operations. A significant degree of difficulty and management involvement is inherentPart 1, Item 1A., “Risk Factors,” in ~~the integration process. The integration process includes but is not limited to:~~

There is no assurance that the Company will be successful or cost effective at integrating the two companies. The integration may cause an interruption of, or loss of momentum in the activities of the business after the consummation of the Exchange. If the Company’s management is unable to manage the integration process effectively, or any significant business activities are interrupted as a result of the integration process, the Company’s business, liquidity, financial condition and results of operations may be adversely impacted. Even if the Company is able to combine the two business operations successfully, it may not be possible to realize the full benefits of the expected synergies, which are expected to result from the Exchange, or realize these benefits within the time frame that is expected. For example, the benefits from the Exchange may be offset by costs incurred or delays in integrating the companies. If the Company fails to realize the benefits it anticipates from the Exchange, the business, liquidity, financial condition and results of operations may be adversely affected.

~~The loss of the services of members of~~ our ~~senior management, key employees or a significant amount of our operating employees could negatively affect our business.~~

Our success depends upon the skills, experience, and active participation of our senior management and key employees, including at our Titan Factory Direct and Star Fleet Trucking operations, many of whom have been with the Company for a significant number of years. If we were to lose members of our senior management or key employees, we might not be able to find appropriate replacements on a timely basis, and our operations could be negatively affected. Also, the loss of a significant number of operating employees in key roles or geographies for whom we are unable to hire qualified replacements could have a material adverse effect on our business.

~~The Company incurs substantial costs as a result of operating as a public company, and the Company’s management is required to devote substantial time to compliance initiatives.~~

As a public company, the Company currently incurs substantial legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, impose various requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. The Company’s management devotes both time and financial resources to these compliance initiatives.

If the Company fails to staff its accounting and finance functions adequately, or fails to maintain internal controls adequate to meet the demands that are placed upon it as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer. The costs of being a public company, as well as diversion of management’s time and attention, may have an adverse effect on the Company’s future business.

~~The Company’s failure to establish and maintain effective internal control over financial reporting could harm its business and financial results.~~

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud. Skyline identified a material weakness in its internal control over financial reporting as of May 31, 2017 as it relates to the accuracy and valuation of its inventory. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company has initiated remediation measures and these activities may divert management’s attention from other business concerns,Fiscal 2019 Annual Report, which could ~~have a material adverse effect on~~materially affect our business, financial condition ~~results of operations, and cash flows. If we are unable~~or future results. There have been no material changes to successfully remediate this material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements.

~~The Company does not anticipate paying any cash dividends for~~ the ~~foreseeable future.~~

~~The Company currently intends to retain our future earnings, if any, for the foreseeable future, to fund the development and growth of the Company’s business. As a result, capital appreciation~~disclosure on these matters set forth in the price of the Company’s common stock, if any, will be investors’ only source of gain on an investment in the Company’s common stock. Any future determination to pay dividends to shareholders will be at the sole discretion of the Company’s board of directors and will depend upon many factors, including general economic conditions, the Company’s financial condition and results of operations, the Company’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by the Company to its shareholders or by the Company’s subsidiaries to the Company and any other factors that the board of directors may deem relevant.

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 thereunto duly authorized.

Indiana		35-1038277
(State ~~or other jurisdiction~~ of ~~incorporation or organization)~~ Incorporation)		(I.R.S. Employer Identification No.)
P.O. Box 743
~~P.O. Box 743,~~ 2520 By-Pass Road
Elkhart, Indiana		46515
(Address of ~~principal executive offices)~~Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SKY	New York Stock Exchange

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of ~~September~~June 29, ~~2018~~2019 (unaudited) and March ~~31, 2018~~30, 2019	1
Condensed Consolidated Statements of Operations (unaudited) for the three months ended June 29, 2019 and June 30, 2018	2
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three ~~and six~~ months ended ~~September~~June 29, ~~2018~~2019 and ~~September 30, 2017~~June 30,2018	23
Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~six~~three months ended ~~September~~June 29, ~~2018~~2019 and ~~September~~June 30, ~~2017~~2018	34
Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity (unaudited) for the ~~six~~three months ended ~~September~~June 29, 2019 and June 30, 2018	4
~~Notes to Condensed Consolidated Financial Statements~~	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3324

Item 4. Controls and Procedures	3324

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	3425

Item 1A. Risk Factors	3425

Item 6. Exhibits	4326

SIGNATURES	4427

(Dollars in thousands)	June 29, 2019		March 30, 2019
Customer deposits and receipts in excess of revenues	$	24,780	$	28,392
Accrued volume rebates		17,561		21,020
Accrued warranty obligations		19,030		17,886
Accrued compensation and payroll taxes		25,142		32,075
Accrued insurance		18,192		16,245
Other		22,066		13,943
Total other current liabilities	$	126,771	$	129,561

(Dollars in thousands)	September 29, 2018		March 31, 2018
	(unaudited)
Customer deposits and receipts in excess of revenues	$	27,332	$	24,557
Accrued volume rebates		19,773		17,037
Accrued warranty obligations		17,171		12,530
Accrued compensation and payroll taxes		26,889		24,100
Accrued insurance		15,915		11,112
Other		12,656		10,776
Total other current liabilities	$	119,736	$	100,112


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐		~~Accelerated filer~~		☒
~~Non-accelerated filer~~		☐		~~Smaller reporting company~~		☐
				~~Emerging growth company~~		☐

	Members’ Contributed			Common Stock				Additional Paid in			Retained Earnings (Accumulated			Accumulated Other Comprehensive
	Capital			Shares		Amount		Capital			Deficit)			Loss			Total
Balance at April 1, 2018	$	140,076			—	$	—	$	—		$	22,514		$	(9,293	)	$	153,297
Members’ capital distributions		(42,763	)		—		—		—			(22,514	)		—			(65,277	)
Exchange of membership interest for shares of Skyline Champion Corporation		(97,313	)		56,143		1,555		380,923			—			—			285,165
Equity-based compensation		—			—		—		93,927			—			—			93,927
Common stock issued under equity-based compensation plans, net of shares withheld for employee taxes		—			570		16		(2,674	)		—			—			(2,658	)
Foreign currency translation adjustments		—			—		—		—			—			(107	)		(107	)
Net loss		—			—		—		—			(77,878	)		—			(77,878	)
Balance at September 29, 2018	$	—			56,713	$	1,571	$	472,176		$	(77,878	)	$	(9,400	)	$	386,469

	Six Months Ended September 29, 2018
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-built Housing		Corporate/ Other		Total
	(unaudited)
Manufacturing and retail	$	562,803	$	52,755	$	—	$	615,558
Commercial		9,936		—		—		9,936
Transportation		—		—		52,203		52,203
Total	$	572,739	$	52,755	$	52,203	$	677,697

(Dollars in thousands)	Three Months Ended June 29, 2019
Operating lease expense	$	1,405
Short-term lease expense		373
Total lease expense	$	1,778

(Dollars in thousands)	June 29, 2019
Right-of-use assets under operating leases:
Other long-term assets	$	13,185
Lease obligations under operating leases:
Other current liabilities		4,208
Other long-term liabilities		8,977
Total lease obligation	$	13,185

(Dollars in thousands)	June 29, 2019
Fiscal 2020 ⁽¹⁾	$	3,744
Fiscal 2021		3,891
Fiscal 2022		2,822
Fiscal 2023		2,035
Fiscal 2024		854
Thereafter		2,214
Total undiscounted cash flows		15,560
Less: imputed interest		(2,375	)
Lease obligations under operating leases	$	13,185

(Dollars in thousands)	Three Months Ended June 29, 2019
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations	$	854
Operating cash flows:
Cash paid related to operating lease obligations	$	1,534

Exhibit Number		Description

~~10.1~~		Skyline Champion Corporation 2018 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 27, 2018).*

31.1		Certification of Chief Executive Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

31.2		Certification of Chief Financial Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

101		The following financial information from Skyline Champion Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 29, ~~2018,~~2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September~~June 29, ~~2018~~2019 and March ~~31,~~30, 2019, (ii) Condensed Consolidated Statements of Operations for the three months ended June 29, 2019 and June 30, 2018, ~~(ii)~~(iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three ~~and six~~ months ended ~~September~~June 29, 2019 and June 30, 2018, ~~and September 30, 2017, (iii)~~(iv) Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~September~~June 29, 2019 and June 30, 2018 ~~and September 30, 2017, (iv)~~, (v) Condensed Consolidated Statements of Stockholders’ Equity for the ~~six~~three months ended ~~September~~June 29, 2019 and June 30, 2018 , and ~~(v)~~(vi) the Notes to the Condensed Consolidated Financial Statements. †

Signature	Title	Date

/s/ ~~Keith Anderson~~Mark Yost	Chief Executive Officer	~~November 8, 2018~~August 1, 2019
~~Keith Anderson~~Mark Yost	(Principal Executive Officer)

/s/ Laurie Hough	Executive Vice President, Chief Financial Officer, and Treasurer	~~November 8, 2018~~August 1, 2019
Laurie Hough	(Principal Financial Officer)