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Skyline Champion (SKY)

Filed: 3 Feb 22, 4:16pm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 1, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-04714

 

Skyline Champion Corporation

(Exact name of registrant as specified in its charter)

 

Indiana

 

35-1038277

(State of Incorporation)

 

(I.R.S. Employer Identification No.)

 

 

 

755 West Big Beaver Road, Suite 1000

 

 

Troy, Michigan

 

48084

(Address of Principal Executive Offices)

 

(Zip Code)

 

(248) 614-8211

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

SKY

 

New York Stock Exchange

 

Indicate by check mark whether the 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 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 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 filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Number of shares of common stock outstanding as of January 24, 2022: 56,827,132

 

 


 

SKYLINE CHAMPION CORPORATION

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of January 1, 2022 (unaudited) and April 3, 2021

1

Condensed Consolidated Income Statements (unaudited) for the three and nine months ended January 1, 2022 and December 26, 2020

2

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended January 1, 2022 and December 26, 2020

3

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 1, 2022 and December 26, 2020

4

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended January 1, 2022 and December 26, 2020

5

Notes to Condensed Consolidated Financial Statements

6

 

 

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

15

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

28

 

 

Item 4. Controls and Procedures

28

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

29

 

 

Item 6. Exhibits

30

 

 

SIGNATURES

31

 

i


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Skyline Champion Corporation

Condensed Consolidated Balance Sheets

(Dollars and shares in thousands, except per share amounts)

 

 

 

January 1,
2022

 

 

April 3,
2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

382,133

 

 

$

262,581

 

Trade accounts receivable, net

 

 

46,184

 

 

 

57,481

 

Inventories, net

 

 

185,052

 

 

 

166,113

 

Other current assets

 

 

21,340

 

 

 

13,592

 

Total current assets

 

 

634,709

 

 

 

499,767

 

Long-term assets:

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

127,196

 

 

 

115,140

 

Goodwill

 

 

191,970

 

 

 

191,803

 

Amortizable intangible assets, net

 

 

53,171

 

 

 

58,835

 

Deferred tax assets

 

 

14,304

 

 

 

19,914

 

Other noncurrent assets

 

 

46,801

 

 

 

32,443

 

Total assets

 

$

1,068,151

 

 

$

917,902

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Floor plan payable

 

$

34,315

 

 

$

25,733

 

Accounts payable

 

 

44,200

 

 

 

57,214

 

Other current liabilities

 

 

205,094

 

 

 

180,695

 

Total current liabilities

 

 

283,609

 

 

 

263,642

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

12,430

 

 

 

39,330

 

Deferred tax liabilities

 

 

4,615

 

 

 

4,280

 

Other liabilities

 

 

34,119

 

 

 

42,039

 

Total long-term liabilities

 

 

51,164

 

 

 

85,649

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.0277 par value, 115,000 shares authorized, 56,827 and 56,640 shares issued as of January 1, 2022 and April 3, 2021, respectively

 

 

1,572

 

 

 

1,569

 

Additional paid-in capital

 

 

498,898

 

 

 

491,668

 

Retained earnings

 

 

241,135

 

 

 

82,898

 

Accumulated other comprehensive loss

 

 

(8,227

)

 

 

(7,524

)

Total stockholders’ equity

 

 

733,378

 

 

 

568,611

 

Total liabilities and stockholders’ equity

 

$

1,068,151

 

 

$

917,902

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

1


 

Skyline Champion Corporation

Condensed Consolidated Income Statements

(Unaudited, dollars in thousands, except per share amounts)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

January 1,
2022

 

 

December 26,
2020

 

 

January 1,
2022

 

 

December 26,
2020

 

Net sales

 

$

534,690

 

 

$

377,581

 

 

$

1,569,112

 

 

$

973,232

 

Cost of sales

 

 

377,451

 

 

 

305,797

 

 

 

1,171,016

 

 

 

784,652

 

Gross profit

 

 

157,239

 

 

 

71,784

 

 

 

398,096

 

 

 

188,580

 

Selling, general, and administrative expenses

 

 

65,825

 

 

 

44,286

 

 

 

181,188

 

 

 

126,466

 

Operating income

 

 

91,414

 

 

 

27,498

 

 

 

216,908

 

 

 

62,114

 

Interest expense, net

 

 

508

 

 

 

795

 

 

 

2,002

 

 

 

2,601

 

Other expense (income)

 

 

7

 

 

 

(180

)

 

 

(36

)

 

 

(6,993

)

Income before income taxes

 

 

90,899

 

 

 

26,883

 

 

 

214,942

 

 

 

66,506

 

Income tax expense

 

 

23,277

 

 

 

5,284

 

 

 

53,696

 

 

 

15,493

 

Net income

 

$

67,622

 

 

$

21,599

 

 

$

161,246

 

 

$

51,013

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.19

 

 

$

0.38

 

 

$

2.84

 

 

$

0.90

 

Diluted

 

$

1.18

 

 

$

0.38

 

 

$

2.81

 

 

$

0.90

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

2


 

Skyline Champion Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, dollars in thousands)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

January 1,
2022

 

 

December 26,
2020

 

 

January 1,
2022

 

 

December 26,
2020

 

Net income

 

$

67,622

 

 

$

21,599

 

 

$

161,246

 

 

$

51,013

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(61

)

 

 

2,151

 

 

 

(703

)

 

 

4,107

 

Total comprehensive income

 

$

67,561

 

 

$

23,750

 

 

$

160,543

 

 

$

55,120

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

3


 

Skyline Champion Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)

 

 

 

Nine months ended

 

 

 

January 1,
2022

 

 

December 26,
2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

161,246

 

 

$

51,013

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

9,869

 

 

 

8,994

 

Amortization of intangible assets

 

 

5,664

 

 

 

4,082

 

Amortization of deferred financing fees

 

 

599

 

 

 

380

 

Equity-based compensation

 

 

6,134

 

 

 

4,625

 

Deferred taxes

 

 

5,942

 

 

 

3,251

 

Loss (gain) on disposal of property, plant, and equipment

 

 

696

 

 

 

(75

)

Foreign currency transaction loss (gain)

 

 

55

 

 

 

(421

)

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

11,419

 

 

 

4,577

 

Inventories

 

 

(19,133

)

 

 

(3,388

)

Prepaids and other assets

 

 

(22,954

)

 

 

(2,239

)

Accounts payable

 

 

(13,076

)

 

 

(284

)

Accrued expenses and other liabilities

 

 

17,945

 

 

 

33,301

 

Net cash provided by operating activities

 

 

164,406

 

 

 

103,816

 

Cash flows from investing activities

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(22,784

)

 

 

(4,235

)

Cash paid for acquisition

 

 

(207

)

 

 

 

Proceeds from maturity of Company owned life insurance policy

 

 

 

 

 

1,186

 

Proceeds from disposal of property, plant, and equipment

 

 

70

 

 

 

1,836

 

Net cash used in investing activities

 

 

(22,921

)

 

 

(1,213

)

Cash flows from financing activities

 

 

 

 

 

 

Changes in floor plan financing, net

 

 

8,583

 

 

 

(8,318

)

Payments on deferred financing fees

 

 

(1,130

)

 

 

 

Payments on revolving debt facility

 

 

(26,900

)

 

 

(38,000

)

Stock option exercises

 

 

1,099

 

 

 

67

 

Tax payments for equity-based compensation

 

 

(3,007

)

 

 

(1,687

)

Net cash used in financing activities

 

 

(21,355

)

 

 

(47,938

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(578

)

 

 

2,940

 

Net increase in cash and cash equivalents

 

 

119,552

 

 

 

57,605

 

Cash and cash equivalents at beginning of period

 

 

262,581

 

 

 

209,455

 

Cash and cash equivalents at end of period

 

$

382,133

 

 

$

267,060

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

4


 

Skyline Champion Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars and shares in thousands)

 

 

 

Three months ended January 1, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total

 

Balance at October 2, 2021

 

 

56,796

 

 

$

1,572

 

 

$

496,059

 

 

$

173,513

 

 

$

(8,166

)

 

$

662,978

 

Net income

 

 

 

 

 

 

 

 

 

 

 

67,622

 

 

 

 

 

 

67,622

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,921

 

 

 

 

 

 

 

 

 

1,921

 

Net common stock issued under equity-based compensation plans

 

 

31

 

 

 

 

 

 

918

 

 

 

 

 

 

 

 

 

918

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61

)

 

 

(61

)

Balance at January 1, 2022

 

 

56,827

 

 

$

1,572

 

 

$

498,898

 

 

$

241,135

 

 

$

(8,227

)

 

$

733,378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended January 1, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total

 

Balance at April 3, 2021

 

 

56,640

 

 

$

1,569

 

 

$

491,668

 

 

$

82,898

 

 

$

(7,524

)

 

$

568,611

 

Net income

 

 

 

 

 

 

 

 

 

 

 

161,246

 

 

 

 

 

 

161,246

 

Equity-based compensation

 

 

 

 

 

 

 

 

6,134

 

 

 

 

 

 

 

 

 

6,134

 

Net common stock issued under equity-based compensation plans

 

 

187

 

 

 

3

 

 

 

1,096

 

 

 

(3,009

)

 

 

 

 

 

(1,910

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(703

)

 

 

(703

)

Balance at January 1, 2022

 

 

56,827

 

 

$

1,572

 

 

$

498,898

 

 

$

241,135

 

 

$

(8,227

)

 

$

733,378

 

 

 

 

 

 

 

Three months ended December 26, 2020

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total

 

Balance at September 26, 2020

 

 

56,638

 

 

$

1,569

 

 

$

487,557

 

 

$

29,121

 

 

$

(10,803

)

 

$

507,444

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,599

 

 

 

 

 

 

21,599

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,001

 

 

 

 

 

 

 

 

 

1,001

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,151

 

 

 

2,151

 

Balance at December 26, 2020

 

 

56,638

 

 

$

1,569

 

 

$

488,558

 

 

$

50,720

 

 

$

(8,652

)

 

$

532,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended December 26, 2020

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total

 

Balance at March 28, 2020

 

 

56,665

 

 

$

1,570

 

 

$

485,552

 

 

$

(48

)

 

$

(12,759

)

 

$

474,315

 

Net income

 

 

 

 

 

 

 

 

 

 

 

51,013

 

 

 

 

 

 

51,013

 

Equity-based compensation

 

 

 

 

 

 

 

 

4,625

 

 

 

 

 

 

 

 

 

4,625

 

Cumulative adjustment for adoption of ASU 2016-13

 

 

 

 

 

 

 

 

 

 

 

(245

)

 

 

 

 

 

(245

)

Net common stock issued under equity-based compensation plans

 

 

(27

)

 

 

(1

)

 

 

(1,619

)

 

 

 

 

 

 

 

 

(1,620

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,107

 

 

 

4,107

 

Balance at December 26, 2020

 

 

56,638

 

 

$

1,569

 

 

$

488,558

 

 

$

50,720

 

 

$

(8,652

)

 

$

532,195

 

 

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

See accompanying Notes to Condensed Consolidated Financial Statements.

5


 

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements

 

1. Basis of Presentation and Business

Nature of Operations: Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the United States (“U.S.”) and Canada. The Company’s operations consist of manufacturing, retail, and transportation activities. The Company operates 35 manufacturing facilities throughout the U.S. and 5 manufacturing facilities in western Canada. These facilities primarily construct factory-built, timber-framed manufactured, and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 18 sales centers that sell manufactured houses to consumers primarily in the Southern U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles and other products throughout the U.S. and Canada.

COVID-19 Government Financial Assistance: The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. Various government programs were announced to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and state level programs in the United States and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. The Company recognized $0.2 million and $7.0 million of subsidies under these programs during the three and nine months ended December 26, 2020, respectively. The Company’s policy is to account for these subsidies as Other Income in the period in which the related costs are incurred and the Company is reasonably assured to receive payment. In addition, the CARES Act allows for deferring payment of certain payroll taxes. Through December 2020 the Company deferred $11.8 million of payroll taxes. The Company paid $5.9 million of the deferred payroll taxes in the third quarter of fiscal 2022, with the remaining amount expected to be paid in December 2022.

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (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 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 in the Company’s Annual Report on Form 10-K, which was filed with the SEC on May 26, 2021 (the “Fiscal 2021 Annual Report”).

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 income statements, condensed consolidated statements of comprehensive income, 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 allowance for credit losses on financial assets measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current economic conditions and forecasts that affect the collectability of the reported amount. Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings. Accounts receivable are reflected net of reserves of $1.0 million and $0.4 million at January 1, 2022 and April 3, 2021, respectively. At both January 1, 2022 and April 3, 2021, other notes receivable are reflected net of reserves of $0.4 million.

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 2022,” will end on April 2, 2022 and will include 52 weeks. References to “fiscal 2021” refer to the Company’s fiscal year ended April 3, 2021. The three and nine months ended January 1, 2022 and December 26, 2020 each included 13 and 39 weeks, respectively.

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

 

6


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

2. Business Acquisition

 

ScotBilt Acquisition

 

On February 28, 2021, the Company acquired 100% of the membership interests of ScotBilt Homes, LLC and related companies (“ScotBilt”), a builder of manufactured homes with annual revenues of approximately $79.0 million, for a purchase price of $53.0 million. Under the terms of the purchase agreement, the preliminary purchase price was adjusted for cash held by ScotBilt at the closing date and working capital adjustments resulting in an initial total purchase consideration of $54.5 million. In the first quarter of fiscal 2022, the Company reduced the preliminary purchase price allocation by $0.2 million as a result of the final working capital settlement. The Company accounted for the acquisition as a business combination under the acquisition method of accounting provided by FASB ASC 805, Business Combinations (“ASC 805”). As such, the purchase price was allocated to the net assets acquired, inclusive of intangible assets, with the excess fair value recorded to goodwill. The purchase price allocation for this acquisition is preliminary and could change.

 

The preliminary allocation of the purchase price was as follows:
 

(Dollars in thousands)

 

 

 

Cash

 

$

1,521

 

Trade accounts receivable

 

 

2,256

 

Inventory

 

 

6,752

 

Property, plant, and equipment

 

 

10,466

 

Other assets

 

 

1,164

 

Accounts payable and accrued liabilities

 

 

(7,432

)

Intangibles

 

 

21,100

 

Goodwill

 

 

18,449

 

Total purchase price allocation

 

$

54,276

 

 

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 deductible for income tax purposes, was allocated to the U.S. Factory-built Housing reporting unit.

 

Cash, trade accounts receivable, inventory, other assets, accounts payable, and accrued liabilities were generally stated at historical carrying values given the short-term nature of these assets and liabilities. Intangible assets include $13.0 million in customer relationships and $8.1 million associated with the ScotBilt trade name and were based on an independent appraisal. The fair value of the customer relationships was determined using the multi-period excess earnings method and the fair value of the trade name was determined using the relief-from-royalty method. The Company estimates that each intangible asset has a weighted average useful life of ten years from the acquisition date. Fair value estimates of property, plant, and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals were based on a combination of market, cost, and sales comparison approaches, as appropriate. Level 3 fair value estimates of $10.5 million related to property, plant, and equipment and $21.1 million related to intangible assets were recorded in the accompanying consolidated balance sheet as of April 3, 2021.

 

The acquisition of ScotBilt was a taxable business combination. Therefore, the Company’s tax basis in the assets acquired and the liabilities assumed approximate the respective fair values at the acquisition date.

3. Inventories, net

The components of inventory, net of reserves for obsolete inventory, were as follows:

 

(Dollars in thousands)

 

January 1,
2022

 

 

April 3,
2021

 

Raw materials

 

$

108,370

 

 

$

91,916

 

Work in process

 

 

22,644

 

 

 

21,642

 

Finished goods and other

 

 

54,038

 

 

 

52,555

 

Total inventories, net

 

$

185,052

 

 

$

166,113

 

 

At January 1, 2022 and April 3, 2021, reserves for obsolete inventory were $4.4 million and $4.6 million, respectively.

 

 

7


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

4. Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is calculated primarily on a straight-line basis, 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 for the three months ended January 1, 2022 and December 26, 2020 was $3.3 million and $3.0 million, respectively. Depreciation expense for the nine months ended January 1, 2022 and December 26, 2020 was $9.9 million and $9.0 million, respectively.

The components of property, plant, and equipment were as follows:

 

(Dollars in thousands)

 

January 1,
2022

 

 

April 3,
2021

 

Land and improvements

 

$

39,411

 

 

$

36,470

 

Buildings and improvements

 

 

97,206

 

 

 

97,005

 

Machinery and equipment

 

 

64,286

 

 

 

57,790

 

Construction in progress

 

 

13,913

 

 

 

1,889

 

Property, plant, and equipment, at cost

 

 

214,816

 

 

 

193,154

 

Less: accumulated depreciation

 

 

(87,620

)

 

 

(78,014

)

Property, plant, and equipment, net

 

$

127,196

 

 

$

115,140

 

 

5. Goodwill, Intangible Assets, and Cloud Computing Arrangements

Goodwill

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 January 1, 2022 and April 3, 2021, the Company had goodwill of $192.0 million and $191.8 million, respectively.

Intangible Assets

The components of amortizable intangible assets were as follows:

 

(Dollars in thousands)

 

January 1, 2022

 

 

April 3, 2021

 

 

 

Customer
Relationships

 

 

Trade
Names

 

 

Total

 

 

Customer
Relationships

 

 

Trade
Names

 

 

Total

 

Gross carrying amount

 

$

61,913

 

 

$

21,389

 

 

$

83,302

 

 

$

61,963

 

 

$

21,409

 

 

$

83,372

 

Accumulated amortization

 

 

(22,336

)

 

 

(7,795

)

 

 

(30,131

)

 

 

(18,158

)

 

 

(6,379

)

 

$

(24,537

)

Amortizable intangibles, net

 

$

39,577

 

 

$

13,594

 

 

$

53,171

 

 

$

43,805

 

 

$

15,030

 

 

$

58,835

 

 

During the three months ended January 1, 2022 and December 26, 2020, amortization of intangible assets was $1.9 million and $1.4 million, respectively. During the nine months ended January 1, 2022 and December 26, 2020, amortization of intangible assets was $5.7 million and $4.1 million, respectively.

Cloud Computing Arrangements

The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed software. At January 1, 2022 and April 3, 2021, the Company had capitalized cloud computing costs of $15.7 million and $0.3 million, respectively. Cloud computing costs are included in other noncurrent assets in the accompanying Consolidated Balance Sheets. There was 0 amortization of capitalized cloud computing costs during the three and nine months ended January 1, 2022 and December 26, 2020 as the related systems have not yet been placed in service.

 

 

 

8


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

6. Other Current Liabilities

The components of other current liabilities were as follows:

 

(Dollars in thousands)

 

January 1,
2022

 

 

April 3,
2021

 

Customer deposits

 

$

65,114

 

 

$

58,888

 

Accrued volume rebates

 

 

24,849

 

 

 

18,207

 

Accrued warranty obligations

 

 

24,508

 

 

 

24,033

 

Accrued compensation and payroll taxes

 

 

50,149

 

 

 

42,560

 

Accrued insurance

 

 

17,455

 

 

 

12,421

 

Other

 

 

23,019

 

 

 

24,586

 

Total other current liabilities

 

$

205,094

 

 

$

180,695

 

 

7. Accrued Warranty Obligations

Changes in the accrued warranty obligations were as follows:

 

 

 

Three months ended

 

 

Nine months ended

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

January 1,
2022

 

 

December 26,
2020

 

Balance at beginning of period

 

$

31,855

 

 

$

24,460

 

 

$

30,469

 

 

$

24,969

 

Warranty expense

 

 

9,146

 

 

 

9,863

 

 

 

30,330

 

 

 

24,616

 

Cash warranty payments

 

 

(10,057

)

 

 

(8,808

)

 

 

(29,855

)

 

 

(24,070

)

Balance at end of period

 

 

30,944

 

 

 

25,515

 

 

 

30,944

 

 

 

25,515

 

Less: noncurrent portion in other long-term liabilities

 

 

(6,436

)

 

 

(5,790

)

 

 

(6,436

)

 

 

(5,790

)

Total current portion

 

$

24,508

 

 

$

19,725

 

 

$

24,508

 

 

$

19,725

 

 

8. Debt and Floor Plan Payable

Long-term debt consisted of the following:

 

(Dollars in thousands)

 

January 1,
2022

 

 

April 3,
2021

 

Revolving credit facility maturing in 2026

 

$

 

 

$

26,900

 

Obligations under industrial revenue bonds due 2029

 

 

12,430

 

 

 

12,430

 

Total debt

 

 

12,430

 

 

 

39,330

 

Less: current portion

 

 

 

 

 

 

Total long-term debt

 

$

12,430

 

 

$

39,330

 

 

On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement with a syndicate of banks that provides for a revolving credit facility of up to $200.0 million, including a $45.0 million letter of credit sub-facility (“Amended Credit Agreement”). The Amended Credit Agreement replaced the Company’s previously existing $100.0 million revolving credit facility. Outstanding borrowings of $26.9 million on the Company’s previous revolving credit facility were repaid in July 2021. The Amended Credit Agreement allows the Company to draw down, repay and re-draw loans on the available funds during the term, subject to certain terms and conditions, matures in July 2026 and has no scheduled amortization. The Company capitalized $1.1 million of deferred financing fees associated with the Amended Credit Agreement, which is included in other noncurrent assets on the accompanying consolidated balance sheets. The Company wrote off $0.3 million of deferred financing fees associated with the previously existing credit facility, which is included in interest expense, net for the nine months ended January 1, 2022.

The interest rate on borrowings under the Amended Credit Agreement adjusts based on the consolidated total net leverage of the Company from a high of LIBOR plus 1.875% and ABR plus 0.875%, at the election of the Company, when the consolidated total net leverage ratio is equal to or greater than 2.25:1.00, to a low of LIBOR plus 1.125% and ABR plus 0.125% when the consolidated total net leverage is below 0.50:1.00. In addition, the Company is obligated to pay an unused line fee ranging between 0.15% and 0.3% (depending on the consolidated total net leverage ratio) in respect of unused commitments under the Amended Credit Agreement. At January 1, 2022 the interest rate under the Amended Credit Agreement was 1.23%. At January 1, 2022, letters of credit issued under the Amended Credit Agreement totaled $30.4 million and total available borrowings were $169.6 million.

 

9


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

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 January 1, 2022, including related costs and fees, was 1.78%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029.

 

The Amended 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 Amended Credit Agreement as of January 1, 2022.

Floor Plan Payable

The Company’s retail operations utilize floor plan financing to fund the purchase of manufactured homes for display or resale. At January 1, 2022 and April 3, 2021, the Company had outstanding borrowings on floor plan financing agreements of $34.3 million and $25.7 million, respectively. Total credit line capacity provided under the agreements was $57.0 million as of January 1, 2022. Borrowings are secured by the financed homes and are required to be repaid when the Company sells a financed home to a customer.

 

10


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

9. Revenue Recognition

The following tables disaggregate the Company’s revenue by sales category for the three and nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Three months ended January 1, 2022

 

(Dollars in thousands)

 

U.S.
Factory-Built
Housing

 

 

Canadian
Factory-Built
Housing

 

 

Corporate/
Other

 

 

Total

 

 

 

 

 

Manufacturing and retail

 

$

478,838

 

 

$

36,910

 

 

$

 

 

$

515,748

 

Commercial

 

 

5,481

 

 

 

 

 

 

 

 

 

5,481

 

Transportation

 

 

 

 

 

 

 

 

13,461

 

 

 

13,461

 

Total

 

$

484,319

 

 

$

36,910

 

 

$

13,461

 

 

$

534,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended January 1, 2022

 

(Dollars in thousands)

 

U.S.
Factory-Built
Housing

 

 

Canadian
Factory-Built
Housing

 

 

Corporate/
Other

 

 

Total

 

 

 

 

 

Manufacturing and retail

 

$

1,403,856

 

 

$

113,242

 

 

$

 

 

$

1,517,098

 

Commercial

 

 

9,482

 

 

 

 

 

 

 

 

 

9,482

 

Transportation

 

 

 

 

 

 

 

 

42,532

 

 

 

42,532

 

Total

 

$

1,413,338

 

 

$

113,242

 

 

$

42,532

 

 

$

1,569,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 26, 2020

 

(Dollars in thousands)

 

U.S.
Factory-Built
Housing

 

 

Canadian
Factory-Built
Housing

 

 

Corporate/
Other

 

 

Total

 

 

 

 

 

Manufacturing and retail

 

$

332,200

 

 

$

26,351

 

 

$

 

 

$

358,551

 

Commercial

 

 

4,158

 

 

 

 

 

 

 

 

 

4,158

 

Transportation

 

 

 

 

 

 

 

 

14,872

 

 

 

14,872

 

Total

 

$

336,358

 

 

$

26,351

 

 

$

14,872

 

 

$

377,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended December 26, 2020

 

(Dollars in thousands)

 

U.S.
Factory-Built
Housing

 

 

Canadian
Factory-Built
Housing

 

 

Corporate/
Other

 

 

Total

 

 

 

 

 

Manufacturing and retail

 

$

857,028

 

 

$

66,104

 

 

$

 

 

$

923,132

 

Commercial

 

 

11,549

 

 

 

 

 

 

 

 

 

11,549

 

Transportation

 

 

 

 

 

 

 

 

38,551

 

 

 

38,551

 

Total

 

$

868,577

 

 

$

66,104

 

 

$

38,551

 

 

$

973,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

10. Income Taxes

For the three months ended January 1, 2022 and December 26, 2020, the Company recorded $23.3 million and $5.3 million of income tax expense and had an effective tax rate of 25.6% and 19.7%, respectively. For the nine months ended January 1, 2022 and December 26, 2020, the Company recorded $53.7 million and $15.5 million of income tax expense and had an effective tax rate of 25.0% and 23.3%, respectively. During the three months ended December 26, 2020, the Company completed a U.S. research and development ("R&D") tax credit study for the years 2018 and 2019 that resulted in the recognition of a tax benefit of $1.7 million.

The Company’s effective tax rate for the three and nine months ended January 1, 2022 differs from the federal statutory rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the three and nine months ended December 26, 2020 differs from the federal statutory rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits (including the $1.7 million R&D credit), and results in foreign jurisdictions.

At January 1, 2022, the Company had 0 unrecognized tax benefits. The Company does not anticipate any material changes to uncertain tax benefits in the next twelve months. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense.

 

11. Earnings Per Share

Basic net income per share (“EPS”) attributable to the Company was computed by dividing net income attributable to the Company by the average number of common shares outstanding during the period. Certain of the Company’s time-based restricted share awards were considered participating securities prior to the completion of the vesting period. The vesting for these time-based shares occurred in the second quarter of fiscal 2021. Diluted earnings per common share is computed based on the more dilutive 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 nine months ended December 26, 2020, the two-class method was more dilutive. The two-class method was not applicable to the computation for the three months ended December 26,2020, or any subsequent periods, as the time-vested restricted share awards were fully vested and no longer considered participating securities.

 

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

 

 

 

Three months ended

 

Nine months ended

 

(Dollars and shares in thousands, except per share data)

 

January 1,
2022

 

 

December 26,
2020

 

 

January 1,
2022

 

 

December 26,
2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

67,622

 

 

$

21,599

 

 

$

161,246

 

 

$

51,013

 

Undistributed earnings allocated to participating securities

 

 

 

 

 

 

 

 

 

 

 

(62

)

Net income attributable to the Company's common shareholders

 

$

67,622

 

 

$

21,599

 

 

$

161,246

 

 

$

50,951

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

 

56,847

 

 

 

56,702

 

 

 

56,787

 

 

 

56,630

 

Dilutive securities

 

 

491

 

 

 

288

 

 

 

498

 

 

 

253

 

Diluted weighted-average shares outstanding

 

 

57,338

 

 

 

56,990

 

 

 

57,285

 

 

 

56,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

1.19

 

 

$

0.38

 

 

$

2.84

 

 

$

0.90

 

Diluted net income per share

 

$

1.18

 

 

$

0.38

 

 

$

2.81

 

 

$

0.90

 

 

 

 

12


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

 

12. Segment Information

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 segments primarily based on net sales, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and operating assets.

The Company operates in 2 reportable segments: (i) U.S. Factory-built Housing, which includes manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, corporate costs 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. Total assets for Corporate/Other primarily includes cash and certain deferred tax items not specifically allocated to another segment.

 

Selected financial information by reportable segment was as follows:

 

 

 

Three months ended

 

 

Nine months ended

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

January 1,
2022

 

 

December 26,
2020

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

484,319

 

 

$

336,358

 

 

$

1,413,338

 

 

$

868,577

 

Canadian Factory-built Housing

 

 

36,910

 

 

 

26,351

 

 

 

113,242

 

 

 

66,104

 

Corporate/Other

 

 

13,461

 

 

 

14,872

 

 

 

42,532

 

 

 

38,551

 

Consolidated net sales

 

$

534,690

 

 

$

377,581

 

 

$

1,569,112

 

 

$

973,232

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing EBITDA

 

$

98,724

 

 

$

35,538

 

 

$

239,816

 

 

$

88,628

 

Canadian Factory-built Housing EBITDA

 

 

7,571

 

 

 

2,933

 

 

 

19,627

 

 

 

13,790

 

Corporate/Other EBITDA

 

 

(9,638

)

 

 

(6,407

)

 

 

(26,966

)

 

 

(20,235

)

Other income

 

 

7

 

 

 

(180

)

 

 

(36

)

 

 

(6,993

)

Depreciation

 

 

(3,348

)

 

 

(3,025

)

 

 

(9,869

)

 

 

(8,994

)

Amortization

 

 

(1,902

)

 

 

(1,361

)

 

 

(5,664

)

 

 

(4,082

)

Consolidated operating income

 

$

91,414

 

 

$

27,498

 

 

$

216,908

 

 

$

62,114

 

Depreciation:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

2,706

 

 

$

2,378

 

 

$

7,935

 

 

$

7,167

 

Canadian Factory-built Housing

 

 

279

 

 

 

246

 

 

 

837

 

 

 

609

 

Corporate/Other

 

 

363

 

 

 

401

 

 

 

1,097

 

 

 

1,218

 

Consolidated depreciation

 

$

3,348

 

 

$

3,025

 

 

$

9,869

 

 

$

8,994

 

Amortization of U.S. Factory-built Housing intangible assets:

 

$

1,902

 

 

$

1,361

 

 

$

5,664

 

 

$

4,082

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

6,799

 

 

$

1,234

 

 

$

19,070

 

 

$

3,173

 

Canadian Factory-built Housing

 

 

248

 

 

 

312

 

 

 

589

 

 

 

554

 

Corporate/Other

 

 

632

 

 

 

137

 

 

 

3,125

 

 

 

508

 

Consolidated capital expenditures

 

$

7,679

 

 

$

1,683

 

 

$

22,784

 

 

$

4,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

January 1,
2022

 

 

April 3,
2021

 

Total Assets:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing (1)

 

 

 

 

 

 

 

$

586,047

 

 

$

578,897

 

Canadian Factory-built Housing (1)

 

 

 

 

 

 

 

 

94,891

 

 

 

87,224

 

Corporate/Other (1)

 

 

 

 

 

 

 

 

387,213

 

 

 

251,781

 

Consolidated total assets

 

 

 

 

 

 

 

$

1,068,151

 

 

$

917,902

 

 

 

13


Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

 

 

(1)
Deferred tax assets for the Canadian operations are reflected in the Canadian Factory-built Housing segment. U.S. deferred tax assets are presented in Corporate/Other because an allocation between segments is not practicable. 

 

 

13. Commitments, Contingencies and Legal Proceedings

Repurchase Contingencies and Guarantees

The Company is contingently liable under terms of repurchase agreements with lending institutions that provide wholesale floor plan financing to retailers. These arrangements, which are customary in the manufactured housing industry, provide for the repurchase of products sold to retailers in the event of default by the retailer on its 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 original sales price of the product less contractually defined curtailment payments. Excluding the resale value of the homes, the contingent repurchase obligation as of January 1, 2022 was estimated to be $281.7 million. 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. In addition, the Company has estimated the expected contingent net loss the Company will incur upon resale of any repurchases. These estimates are based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting retailers for which the Company has a contingent repurchase obligation. Based on these repurchase agreements and historical loss experience, as well as current economic conditions and forecasts that affect the potential loss exposure, a loss reserve of $1.8 million and $1.4 million was recorded as of January 1, 2022 and April 3, 2021, respectively. Losses incurred on homes repurchased were not significant during the three or nine months ended January 1, 2022 or December 26, 2020.

At January 1, 2022, the Company was contingently obligated for $30.4 million under letters of credit, primarily consisting of $12.6 million to support long-term debt, $17.5 million to support the casualty insurance program, and $0.3 million to support bonding agreements. The letters of credit are issued from a sub-facility of the Amended Credit Agreement. The Company was also contingently obligated for $35.6 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, the Company expects few, if any, claims to be reported under the terms of the guarantees.

Legal Proceedings

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.

 

 

14


 

Item 2. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with Skyline Champion Corporation’s condensed consolidated financial statements and the related notes that appear in Item 1 of this Report.

Overview

Skyline Champion Corporation (the “Company”) is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured offsite construction, company-owned retail locations, and transportation logistics services. The Company is the largest independent publicly traded factory-built solutions provider in North America (based on revenue) and markets its homes under several nationally recognized brand names including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 35 manufacturing facilities throughout the U.S. and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold mainly to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 18 sales centers that sell manufactured homes to consumers primarily in the southern U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

 

Industry and Company Outlook

 

Since July 2020, U.S. and Canadian housing demand has been robust. The limited availability of existing homes for sale and the broader need for newly built affordable, single-family housing has continued to drive demand for new homes in these markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the U.S., including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time home buyers, and the population of households earning less than $60,000 per year. We have also seen a number of market trends pointing to increased sales of accessory dwelling units and urban-to-rural migration as customers accommodate working-from-home patterns, as well as people seeking rent-to-own single-family options.

 

The robust demand environment has resulted in backlog of $1.5 billion as of January 1, 2022 compared to $488.5 million as of December 26, 2020. Generally higher backlog at our manufacturing facilities creates an opportunity to increase production efficiencies. Although the higher demand brings opportunities, it also has resulted in significant increases in raw material and labor costs. In addition, we are experiencing intermittent supply disruption and higher freight costs. Finding and retaining qualified labor continues to be a challenge for our plants which requires us to review our compensation programs and adjust accordingly. We manage our business to anticipate or quickly react to these supply challenges and cost increases and generally are able to pass along increased costs to our customers. Historically, order cancellation rates have been very low, but the longer lead-time caused by larger backlogs and changing prices could result in higher cancellations in future periods.

 

For the nine months ended January 1, 2022, approximately 78% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the U.S. Department of Housing and Urban Development ("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the Manufactured Housing Institute ("MHI"), HUD-code industry home shipments were 71,281 and 61,492 units during the eight months ended November 30, 2021 and 2020, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 19.4% and 16.2%, for the eight months ended November 30, 2021 and 2020, respectively. Annual shipments have generally increased each year since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, current manufactured housing shipments are still at lower levels than the long-term historical average of over 200,000 units a year.

 

Acquisitions and Expansions

Over the last several years, demand for the Company’s products, primarily affordable housing in the U.S., has continued to improve. As a result, the Company has focused on operational improvements to make existing manufacturing facilities more profitable as well as executing measured expansion of its manufacturing and retail footprints. The Company has increased capacity through strategic acquisitions and expansions of its manufacturing operations. The Company is focused on growing in strong housing markets across the U.S.

On June 21, 2021, the Company acquired two idle facilities in Navasota, Texas in order to strengthen its production capabilities in the Texas market. The Company began certification of the manufacturing operations at one of these facilities in the third quarter of fiscal 2022, and expects to begin delivering products from that facility in the fourth fiscal quarter. On February 28, 2021, the Company acquired ScotBilt, which operates two manufacturing facilities in Georgia that provide affordable housing throughout Alabama, Florida, Georgia and the Carolinas. The operations of ScotBilt are included in the financial results of the Company since the date of the acquisition. On January 14, 2021, the Company

 

15


 

acquired two idled facilities in Pembroke, North Carolina, which provides an opportunity to further expand its manufacturing footprint in the South and Southeast markets. The Company is currently assessing prospects for initiating production in one or both of these facilities.

The Company's acquisitions and investments are part of a strategy to grow and diversify revenue with a focus on increasing the Company’s HUD and modular homebuilding presence in the U.S. as well as improving the results of operations. These acquisitions and investments are included in the Company's consolidated results for periods subsequent to their respective acquisition dates.

COVID-19 Pandemic

The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. There remains continued uncertainty regarding the extent and duration of the impact that the COVID-19 pandemic will have on the economy, the housing market, and the Company, as well as the Company’s employees, customers, and suppliers.

The Company has prioritized the safety and well-being of its employees and customers and has implemented standards to operate in accordance with social-distancing protocols and public health authority guidelines. Beginning in March 2020, the Company took actions to temporarily idle certain facilities in response to government shutdown orders or reduced demand. By late April 2020, most of the temporarily idled manufacturing facilities had reopened, but at reduced production levels due to employee absenteeism, difficulty hiring new team members, and social distancing protocols. During fiscal 2021, the Company experienced intermittent closures due to COVID-19 outbreaks at the facilities or surrounding communities causing higher than normal absenteeism. In the second half of fiscal 2021, the Company was able to increase daily production rates over the levels achieved in the prior fiscal year period as direct labor staffing levels increased and production efficiencies improved. Although the Company has generally been able to navigate the production challenges caused by the pandemic in fiscal 2022, availability of labor and certain materials remain subject to disruption and uncertainty. Prices for key raw materials have experienced increased volatility and, overall, manufacturing costs have trended higher than prior periods.

As part of the initial response to the pandemic, the Company offered extended benefits to employees, including increased sick pay and waived premium payments on healthcare benefits for furloughed employees. The Company’s U.S. operations incurred $2.2 million of expense related to the extended benefits during the nine months ended December 26, 2020. Various government programs were enacted to provide financial relief for affected businesses, including the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in the U.S. and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada. CEWS provided a cash subsidy of up to 75% of eligible employees’ remuneration, subject to certain criteria. The Company recognized $6.2 million for payroll subsidies under CEWS and $0.6 million for payroll subsidies under the CARES Act during the nine months ended December 26, 2020. No payroll subsidy was recognized under CEWS or Cares Act during the three months ended December 26, 2020. In addition, the CARES Act allowed for deferring payment of certain payroll taxes. Through December 2020 the Company deferred $11.8 million of payroll taxes . The Company repaid $5.9 million in the current quarter, with the remaining amount expected to be paid in December 2022.

 

 

16


 

UNAUDITED INCOME STATEMENTS FOR THE THIRD QUARTER OF FISCAL 2022 VS. 2021

 

 

 

Three months ended

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

 

 

 

Results of Operations Data:

 

 

 

 

 

 

Net sales

 

$

534,690

 

 

$

377,581

 

Cost of sales

 

 

377,451

 

 

 

305,797

 

Gross profit

 

 

157,239

 

 

 

71,784

 

Selling, general, and administrative expenses

 

 

65,825

 

 

 

44,286

 

Operating income

 

 

91,414

 

 

 

27,498

 

Interest expense, net

 

 

508

 

 

 

795

 

Other income (expense)

 

 

7

 

 

 

(180

)

Income before income taxes

 

 

90,899

 

 

 

26,883

 

Income tax expense

 

 

23,277

 

 

 

5,284

 

Net income

 

$

67,622

 

 

$

21,599

 

 

 

 

 

 

 

 

Reconciliation of Adjusted EBITDA:

 

 

 

 

 

 

Net income

 

$

67,622

 

 

$

21,599

 

Income tax expense

 

 

23,277

 

 

 

5,284

 

Interest expense, net

 

 

508

 

 

 

795

 

Depreciation and amortization

 

 

5,250

 

 

 

4,386

 

Adjusted EBITDA

 

$

96,657

 

 

$

32,064

 

As a percent of net sales:

 

 

 

 

 

 

Gross profit

 

 

29.4

%

 

 

19.0

%

Selling, general, and administrative expenses

 

 

12.3

%

 

 

11.7

%

Operating income

 

 

17.1

%

 

 

7.3

%

Net income

 

 

12.6

%

 

 

5.7

%

Adjusted EBITDA

 

 

18.1

%

 

 

8.5

%

 

NET SALES

The following table summarizes net sales for the three months ended January 1, 2022 and December 26, 2020:

 

 

Three months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

Net sales

 

$

534,690

 

 

$

377,581

 

 

$

157,109

 

 

 

41.6

%

U.S. manufacturing and retail net sales

 

$

484,319

 

 

$

336,358

 

 

$

147,961

 

 

 

44.0

%

U.S. homes sold

 

 

5,832

 

 

 

5,343

 

 

 

489

 

 

 

9.2

%

U.S. manufacturing and retail average home selling price

 

$

83.0

 

 

$

63.0

 

 

$

20.0

 

 

 

31.7

%

Canadian manufacturing net sales

 

$

36,910

 

 

$

26,351

 

 

$

10,559

 

 

 

40.1

%

Canadian homes sold

 

 

336

 

 

 

318

 

 

 

18

 

 

 

5.7

%

Canadian manufacturing average home selling price

 

$

109.9

 

 

$

82.9

 

 

$

27.0

 

 

 

32.6

%

Corporate/Other net sales

 

$

13,461

 

 

$

14,872

 

 

$

(1,411

)

 

 

(9.5

%)

U.S. manufacturing facilities in operation at end of period

 

 

35

 

 

 

33

 

 

 

 

 

 

 

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

 

 

18

 

 

 

18

 

 

 

 

 

 

 

Canadian manufacturing facilities in operation at end of period

 

 

5

 

 

 

5

 

 

 

 

 

 

 

 

Net sales for the three months ended January 1, 2022 were $534.7 million, an increase of $157.1 million, or 41.6%, over the three months ended December 26, 2020. The following is a summary of the change by operating segment.

 

17


 

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations increased by $148.0 million, or 44.0%, for the three months ended January 1, 2022 compared to the three months ended December 26, 2020. The change was primarily due to an increase in the number of homes sold during the period of 9.2%, an increase in the average home selling price of 31.7%, and the impact of the acquisition of ScotBilt. Demand for our products has increased significantly in recent periods and we have been able to increase production in response to that demand. The average selling price increased during the period due to pricing actions enacted in response to rising material, freight, and labor costs as well as a shift in product mix to larger homes with more features and amenities. Generally, we are able to pass the increase in input costs along to our customers.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales increased by $10.6 million, or 40.1% for the three months ended January 1, 2022 compared to the same period in the prior fiscal year, primarily due to a 5.7% increase in the number of homes sold and a 32.6% increase in average home selling price. The increase in volume was due to an increase in homes sold driven by strong demand. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. On a constant currency basis, net sales for the Canadian segment were also favorably impacted by approximately $1.8 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended January 1, 2022 as compared to the same period of the prior fiscal year.

Corporate/Other:

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the three months ended January 1, 2022, net sales decreased $1.4 million, or 9.5%, primarily attributable to lower revenue from the shipment of recreational vehicles.

 

 

GROSS PROFIT

The following table summarizes gross profit for the three months ended January 1, 2022 and December 26, 2020:
 

 

 

Three months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

143,333

 

 

$

62,943

 

 

$

80,390

 

 

 

127.7

%

Canadian Factory-built Housing

 

 

10,251

 

 

 

5,372

 

 

 

4,879

 

 

 

90.8

%

Corporate/Other

 

 

3,655

 

 

 

3,469

 

 

 

186

 

 

 

5.4

%

Total gross profit

 

$

157,239

 

 

$

71,784

 

 

$

85,455

 

 

 

119.0

%

Gross profit as a percent of net sales

 

 

29.4

%

 

 

19.0

%

 

 

 

 

 

 

 

Gross profit as a percent of sales during the three months ended January 1, 2022 was 29.4% compared to 19.0% during the three months ended December 26, 2020. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Gross profit for the U.S. Factory-built Housing segment increased by $80.4 million, or 127.7%, during the three months ended January 1, 2022 compared to the same period in the prior fiscal year. Gross profit was 29.6% as a percent of segment net sales for the three months ended January 1, 2022, compared to 18.7% in the same period of the prior fiscal year. Margin improvement was driven primarily by price increases in response to rising input costs and the timing of certain price adjustments for raw materials under our buying programs. We have also focused on product simplification and material SKU rationalization to improve operational efficiencies to better leverage increased production and manufacturing fixed costs.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment increased by $4.9 million, or 90.8%, during the three months ended January 1, 2022, compared to the same period in the prior fiscal year, primarily due to increased sales volume. Gross profit as a percent of net sales was 27.8% for the three months ended January 1, 2022, compared to 20.4% in the same period of the prior fiscal year. Margin improvement was driven by price increases in response to rising material and labor costs, as well as direct labor and manufacturing efficiencies, and increased leverage of manufacturing fixed costs.

 

18


 

Corporate/Other:

Gross profit for the Corporate/Other segment increased $0.2 million, or 5.4%, during the three months ended January 1, 2022, compared to the same period of the prior fiscal year, as a result of changes in revenue mix.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended January 1, 2022 and December 26, 2020:

 

 

 

Three months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

Selling, general, and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

49,208

 

 

$

31,324

 

 

$

17,884

 

 

 

57.1

%

Canadian Factory-built Housing

 

 

2,958

 

 

 

2,682

 

 

 

276

 

 

 

10.3

%

Corporate/Other

 

 

13,659

 

 

 

10,280

 

 

 

3,379

 

 

 

32.9

%

Total selling, general, and administrative expenses

 

$

65,825

 

 

$

44,286

 

 

$

21,539

 

 

 

48.6

%

Selling, general, and administrative expense as a percent of net sales

 

 

12.3

%

 

 

11.7

%

 

 

 

 

 

 

Selling, general, and administrative expenses were $65.8 million for the three months ended January 1, 2022, an increase of $21.5 million, or 48.6%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

 

 

U.S. Factory-built Housing:

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $17.9 million, or 57.1%, during the three months ended January 1, 2022, as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increased to 10.2% for the three months ended January 1, 2022, compared to 9.3% during the comparable period of the prior fiscal year. The increase in expenses resulted from the following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) higher wage expense from increased headcount as we staffed to respond to the growth in housing demand; and (iii) the impact of the acquisition of the ScotBilt operations.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $0.3 million, or 10.3%, for the three months ended January 1, 2022 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 8.0% for the three months ended January 1, 2022, compared to 10.2% during the comparable period of the prior fiscal year. The higher expenses are a result of an increase in incentive compensation which is generally based on a measure of profitability.

Corporate/Other:

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $3.4 million, or 32.9%, during the three months ended January 1, 2022, compared to the same period of the prior fiscal year, due to an increase in equity compensation, as well as $2.2 million of costs related to investments made to enhance our customer buying experience and supporting systems.

 

19


 

INTEREST EXPENSE, NET

The following table summarizes the components of interest expense, net for the three months ended January 1, 2022 and December 26, 2020:

 

 

 

Three months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

Interest expense

 

$

701

 

 

$

946

 

 

$

(245

)

 

 

(25.9

%)

Less: Interest income

 

 

(193

)

 

 

(151

)

 

 

(42

)

 

 

27.8

%

Interest expense, net

 

$

508

 

 

$

795

 

 

$

(287

)

 

 

(36.1

%)

Average outstanding floor plan payable

 

$

32,942

 

 

$

24,304

 

 

 

 

 

 

 

Average outstanding long-term debt

 

$

12,430

 

 

$

64,663

 

 

 

 

 

 

 

 

Interest expense, net was $0.5 million for the three months ended January 1, 2022, a decrease of $0.3 million compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to lower average outstanding borrowings on long-term debt, offset in part by higher average borrowings on floor plan payables. The Company repaid the outstanding balance on its revolving credit facility during the second quarter of fiscal 2022.

 

 

INCOME TAX EXPENSE

The following table summarizes income tax expense for the three months ended January 1, 2022 and December 26, 2020:

 

 

 

Three months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

23,277

 

 

$

5,284

 

 

$

17,993

 

 

 

340.5

%

Effective tax rate

 

 

25.6

%

 

 

19.7

%

 

 

 

 

 

 

 

Income tax expense for the three months ended January 1, 2022 was $23.3 million, representing an effective tax rate of 25.6%, compared to income tax expense of $5.3 million, representing an effective tax rate of 19.7% for the three months ended December 26, 2020. The change in the effective tax rate for the three months ended January 1, 2022 compared with the same period of the prior year, was primarily due to the recognition of a tax benefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax credit study.

The Company’s effective tax rate for the three months ended January 1, 2022 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the three months ended December 26, 2020 differed from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.


ADJUSTED EBITDA

The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended January 1, 2022 and December 26, 2020:

 

 

 

Three months ended

��

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

Net income

 

$

67,622

 

 

$

21,599

 

 

$

46,023

 

 

 

213.1

%

Income tax expense

 

 

23,277

 

 

 

5,284

 

 

 

17,993

 

 

 

340.5

%

Interest expense, net

 

 

508

 

 

 

795

 

 

 

(287

)

 

 

(36.1

%)

Depreciation and amortization

 

 

5,250

 

 

 

4,386

 

 

 

864

 

 

 

19.7

%

Adjusted EBITDA

 

$

96,657

 

 

$

32,064

 

 

$

64,593

 

 

 

201.5

%

 

Adjusted EBITDA for the three months ended January 1, 2022 was $96.7 million, an increase of $64.6 million from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in net sales volume and gross margins, partially offset by higher SG&A expenses.

 

 

20


 

UNAUDITED INCOME STATEMENTS FOR THE FIRST NINE MONTHS OF FISCAL 2022 VS. 2021

 

 

 

Nine months ended

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

 

 

 

Results of Operations Data:

 

 

 

 

 

 

Net sales

 

$

1,569,112

 

 

$

973,232

 

Cost of sales

 

 

1,171,016

 

 

 

784,652

 

Gross profit

 

 

398,096

 

 

 

188,580

 

Selling, general, and administrative expenses

 

 

181,188

 

 

 

126,466

 

Operating income

 

 

216,908

 

 

 

62,114

 

Interest expense, net

 

 

2,002

 

 

 

2,601

 

Other income

 

 

(36

)

 

 

(6,993

)

Income before income taxes

 

 

214,942

 

 

 

66,506

 

Income tax expense

 

 

53,696

 

 

 

15,493

 

Net income

 

$

161,246

 

 

$

51,013

 

 

 

 

 

 

 

 

Reconciliation of Adjusted EBITDA:

 

 

 

 

 

 

Net income

 

$

161,246

 

 

$

51,013

 

Income tax expense

 

 

53,696

 

 

 

15,493

 

Interest expense, net

 

 

2,002

 

 

 

2,601

 

Depreciation and amortization

 

 

15,533

 

 

 

13,076

 

Equity-based compensation (for awards granted prior to December 31, 2018)

 

 

 

 

 

1,358

 

Adjusted EBITDA

 

$

232,477

 

 

$

83,541

 

As a percent of net sales:

 

 

 

 

 

 

Gross profit

 

 

25.4

%

 

 

19.4

%

Selling, general, and administrative expenses

 

 

11.5

%

 

 

13.0

%

Operating income

 

 

13.8

%

 

 

6.4

%

Net income

 

 

10.3

%

 

 

5.2

%

Adjusted EBITDA

 

 

14.8

%

 

 

8.6

%

 

NET SALES

The following table summarizes net sales for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,569,112

 

 

$

973,232

 

 

$

595,880

 

 

 

61.2

%

U.S. manufacturing and retail net sales

 

$

1,413,338

 

 

$

868,577

 

 

$

544,761

 

 

 

62.7

%

U.S. homes sold

 

 

18,106

 

 

 

14,060

 

 

 

4,046

 

 

 

28.8

%

U.S. manufacturing and retail average home selling price

 

$

78.1

 

 

$

61.8

 

 

$

16.3

 

 

 

26.4

%

Canadian manufacturing net sales

 

$

113,242

 

 

$

66,104

 

 

$

47,138

 

 

 

71.3

%

Canadian homes sold

 

 

1,079

 

 

 

812

 

 

 

267

 

 

 

32.9

%

Canadian manufacturing average home selling price

 

$

105.0

 

 

$

81.4

 

 

$

23.6

 

 

 

29.0

%

Corporate/Other net sales

 

$

42,532

 

 

$

38,551

 

 

$

3,981

 

 

 

10.3

%

U.S. manufacturing facilities in operation at end of period

 

 

35

 

 

 

33

 

 

 

 

 

 

 

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

 

 

18

 

 

 

18

 

 

 

 

 

 

 

Canadian manufacturing facilities in operation at end of period

 

 

5

 

 

 

5

 

 

 

 

 

 

 

 

Net sales for the nine months ended January 1, 2022 were $1,569.1 million, an increase of $595.9 million, or 61.2%, over the nine months ended December 26, 2020. The following is a summary of the change by operating segment.

 

21


 

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations increased by $544.8 million, or 62.7%, for the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020. The increase was primarily due to an increase in the number of homes sold during the period of 4,046 and an increase in the average selling price of 26.4%. The increase in the number of homes sold was a result of increased production levels at many of the Company’s manufacturing locations in response to strong demand for our products, as well as the addition of production volume through the acquisition of ScotBilt. The average selling price increased over the prior year due to pricing actions enacted in response to rising material and labor costs. Generally, we are able to pass increases in input costs along to our customers. The improvement this year is also a result of a negative impact to sales in the prior fiscal year caused by COVID-19 related plant shutdowns and higher than normal absenteeism.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales increased by $47.1 million, or 71.3%, for the nine months ended January 1, 2022 compared to the same period in the prior fiscal year, primarily due to an increase in homes sold of 267 and a 29.0% increase in average home selling price. The increase in volume was due to an increase in production rates in response to strong housing demand. The increase in average selling price was due to pricing actions enacted in response to rising material and labor costs. In addition, on a constant currency basis, net sales for the Canadian segment were favorably impacted by approximately $8.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the first nine months of fiscal 2022 as compared to the same period of the prior fiscal year. Net sales during the nine months ended December 26, 2020 were negatively impacted by COVID-19 related plant shutdowns and higher than normal absenteeism.

Corporate/Other:

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the nine months ended January 1, 2022, net sales increased $4.0 million, or 10.3%, primarily attributable to an increase in shipments of manufactured homes and recreational vehicles.

 

 

GROSS PROFIT

The following table summarizes gross profit for the nine months ended January 1, 2022 and December 26, 2020:
 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

359,148

 

 

$

165,899

 

 

$

193,249

 

 

 

116.5

%

Canadian Factory-built Housing

 

 

27,444

 

 

 

12,941

 

 

 

14,503

 

 

 

112.1

%

Corporate/Other

 

 

11,504

 

 

 

9,740

 

 

 

1,764

 

 

 

18.1

%

Total gross profit

 

$

398,096

 

 

$

188,580

 

 

$

209,516

 

 

 

111.1

%

Gross profit as a percent of net sales

 

 

25.4

%

 

 

19.4

%

 

 

 

 

 

 

 

Gross profit as a percent of sales during the nine months ended January 1, 2022 was 25.4% compared to 19.4% during the nine months ended December 26, 2020. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Gross profit for the U.S. Factory-built Housing segment increased by $193.2 million, or 116.5%, during the nine months ended January 1, 2022 compared to the same period in the prior fiscal year. Gross profit was 25.4% as a percent of segment net sales for the nine months ended January 1, 2022 compared to 19.1% in the same period of the prior fiscal year. The increase in gross profit is due to operational efficiencies and increased leverage of manufacturing fixed costs resulting from higher production volumes and higher average selling prices during fiscal 2022. Higher input costs for materials and labor have generally been offset to date by increasing the prices of our products. The improvement is also a result of less COVID-19 related sick-pay and health benefits which were provided in the prior fiscal year.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment increased by $14.5 million, or 112.1% during the nine months ended January 1, 2022 compared to the same period in the prior fiscal year primarily due to increased sales volumes and the price of our products. Gross profit as a percent of net sales was 24.2% for the nine months ended January 1, 2022, compared to 19.6% in the same period of the prior

 

22


 

fiscal year. The increase in gross profit as a percent of sales is primarily due to operational leverage from the increase in homes sold, partially offset by higher material costs.

Corporate/Other:

Gross profit for the Corporate/Other segment increased $1.8 million, or 18.1%, during the nine months ended January 1, 2022 compared to the same period of the prior fiscal year, primarily due to increased net sales and the product mix within the Company’s transportation operations.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Factory-built Housing

 

$

132,977

 

 

$

89,301

 

 

$

43,676

 

 

 

48.9

%

Canadian Factory-built Housing

 

 

8,654

 

 

 

5,971

 

 

 

2,683

 

 

 

44.9

%

Corporate/Other

 

 

39,557

 

 

 

31,194

 

 

 

8,363

 

 

 

26.8

%

Total selling, general, and administrative expenses

 

$

181,188

 

 

$

126,466

 

 

$

54,722

 

 

 

43.3

%

Selling, general, and administrative expense as a percent of net sales

 

 

11.5

%

 

 

13.0

%

 

 

 

 

 

 

 

Selling, general, and administrative expenses were $181.2 million for the nine months ended January 1, 2022, an increase of $54.7 million, or 43.3%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

 

 

U.S. Factory-built Housing:

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $43.7 million, or 48.9%, during the nine months ended January 1, 2022 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales decreased to 9.4% for the nine months ended January 1, 2022 compared to 10.3% during the comparable period of the prior fiscal year. The increase in expenses resulted from the following factors: (i) higher sales commissions and incentive compensation, which is generally based on sales volume or a measure of profitability; (ii) higher wage expense from headcount increases to support increased sales; (iii) an increase in travel expenses compared to the same period in the prior fiscal year; and (iv) the impact of the acquisition of the ScotBilt operations.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $2.7 million, or 44.9%, for the nine months ended January 1, 2022 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 7.6% for the nine months ended January 1, 2022 compared to 9.0% during the comparable period of the prior fiscal year. The increase in selling, general, and administrative expenses resulted from an increase in commissions and incentive compensation as well as wage expense from additional headcount to support the increase in sales.

Corporate/Other:

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $8.4 million, or 26.8%, during the nine months ended January 1, 2022 as compared to the same period of the prior fiscal year due to $4.2 million of costs related to investments made to enhance our customer buying experience and supporting systems and an increase in incentive, equity compensation costs, and wage expense from additional headcount.

 

23


 

INTEREST EXPENSE, NET

The following table summarizes the components of interest expense, net for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$

2,502

 

 

$

3,007

 

 

$

(505

)

 

 

(16.8

%)

Less: Interest income

 

 

(500

)

 

 

(406

)

 

 

(94

)

 

 

23.2

%

Interest expense, net

 

$

2,002

 

 

$

2,601

 

 

$

(599

)

 

 

(23.0

%)

Average outstanding floor plan payable

 

$

30,278

 

 

$

27,560

 

 

 

 

 

 

 

Average outstanding long-term debt

 

$

12,430

 

 

$

73,108

 

 

 

 

 

 

 

 

Interest expense, net was $2.0 million for the nine months ended January 1, 2022, a decrease of $0.6 million, or 23.0%, compared to the same period of the prior fiscal year. The net decrease in expense was primarily due to lower average outstanding borrowings on long-term debt, offset in part by higher average borrowings on floor plan payables. The Company repaid the outstanding balance on its revolving credit facility during the second quarter of fiscal 2022.

 

OTHER EXPENSE (INCOME)

The following table summarizes other income for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Other income

 

$

(36

)

 

$

(6,993

)

 

$

6,957

 

 

 

(99.5

%)

 

Other income decreased $7.0 million, or 99.5%, during the nine months ended January 1, 2022, compared to the same period of the prior fiscal year. The decrease is due to a reduction in the wage subsidies provided by government sponsored financial assistance programs that were enacted in response to the COVID-19 pandemic during fiscal 2021. The programs included a Canadian wage subsidy benefit of $6.2 million and U.S. federal and state wage subsidy benefits of $0.8 million recognized in the nine months ended December 26, 2020 which did not recur in the current year.

 

 

INCOME TAX EXPENSE

The following table summarizes income tax expense for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

53,696

 

 

$

15,493

 

 

$

38,203

 

 

 

246.6

%

Effective tax rate

 

 

25.0

%

 

 

23.3

%

 

 

 

 

 

 

 

Income tax expense for the nine months ended January 1, 2022 was $53.7 million, representing an effective tax rate of 25.0%, compared to income tax expense of $15.5 million, representing an effective tax rate of 23.3% for the nine months ended December 26, 2020. The change in the effective tax rate for the nine months ended January 1, 2022 compared with the same period of the prior year, was primarily due to the recognition of a tax benefit of $1.7 million during the third quarter of fiscal 2021 related to a U.S. R&D tax credit study.

The Company’s effective tax rate for the nine months ended January 1, 2022 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, results in foreign jurisdictions, and tax benefits related to equity compensation. The Company’s effective tax rate for the nine months ended December 26, 2020 differs from the federal statutory income tax rate of 21.0% due primarily to the effect of non-deductible expenses, state and local income taxes, tax credits (including the R&D study), and results in foreign jurisdictions.

 

 

24


 

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 nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

 

 

 

 

 

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

 

$
Change

 

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

161,246

 

 

$

51,013

 

 

$

110,233

 

 

 

216.1

%

Income tax expense

 

 

53,696

 

 

 

15,493

 

 

 

38,203

 

 

 

246.6

%

Interest expense, net

 

 

2,002

 

 

 

2,601

 

 

 

(599

)

 

 

(23.0

%)

Depreciation and amortization

 

 

15,533

 

 

 

13,076

 

 

 

2,457

 

 

 

18.8

%

Equity-based compensation (for awards granted prior to December 31, 2018)

 

 

 

 

 

1,358

 

 

 

(1,358

)

 

 

(100.0

%)

Adjusted EBITDA

 

$

232,477

 

 

$

83,541

 

 

$

148,936

 

 

 

178.3

%

 

Adjusted EBITDA for the nine months ended January 1, 2022 was $232.5 million, an increase of $148.9 million, from the same period of the prior fiscal year. The increase is primarily a result of higher operating income due to increases in net sales volume and gross margins, partially offset by higher SG&A expenses and the reduction in wage subsidies received in the prior year.

The Company defines Adjusted EBITDA as net income or loss plus; (a) the provision for income taxes; (b) interest expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) equity based compensation for awards granted prior to December 31, 2018; (f) non-cash restructuring charges and impairment of assets; and (g) other non-operating costs including those for the acquisition and integration or disposition of businesses and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP and should not be considered an alternative to, or more meaningful than, net income or loss prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

In evaluating Adjusted EBITDA, investors should be aware that, in the future, the Company may incur expenses similar to those adjusted for in this presentation. This presentation of Adjusted EBITDA should not be construed as an implication that the Company’s future results will be unaffected by unusual or nonrecurring items.

Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

Adjusted EBITDA:

does not reflect the interest expense on our debt;
excludes impairments; and
does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

Also about Adjusted EBITDA:

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Given these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using non-GAAP financial measures only on a supplemental basis.

 

25


 

BACKLOG

Although orders from customers can be cancelled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at January 1, 2022 totaled $1.5 billion compared to $488.5 million at December 26, 2020. The increase in backlog was driven by increased demand for single-family homes, which resulted in order levels that significantly outpaced production in both the U.S. and Canada. Our ability to increase production rates to keep pace with orders is limited by individual plant capacity, the availability of and time needed to train new employees, employee attendance and availability of materials, including certain allocations of raw materials by our suppliers. We may experience greater order cancellations in the future as a result of higher prices and the longer time required to manufacture and deliver our products.

Liquidity and Capital Resources

Sources and Uses of Cash

The following table presents summary cash flow information for the nine months ended January 1, 2022 and December 26, 2020:

 

 

 

Nine months ended

 

(Dollars in thousands)

 

January 1,
2022

 

 

December 26,
2020

 

Net cash provided by (used in):

 

 

 

 

 

 

Operating activities

 

$

164,406

 

 

$

103,816

 

Investing activities

 

 

(22,921

)

 

 

(1,213

)

Financing activities

 

 

(21,355

)

 

 

(47,938

)

Effect of exchange rate changes on cash, cash equivalents

 

 

(578

)

 

 

2,940

 

Net increase in cash and cash equivalents

 

 

119,552

 

 

 

57,605

 

Cash and cash equivalents at beginning of period

 

 

262,581

 

 

 

209,455

 

Cash and cash equivalents at end of period

 

$

382,133

 

 

$

267,060

 

 

The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements and capital expenditures. The Company does not have any scheduled long-term debt maturities in the next twelve months. On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At January 1, 2022, $169.6 million was available for borrowing under the Amended Credit Agreement. The Company’s revolving credit facility includes (i) a maximum consolidated total net leverage ratio of 3.25 to 1.00, subject to an upward adjustment upon the consummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to 1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise operating strategies accordingly.

Cash provided by operating activities was $164.4 million for the nine months ended January 1, 2022 compared to $103.8 million for the nine months ended December 26, 2020. Cash provided by operating activities increased due to higher net income in the current year, partially offset by an increase in inventory from higher material costs and higher stocking levels to mitigate supply chain challenges, an increase in prepaid and other assets primarily from the capitalization of $15.4 million of cloud computing costs in fiscal 2022, and a $5.9 million payment of payroll taxes which were deferred in the prior fiscal year under the CARES Act regulations.

Cash used in investing activities was $22.9 million for the nine months ended January 1, 2022 compared to $1.2 million for the nine months ended December 26, 2020. The increase was primarily related to an increase in capital expenditures in the current period. The Company acquired two idle manufacturing facilities in Texas and made investments in plant improvements to facilitate increased production or operational efficiencies. The Company deferred all non-essential spending in the first half of fiscal 2021 due to COVID-19 concerns.

Cash used in financing activities was $21.4 million for the nine months ended January 1, 2022 compared to $47.9 million for the nine months ended December 26, 2020. The decrease in cash used for financing was primarily related to lower repayments during fiscal 2022 of the Company's previously existing revolving credit facility. The Company also saw an increase in floor plan financing during fiscal 2022, which had decreased in fiscal 2021 in response to lowering financed retail inventories in response to the pandemic.

 

Critical Accounting Policies

 

For a discussion of our critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements, see Part II, Item 7 of the Fiscal 2021 Annual Report, under the heading “Critical

 

26


 

Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal 2021 Annual Report.

Recently Issued Accounting Pronouncements

For information on the impact of recently issued accounting pronouncements, see Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements,” to the condensed consolidated financial statements included in this Report.

Forward-Looking Statements
 

Some of the statements in this Report are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words “will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in our forward-looking statements, including regional, national and international economic, financial, public health and labor conditions, and the following:

The COVID-19 pandemic, which has had, and could continue to have, significant adverse effects on us;
supply-related issues, including prices and availability of materials;
labor-related issues;
the cyclicality and seasonality of the housing industry and its sensitivity to changes in general economic or other business conditions;
demand fluctuations in the housing industry;
the possible unavailability of additional capital when needed;
competition and competitive pressures;
changes in consumer preferences for our products or our failure to gauge those preferences;
quality problems, including the quality of parts sourced from suppliers and related liability and reputational issues;
data security breaches, cybersecurity attacks, and other information technology disruptions;
the potential disruption of operations caused by the conversion to new information systems;
the extensive regulation affecting the production and sale of factory-built housing and the effects of possible changes in laws with which we must comply;
the potential impact of natural disasters on sales and raw material costs;
the risks associated with mergers and acquisitions, including integration of operations and information systems;
periodic inventory adjustments by, and changes to relationships with, independent retailers;
changes in interest and foreign exchange rates;
insurance coverage and cost issues;
the possibility that all or part of our intangible assets, including goodwill, might become impaired;
the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks; and
other risks described in Part I — Item 1A, "Risk Factors," included in the Fiscal 2021 Annual Report, as well as the risks and information provided from time to time in our other periodic reports filed with the Securities and Exchange Commission.

 

If any of the risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements proves to be incorrect, then differences may arise between our forward-looking statements and our actual results, and such differences may be material. Investors should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. We assume no obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof, except as required by law.

 

27


 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

For a discussion of the Company’s interest rate and foreign exchange risks, see Part II, Item 7A of the Fiscal 2021 Annual Report, under the heading "Quantitative and Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since April 3, 2021.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

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 CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) of the Exchange Act at January 1, 2022. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of January 1, 2022.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

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PART II – OTHER INFORMATION

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 13 “Commitments, Contingencies and Legal Proceedings – Legal Proceedings,” to the condensed consolidated financial statements included in this Report.

 

 

 

29


 

Item 6. EXHIBITS

 

Exhibit

Number

 

Description

 

 

 

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 (INS)

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 

101(SCH)

 

Inline XBRL Taxonomy Extension Schema Document.
 

101(CAL)

 

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101(DEF)

 

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

101(LAB)

 

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

101(PRE)

 

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

 

 

 

 

 

† Filed herewith.

 

 

30


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Skyline Champion Corporation

Registrant

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Mark Yost

 

President and Chief Executive Officer

 

February 3, 2022

Mark Yost

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Laurie Hough

 

Executive Vice President, Chief Financial Officer and Treasurer

 

February 3, 2022

Laurie Hough

 

(Principal Financial Officer)

 

 

 

 

31