Skyline Champion Corp - Quarter Report: 2023 September (Form 10-Q)

10-Q

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 September 30, 2023

☐ 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 October 23, 2023: 57,617,679

SKYLINE CHAMPION CORPORATION

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and April 1, 2023	1
Condensed Consolidated Income Statements (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	3
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended September 30, 2023 and October 1, 2022	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended September 30, 2023 and October 1, 2022	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3. Quantitative and Qualitative Disclosures About Market Risk	26

Item 4. Controls and Procedures	27

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	28

Item 6. Exhibits	29

SIGNATURES	30

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Skyline Champion Corporation

Condensed Consolidated Balance Sheets

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


	September 30, 2023			April 1, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	701,155		$	747,453
Trade accounts receivable, net		55,097			67,296
Inventories, net		182,239			202,238
Other current assets		39,447			26,479
Total current assets		977,938			1,043,466
Long-term assets:
Property, plant, and equipment, net		191,766			177,125
Goodwill		196,574			196,574
Amortizable intangible assets, net		40,299			45,343
Deferred tax assets		19,798			17,422
Other noncurrent assets		242,800			82,794
Total assets	$	1,669,175		$	1,562,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,829		$	44,702
Other current liabilities		192,322			204,215
Total current liabilities		243,151			248,917
Long-term liabilities:
Long-term debt		12,430			12,430
Deferred tax liabilities		6,417			5,964
Other liabilities		66,984			62,412
Total long-term liabilities		85,831			80,806

Stockholders' Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 57,162 and 57,108 shares issued as of September 30, 2023 and April 1, 2023, respectively		1,587			1,585
Additional paid-in capital		530,645			519,479
Retained earnings		821,628			725,672
Accumulated other comprehensive loss		(13,667	)		(13,735	)
Total stockholders’ equity		1,340,193			1,233,001
Total liabilities and stockholders’ equity	$	1,669,175		$	1,562,724

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Income Statements

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


	Three months ended						Six months ended
	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Net sales	$	464,236		$	806,825		$	929,005		$	1,532,706
Cost of sales		347,747			532,719			682,843			1,029,265
Gross profit		116,489			274,106			246,162			503,441
Selling, general, and administrative expenses		64,454			83,915			134,893			156,197
Operating income		52,035			190,191			111,269			347,244
Interest (income), net		(10,480	)		(1,974	)		(19,781	)		(1,884	)
Other expense (income)		2,065			—			2,065			(634	)
Income before income taxes		60,450			192,165			128,985			349,762
Income tax expense		14,781			48,073			32,047			88,519
Net income	$	45,669		$	144,092		$	96,938		$	261,243
Net income per share:
Basic	$	0.80		$	2.53		$	1.69		$	4.59
Diluted	$	0.79		$	2.51		$	1.68		$	4.55

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, dollars in thousands)


	Three months ended						Six months ended
	September 30, 2023			October 1, 2022			September 30, 2023		October 1, 2022
Net income	$	45,669		$	144,092		$	96,938	$	261,243
Other comprehensive (loss) income:
Foreign currency translation adjustments		(2,115	)		(5,295	)		68		(7,599	)
Total comprehensive income	$	43,554		$	138,797		$	97,006	$	253,644

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)


	Six months ended
	September 30, 2023			October 1, 2022
Cash flows from operating activities
Net income	$	96,938		$	261,243
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,378			12,557
Amortization of deferred financing fees		162			175
Equity-based compensation		10,943			7,753
Deferred taxes		(1,919	)		3,318
Loss (gain) on disposal of property, plant, and equipment		96			(85	)
Foreign currency transaction loss		76			974
Change in assets and liabilities:
Accounts receivable		12,101			7,633
Floor plan receivables		(2,521	)		—
Inventories		20,059			11,540
Other assets		(13,434	)		(14,489	)
Accounts payable		4,387			(21,000	)
Accrued expenses and other liabilities		(12,128	)		8,947
Net cash provided by operating activities		129,138			278,566
Cash flows from investing activities
Additions to property, plant, and equipment		(22,847	)		(25,613	)
Cash paid for equity method investment		(1,000	)		—
Cash paid for investment in ECN common stock		(78,858	)		—
Cash paid for investment in ECN preferred stock		(64,520	)		—
Investment in floor plan loans		(18,466	)		—
Proceeds from floor plan loans		10,528			—
Acquisitions, net of cash acquired		—			(6,810	)
Proceeds from disposal of property, plant, and equipment		524			132
Net cash used in investing activities		(174,639	)		(32,291	)
Cash flows from financing activities
Changes in floor plan financing, net		—			3,027
Stock option exercises		224			596
Tax payments for equity-based compensation		(982	)		(1,363	)
Net cash (used in) provided by financing activities		(758	)		2,260
Effect of exchange rate changes on cash and cash equivalents		(39	)		(6,944	)
Net (decrease) increase in cash and cash equivalents		(46,298	)		241,591
Cash and cash equivalents at beginning of period		747,453			435,413
Cash and cash equivalents at end of period	$	701,155		$	677,004

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars and shares in thousands)


	Three months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 1, 2023		57,133	$	1,586	$	524,907	$	775,980		$	(11,552	)	$	1,290,921
Net income		—		—		—		45,669			—			45,669
Equity-based compensation		—		—		5,515		—			—			5,515
Net common stock issued under equity-based compensation plans		29		1		223		(21	)		—			203
Foreign currency translation adjustments		—		—		—		—			(2,115	)		(2,115	)
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193


	Six months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 1, 2023		57,108	$	1,585	$	519,479	$	725,672		$	(13,735	)	$	1,233,001
Net income		—		—		—		96,938			—			96,938
Equity-based compensation		—		—		10,943		—			—			10,943
Net common stock issued under equity-based compensation plans		54		2		223		(982	)		—			(757	)
Foreign currency translation adjustments		—		—		—		—			68			68
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193


	Three months ended October 1, 2022
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 2, 2022		56,848	$	1,573	$	506,815	$	444,702		$	(9,512	)	$	943,578
Net income		—		—		—		144,092			—			144,092
Equity-based compensation		—		—		3,793		—			—			3,793
Net common stock issued under equity-based compensation plans		77		7		642		(1,074	)		—			(425	)
Foreign currency translation adjustments		—		—		—		—			(5,295	)		(5,295	)
Balance at October 1, 2022		56,925	$	1,580	$	511,250	$	587,720		$	(14,807	)	$	1,085,743

	Six months ended October 1, 2022
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 2, 2022		56,838	$	1,573	$	502,846	$	327,902		$	(7,208	)	$	825,113
Net income		—		—		—		261,243			—			261,243
Equity-based compensation		—		—		7,753		—			—			7,753
Net common stock issued under equity-based compensation plans		87		7		651		(1,425	)		—			(767	)
Foreign currency translation adjustments		—		—		—		—			(7,599	)		(7,599	)
Balance at October 1, 2022		56,925	$	1,580	$	511,250	$	587,720		$	(14,807	)	$	1,085,743

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

See accompanying Notes to Condensed Consolidated Financial Statements.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation and Business

Nature of Operations: Skyline Champion Corporation's (the “Company”) operations consist of manufacturing, retail, construction services, and transportation activities. At September 30, 2023, the Company operated 39 manufacturing facilities throughout the United States (“U.S.”) and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. In addition to its core home building business, the Company provides construction services to install and set-up factory-built homes. The Company’s retail operations consist of 31 sales centers that sell manufactured houses to consumers across the U.S. The Company’s transportation business engages independent owners/drivers to transport recreational vehicles throughout the U.S. and Canada and manufactured houses in certain regions of the U.S. The Company also has a holding company located in the Netherlands.

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 30, 2023 (the “Fiscal 2023 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 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 2024,” will end on March 30, 2024 and will include 52 weeks. References to “fiscal 2023” refer to the Company’s fiscal year ended April 1, 2023. The three and six months ended September 30, 2023 and October 1, 2022 each included 13 and 26 weeks, respectively.

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 $2.6 million and $1.7 million at September 30, 2023 and April 1, 2023, respectively.

Floor plan receivables consist of loans the Company purchased from an independent financial institution in the first quarter of fiscal 2024 for $18.5 million, of which approximately $8.0 million remains outstanding at September 30, 2023, and amounts loaned by the Company through the financial institution to certain independent retailers for purchases of homes manufactured by the Company, of which $2.6 million was outstanding at September 30, 2023, both of which are carried net of payments received and recorded at amortized cost. The Company intends to hold the floor plan receivables until maturity or payoff. These loans are serviced by the financial institution for which we pay a servicing fee. Upon execution of the financing arrangement, the loans are generally payable at the earlier of the sale of the underlying home or two years from the origination date. At September 30, 2023, Floor Plan Receivables are included in Other Current Assets and Other Noncurrent Assets in the Condensed Consolidated Balance Sheets.

The floor plan receivables are collateralized by the related homes, mitigating loss exposure. The Company and the financial institution evaluate the credit worthiness of each independent retailer prior to credit approval, including reviewing the independent retailer’s payment history, financial condition, and overall economic environment. We evaluate the risk of credit loss in aggregate on existing loans with similar terms, based on historic experience and current economic conditions, as well as individual retailers with past due balances or other indications of heightened credit risk. The allowance for credit losses related to floor plan receivables was not material as of September 30, 2023. Loans are considered past due if any required interest or curtailment payment remains unpaid 30 days after the due date. Receivables are placed on non-performing status if any interest or installment payments are past due over 90 days. Loans are placed on nonaccrual status when interest payments are past due over 90 days. At September 30, 2023, there were no floor plan receivables on nonaccrual status and the weighted-average age of the floor plan receivables was nine months.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

Interest income from floor plan receivables is recognized on an accrual basis and is included in Interest Income in the accompanying Condensed Consolidated Income Statements. Interest income for the three and six months ended September 30, 2023 was $0.3 million and $0.6 million, respectively. There were no floor plan receivables as of October 1, 2022 or related interest income for the three and six months then ended.

In May 2022, the Company acquired certain operating assets from Manis Custom Builders, Inc. ("Manis"). In July 2022, the Company acquired 12 Factory Expo retail sales centers from Alta Cima Corporation. The purchase price and net assets acquired for both transactions were not material to the accompanying condensed consolidated financial statements.

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.

2. Inventories, net

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


(Dollars in thousands)	September 30, 2023		April 1, 2023
Raw materials	$	92,121	$	100,379
Work in process		21,239		23,157
Finished goods and other		68,879		78,702
Total inventories, net	$	182,239	$	202,238

At September 30, 2023 and April 1, 2023, reserves for obsolete inventory were $9.1 million and $7.9 million, respectively.

3. 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 September 30, 2023 and October 1, 2022 was $4.7 million and $4.2 million, respectively. Depreciation expense for the six months ended September 30, 2023 and October 1, 2022 was $9.3 million and $7.8 million, respectively.

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


(Dollars in thousands)	September 30, 2023			April 1, 2023
Land and improvements	$	42,676		$	41,749
Buildings and improvements		131,386			119,226
Machinery and equipment		100,694			91,007
Construction in progress		31,035			30,010
Property, plant, and equipment, at cost		305,791			281,992
Less: accumulated depreciation		(114,025	)		(104,867	)
Property, plant, and equipment, net	$	191,766		$	177,125

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

4. 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 both September 30, 2023 and April 1, 2023, the Company had goodwill of $196.6 million. At September 30, 2023, there were no accumulated impairment losses related to goodwill.

Intangible Assets

The components of amortizable intangible assets were as follows:


(Dollars in thousands)	September 30, 2023									April 1, 2023
	Customer Relationships & Other			Trade Names			Total			Customer Relationships & Other			Trade Names			Total
Gross carrying amount	$	66,019		$	21,499		$	87,518		$	66,013		$	21,497		$	87,510
Accumulated amortization		(36,200	)		(11,019	)		(47,219	)		(32,103	)		(10,064	)		(42,167	)
Amortizable intangibles, net	$	29,819		$	10,480		$	40,299		$	33,910		$	11,433		$	45,343

During the three months ended September 30, 2023 and October 1, 2022, amortization of intangible assets was $2.1 million and $2.8 million, respectively. During the six months ended September 30, 2023 and October 1, 2022, amortization of intangible assets was $5.0 million and $4.7 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 September 30, 2023 and April 1, 2023, the Company had capitalized cloud computing costs, net of amortization of $25.7 million and $25.0 million, respectively. Cloud computing costs are included in other noncurrent assets in the accompanying condensed consolidated balance sheets. Amortization of capitalized cloud computing costs for the three and six months ended September 30, 2023 was $0.2 million and $0.4 million, respectively. Amortization of capitalized cloud computing costs for the three and six months ended October 1, 2022 was $0.2 million and $0.4 million, respectively.

5. Investment in ECN Capital Corporation

In September 2023, the Company entered into a share subscription agreement with ECN Capital Corp. ("ECN") and made a $137.8 million equity investment in ECN on a private placement basis. The Company purchased 33.6 million common shares, representing approximately 12% of the total outstanding common shares of ECN, and 27.5 million mandatory convertible preferred shares (the “Preferred Shares”). The Preferred Shares receive cumulative cash dividends at an annual rate of 4.0%. Following the private placement, the Company owns approximately 19.9% of the voting shares of ECN.

The Company's interest in the common stock investment in ECN is accounted for under the equity method and the Company’s share of the earnings or losses of ECN are recorded on a three-month lag. For the three and six months ended September 30, 2023, there were no earnings or losses recognized related to the equity method investment. At September 30, 2023, the investment in the common stock of ECN totaled $78.9 million, including $3.1 million of capitalized transaction costs, and is included in Other Noncurrent Assets in the accompanying Condensed Consolidated Balance Sheets.

The Company's investment in the Preferred Shares is included in Other Noncurrent Assets in the accompanying Condensed Consolidated Balance Sheets. The investment is measured using the measurement alternative for equity investments without a readily determinable fair value. The carrying amount of $64.5 million at September 30, 2023 represents the purchase price and capitalized transaction costs of $2.5 million. There have been no adjustments to the carrying amount or impairment of the investment.

Amounts due to ECN, a related party, were not material at September 30, 2023. ECN, through its wholly-owned subsidiary Triad Financial Services, Inc. ("Triad") provides loan servicing for the Company's floor plan receivables, for which we pay a fee that was immaterial for the period subsequent to the investment in ECN. Triad also provides floor plan financing of the Company's products to independent retailers. At September 30, 2023, the Company had repurchase commitments on retailer floor plan loans outstanding with Triad of $55.7 million.

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)	September 30, 2023		April 1, 2023
Customer deposits	$	63,746	$	69,285
Accrued volume rebates		27,211		25,084
Accrued warranty obligations		29,977		28,576
Accrued compensation and payroll taxes		28,710		41,422
Accrued insurance		14,708		15,075
Other		27,970		24,773
Total other current liabilities	$	192,322	$	204,215

7. Accrued Warranty Obligations

Changes in the accrued warranty obligations were as follows:


	Three months ended						Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Balance at beginning of period	$	35,090		$	33,155		$	35,961		$	32,832
Warranty expense		14,977			15,839			27,833			27,760
Cash warranty payments		(12,705	)		(13,239	)		(26,432	)		(24,837	)
Balance at end of period		37,362			35,755			37,362			35,755
Less: noncurrent portion in other long-term liabilities		(7,385	)		(7,026	)		(7,385	)		(7,026	)
Total current portion	$	29,977		$	28,729		$	29,977		$	28,729

8. Debt

Long-term debt consisted of the following:


(Dollars in thousands)	September 30, 2023		April 1, 2023
Obligations under industrial revenue bonds due 2029	$	12,430	$	12,430
Revolving credit facility maturing in 2026		—		—
Total long-term debt	$	12,430	$	12,430

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. The Amended Credit Agreement allows the Company to draw down, repay and re-draw loans on the available facility during the term, subject to certain terms and conditions, matures in July 2026, and has no scheduled amortization.

On May 18, 2023, the Company further amended the Amended Credit Agreement, which removed references to the London Interbank Offer Rate ("LIBOR") and clarified language pertaining to the Secured Overnight Financing Rate ("SOFR") in regards to the interest rate on borrowings. The interest rate on borrowings under the Amended Credit Agreement is based on SOFR plus a SOFR adjustment, plus an interest rate spread. The interest rate spread adjusts based on the consolidated total net leverage of the Company from a high of 1.875% when the consolidated total net leverage ratio is equal to or greater than 2.25:1.00, to a low of 1.125% when the consolidated total net leverage ratio is below 0.50:1.00. Alternatively for same day borrowings, the interest rate is based on an Alternative Base Rate ("ABR") plus an interest rate spread that ranges from a high of 0.875% to a low of 0.125% based on the consolidated total net leverage ratio. 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 September 30, 2023 the interest rate under the Amended Credit Agreement

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

was 6.54% and letters of credit issued under the Amended Credit Agreement totaled $34.0 million. Available borrowing capacity under the Amended Credit Agreement as of September 30, 2023 was $166.0 million.

Obligations under industrial revenue bonds are supported by letters of credit and bear interest based on a municipal bond index rate. The weighted-average interest rate at September 30, 2023, including related costs and fees, was 5.62%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029 and are secured by the assets of certain manufacturing facilities.

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 September 30, 2023.

9. Revenue Recognition

The following tables disaggregate the Company’s revenue by sales category:


	Three months ended September 30, 2023
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing and retail	$	428,132	$	29,256	$	—	$	457,388
Transportation		—		—		6,848		6,848
Total	$	428,132	$	29,256	$	6,848	$	464,236


	Six months ended September 30, 2023
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing and retail	$	856,917	$	55,376	$	—	$	912,293
Transportation		—		—		16,712		16,712
Total	$	856,917	$	55,376	$	16,712	$	929,005

	Three months ended October 1, 2022
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing and retail	$	754,148	$	39,198	$	—	$	793,346
Commercial		89		—		—		89
Transportation		—		—		13,390		13,390
Total	$	754,237	$	39,198	$	13,390	$	806,825


	Six months ended October 1, 2022
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing and retail	$	1,414,959	$	84,260	$	—	$	1,499,219
Commercial		359		—		—		359
Transportation		—		—		33,128		33,128
Total	$	1,415,318	$	84,260	$	33,128	$	1,532,706

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

10. Income Taxes

For the three months ended September 30, 2023 and October 1, 2022, the Company recorded $14.8 million and $48.1 million of income tax expense and had an effective tax rate of 24.5% and 25.0%, respectively. For the six months ended September 30, 2023 and October 1, 2022, the Company recorded $32.0 million and $88.5 million of income tax expense and had an effective tax rate of 24.8% and 25.3%, respectively.

The Company’s effective tax rate for the three and six months ended September 30, 2023 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, and results in foreign jurisdictions. The Company’s effective tax rate for the three and six months ended October 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, and results in foreign jurisdictions.

At September 30, 2023, the Company had no unrecognized tax benefits.

11. Earnings Per Share

Basic net income per share 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. Diluted earnings per share is calculated using our weighted-average outstanding common shares, including the dilutive effect of stock awards as determined under the treasury stock method.

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


	Three months ended				Six months ended
(Dollars and shares in thousands, except per share data)	September 30, 2023		October 1, 2022			September 30, 2023		October 1, 2022
Numerator:
Net income attributable to the Company's common shareholders	$	45,669	$	144,092		$	96,938	$	261,243
Denominator:
Basic weighted-average shares outstanding		57,232		56,956			57,224		56,933
Dilutive securities		492		450			471		431
Diluted weighted-average shares outstanding		57,724		57,406			57,695		57,364

Basic net income per share	$	0.80	$	2.53		$	1.69	$	4.59
Diluted net income per share	$	0.79	$	2.51		$	1.68	$	4.55

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, before elimination of inter-company shipments, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and operating assets.

The Company operates in two reportable segments: (i) U.S. Factory-built Housing, which includes manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, corporate costs directly incurred for all segments and intersegment eliminations. Segments are generally determined by geography. Segment data includes intersegment revenues and corporate office costs that are directly and exclusively incurred for each segment. Total assets for Corporate/Other primarily include cash and certain U.S. deferred tax items not specifically allocated to another segment.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

Selected financial information by reportable segment was as follows:


	Three months ended						Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Net sales:
U.S. Factory-built Housing	$	428,132		$	754,237		$	856,917		$	1,415,318
Canadian Factory-built Housing		29,256			39,198			55,376			84,260
Corporate/Other		6,848			13,390			16,712			33,128
Consolidated net sales	$	464,236		$	806,825		$	929,005		$	1,532,706
Operating income:
U.S. Factory-built Housing EBITDA	$	64,752		$	199,284		$	138,985		$	360,849
Canadian Factory-built Housing EBITDA		5,763			10,141			10,527			21,468
Corporate/Other EBITDA		(13,759	)		(12,293	)		(25,930	)		(21,882	)
Other expense (income)		2,065			—			2,065			(634	)
Depreciation		(4,700	)		(4,166	)		(9,333	)		(7,836	)
Amortization		(2,086	)		(2,775	)		(5,045	)		(4,721	)
Consolidated operating income	$	52,035		$	190,191		$	111,269		$	347,244
Depreciation:
U.S. Factory-built Housing	$	4,198		$	3,505		$	8,326		$	6,542
Canadian Factory-built Housing		356			345			712			626
Corporate/Other		146			316			295			668
Consolidated depreciation	$	4,700		$	4,166		$	9,333		$	7,836
Amortization of U.S. Factory-built Housing intangible assets:	$	2,086		$	2,775		$	5,045		$	4,721
Capital expenditures:
U.S. Factory-built Housing	$	11,743		$	14,778		$	21,421		$	23,711
Canadian Factory-built Housing		475			1,068			941			1,429
Corporate/Other		288			332			485			473
Consolidated capital expenditures	$	12,506		$	16,178		$	22,847		$	25,613

(Dollars in thousands)							September 30, 2023			April 1, 2023
Total Assets:
U.S. Factory-built Housing (1)							$	697,547		$	708,573
Canadian Factory-built Housing (1)								125,961			124,673
Corporate/Other (1)								845,667			729,478
Consolidated total assets							$	1,669,175		$	1,562,724

(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 significantly reduced by the potential resale value of any products that are subject to repurchase and is spread over numerous retailers. The repurchase price is generally determined by the original sales price of the product less contractually defined curtailment payments. Based on these repurchase agreements and our historical loss experience, we established an associated loss reserve which was $2.0 million and $2.5 million at September 30, 2023 and April 1, 2023, respectively. Excluding the resale value of the homes, the contingent repurchase obligation as of September 30, 2023 was estimated to be $297.1 million. Losses incurred on homes repurchased were immaterial during the three and six months ended September 30, 2023 and October 1, 2022.

Skyline Champion Corporation

Notes to Condensed Consolidated Financial Statements - Continued

At September 30, 2023, the Company was contingently obligated for $34.0 million under letters of credit, consisting of $12.6 million to support long-term debt, $21.1 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 $31.3 million under surety bonds, generally to support performance on long-term construction contracts and license and service bonding requirements.

The Company has received claims for damage related to water intrusion in homes built in one of its manufacturing facilities. The Company is investigating the cause of the damage and assessing its responsibility to remediate. While it is reasonably possible that the Company will receive future claims that could result in additional costs to repair that could be significant in the aggregate, the Company is unable to estimate the number of such claims or the amount or range of any potential losses associated with such claims at this time.

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. Subsequent Event

On October 13, 2023, the Company acquired 100% of the equity interests of Regional Enterprises, LLC and related companies ("Regional"). The purchase price (exclusive of working capital and earnout adjustments) is estimated to be $313 million, net of cash acquired, plus assumed debt, primarily related to inventory floor plan liabilities, of $93 million. The purchase price is subject to an earnout provision as well as customary net working capital adjustments. The Company funded the acquisition with cash on hand and $30 million of the Company’s common stock. Regional, the fourth largest HUD manufacturer in the United States, operates three manufacturing facilities in Alabama and 43 retail sales centers across the southeast U.S. The related acquisition costs, which are included in Other Expense (Income), Net in the Condensed Consolidated Income Statements, were $2.1 million during the three and six months ended September 30, 2023. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation. Therefore, it is not practical for the Company to provide the major classes of assets acquired and liabilities assumed or pro forma revenue and earnings.

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 factory-built home manufacturing, company-owned retail locations, construction services, and transportation logistics services. The Company markets its homes under several nationally recognized brand names including Skyline Homes, Champion Home Builders, Genesis Homes, Athens Park Models, Dutch Housing, Atlantic Homes, 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 39 manufacturing facilities throughout the U.S. and five manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 31 sales centers that sell manufactured homes to consumers across the 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.

Acquisitions and Expansions

Over the last several years, demand for affordable housing in the U.S. has increased. As a result, the Company focused on operational improvements to increase capacity utilization and profitability at its existing manufacturing facilities as well as executed measured expansion of its manufacturing footprint through facility and equipment investments and acquisitions. During fiscal 2023, robust demand began to slow as inflation and higher interest rates made housing less affordable. Even though demand in the housing markets has returned to more normal levels recently, the Company continues to focus on growing in strong housing markets across the U.S. and Canada, as well as expanding products and services to provide more holistic solutions to homebuyers.

In October 2023, the Company acquired Regional, which operates three manufacturing facilities in Alabama and 43 retail sales centers across the Southeast U.S. Regional's strong presence in large markets in the Southeast U.S. will help expand our captive retail and manufacturing distribution in the region. In July 2022, the Company acquired 12 Factory Expo retail sales centers from Alta Cima Corporation, which expanded the internal retail network across a broader portion of the U.S. In May 2022, the Company acquired Manis Custom Builders, Inc. ("Manis") in order to expand its manufacturing footprint and further streamline its product offering in the Southeast U.S. In February 2021, the Company acquired ScotBilt Homes, LLC and related companies (collectively, "Scotbilt"), which operated two manufacturing facilities in Georgia providing affordable housing throughout Alabama, Florida, Georgia and the Carolinas. The ScotBilt acquisition complemented the Company’s prior manufacturing footprint in the attractive mid-south region.

In addition to those acquisitions, the Company is also focused on growing its U.S. manufacturing production capacity through various plant start-ups. The Company began production in a previously idled facility in Decatur, Indiana in the first quarter of fiscal 2024. In January 2021, the Company acquired two idle facilities in Pembroke, North Carolina, one of which began production in the fourth quarter of fiscal 2023. In June 2021, the Company acquired two idle facilities in Navasota, Texas and began production at one of those facilities during the fourth quarter of fiscal 2022. The Company is also in the process of opening a previously idled facility in Bartow, Florida, which is expected to begin production in fiscal 2024.

In September 2023, the Company entered into a share subscription agreement with ECN Capital Corp. ("ECN") in which the Company made a $137.8 million equity investment in ECN on a private placement basis to purchase 33.6 million common shares, representing approximately 12% of the total outstanding common shares of ECN, and 27.5 million mandatory convertible preferred shares. Following the private placement, the Company owns approximately 19.9% interest in ECN. In conjunction with the investment, the Company and ECN entered into a joint venture agreement to develop a captive finance company which allows us to leverage ECN's knowledge and systems to develop tailored dealer floor plan and retail consumer lending products which will facilitate further growth.

The Company's acquisitions and investments are part of a strategy to grow and diversify revenue with a focus on increasing the Company’s home building presence in the U.S. as well as improving the results of operations through streamlining production of similar product categories. These acquisitions and investments are included in the Company's consolidated results for periods subsequent to their respective acquisition dates.

Industry and Company Outlook

Since July 2020, the U.S. and Canadian housing industry demand has generally been robust. The limited availability of existing homes for sale and the broader need for newly built affordable, single-family housing has driven demand for new homes in those 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

homebuyers, and the population of households earning less than $60,000 per year. More recently, we have seen a number of market trends pointing to increased sales of accessory dwelling units ("ADUs") and urban-to-rural migration as customers accommodate working-from-home patterns, as well as people seeking rent-to-own single-family options.

The rise in interest rates in response to inflation have impacted the demand for the Company's products in both the U.S. and Canada. In addition, many of our community customers have reduced order rates in response to excess inventory in their sales channels. As a result, the Company's backlog was $257.8 million as of September 30, 2023 compared to $814.0 million as of October 1, 2022. Cancellation of end-consumer orders, at the retail level, have been minimal.

For the six months ended September 30, 2023, approximately 86% 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, HUD-code industry home shipments were 22,984 and 30,130 units during the three months ended August 31, 2023 and 2022, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 18.0% and 22.5%, for the three months ended August 31, 2023 and 2022, respectively. Annual HUD-code industry shipments have generally increased since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, manufactured housing’s most recent annual shipment levels still operate at lower levels than the long-term historical average of over 200,000 units annually. Manufactured home sales represent approximately 11% of all of U.S. single family home starts. Our market share in the U.S. total housing market was approximately 2.0% for the twelve months ended September 30, 2023.

UNAUDITED INCOME STATEMENTS FOR THE SECOND QUARTER OF FISCAL 2024 VS. 2023


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022
Income Statements Data:
Net sales	$	464,236		$	806,825
Cost of sales		347,747			532,719
Gross profit		116,489			274,106
Selling, general, and administrative expenses		64,454			83,915
Operating income		52,035			190,191
Interest (income), net		(10,480	)		(1,974	)
Other expense		2,065			—
Income before income taxes		60,450			192,165
Income tax expense		14,781			48,073
Net income	$	45,669		$	144,092

Reconciliation of Adjusted EBITDA:
Net income	$	45,669		$	144,092
Income tax expense		14,781			48,073
Interest (income), net		(10,480	)		(1,974	)
Depreciation and amortization		6,786			6,941
Transaction costs		2,065			—
Adjusted EBITDA	$	58,821		$	197,132
As a percent of net sales:
Gross profit		25.1	%		34.0	%
Selling, general, and administrative expenses		13.9	%		10.4	%
Operating income		11.2	%		23.6	%
Net income		9.8	%		17.9	%
Adjusted EBITDA		12.7	%		24.4	%

NET SALES

The following table summarizes net sales for the three months ended September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023		October 1, 2022		$ Change			% Change
Net sales	$	464,236	$	806,825	$	(342,589	)		(42.5	%)
U.S. manufacturing and retail net sales	$	428,132	$	754,237	$	(326,105	)		(43.2	%)
U.S. homes sold		4,842		7,274		(2,432	)		(33.4	%)
U.S. manufacturing and retail average home selling price	$	88.4	$	103.7	$	(15.3	)		(14.8	%)
Canadian manufacturing net sales	$	29,256	$	39,198	$	(9,942	)		(25.4	%)
Canadian homes sold		232		303		(71	)		(23.4	%)
Canadian manufacturing average home selling price	$	126.1	$	129.4	$	(3.3	)		(2.6	%)
Corporate/Other net sales	$	6,848	$	13,390	$	(6,542	)		(48.9	%)
U.S. manufacturing facilities in operation at end of period		39		37
U.S. retail sales centers in operation at end of period		31		31
Canadian manufacturing facilities in operation at end of period		5		5

Net sales for the three months ended September 30, 2023 were $464.2 million, a decrease of $342.6 million, or 42.5%, compared to the three months ended October 1, 2022. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations decreased by $326.1 million, or 43.2%, for the three months ended September 30, 2023 compared to the three months ended October 1, 2022. The decrease was primarily due to a 33.4% decrease in the number of homes sold during the period, as well as a 14.8% decrease in the average home selling price. The decrease in the number of homes sold was due to lower customer demand and production volumes compared to the prior year. The average selling price decrease was due, in part, to the impact of disaster relief housing sales of $117.8 million to the Federal Emergency Management Agency ("FEMA") in the second quarter of fiscal 2023, as well as customers choosing smaller homes with fewer or lower cost options on new homes, and decrease in material surcharges. FEMA units generally have more specifications than our typical products and therefore drive a higher average selling price per home. The decline in sales was partially offset by sales from the start-up of new plants.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales decreased by $9.9 million, or 25.4% for the three months ended September 30, 2023 compared to the same period in the prior fiscal year, primarily due to a 23.4% decrease in homes sold and a 2.6% decrease in average home selling price. The decrease in homes sold is due to slowing demand. We also reduced prices on certain models in order to respond to changes in demand. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $0.9 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended September 30, 2023 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 September 30, 2023, net sales decreased $6.5 million, or 48.9%, primarily attributable to the decrease in recreational vehicle shipments.

GROSS PROFIT

The following table summarizes gross profit for the three months ended September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Gross profit:
U.S. Factory-built Housing	$	105,084		$	256,744		$	(151,660	)		(59.1	%)
Canadian Factory-built Housing		8,007			13,170			(5,163	)		(39.2	%)
Corporate/Other		3,398			4,192			(794	)		(18.9	%)
Total gross profit	$	116,489		$	274,106		$	(157,617	)		(57.5	%)
Gross profit as a percent of net sales		25.1	%		34.0	%

Gross profit as a percent of sales during the three months ended September 30, 2023 was 25.1% compared to 34.0% during the three months ended October 1, 2022. 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 decreased by $151.7 million, or 59.1%, during the three months ended September 30, 2023 compared to the same period in the prior fiscal year. Gross profit was 24.5% as a percent of segment net sales for the three months ended September 30, 2023 compared to 34.0% in the same period of the prior fiscal year. The decrease in gross profit as a percent of segment net sales is being driven by lower product prices, unit volume and changes in product mix including the decrease in FEMA sales which are generally at higher prices than our core products.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment decreased by $5.2 million, or 39.2%, during the three months ended September 30, 2023 compared to the same period in the prior fiscal year. The decrease in gross profit is primarily due to lower product prices, sales volumes and production. Gross profit as a percent of net sales was 27.4% for the three months ended September 30, 2023, compared to 33.6% in the same period of the prior year, primarily the result of decreased leverage of fixed manufacturing costs due to lower sales volumes.

Corporate/Other:

Gross profit for the Corporate/Other segment decreased $0.8 million, or 18.9%, during the three months ended September 30, 2023 compared to the same period of the prior fiscal year. Gross profit increased as a percent of segment net sales to 49.6% from 31.3% due to revenue mix in the Company's transportation business.

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 September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	46,614		$	63,741		$	(17,127	)		(26.9	%)
Canadian Factory-built Housing		2,600			3,373			(773	)		(22.9	%)
Corporate/Other		15,240			16,801			(1,561	)		(9.3	%)
Total selling, general, and administrative expenses	$	64,454		$	83,915		$	(19,461	)		(23.2	%)
Selling, general, and administrative expense as a percent of net sales		13.9	%		10.4	%

Selling, general, and administrative expenses were $64.5 million for the three months ended September 30, 2023, a decrease of $19.5 million, or 23.2%, 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 decreased $17.1 million, or 26.9%, during the three months ended September 30, 2023 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 10.9% for the three months ended September 30, 2023 compared to 8.5% during the comparable period of the prior fiscal year primarily due to lower sales volume in relation to certain fixed costs. The decrease in selling, general, and administrative expenses resulted from lower sales commissions and incentive compensation which is generally based on sales volume or a measure of profitability.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment decreased $0.8 million, or 22.9%, for the three months ended September 30, 2023 when compared to the same period of the prior fiscal year. The decrease in selling, general, and administrative expenses is due primarily to incentive compensation which is based on sales volume and profitability. Selling, general, and administrative expenses as a percent of segment net sales increased to 8.9% for the three months ended September 30, 2023 compared to 8.6% during the comparable period of the prior fiscal year due to less absorption of fixed costs caused by lower 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 decreased $1.6 million, or 9.3%, during the three months ended September 30, 2023 as compared to the same period of the prior fiscal year due primarily to lower incentive compensation offset in part by higher equity-based compensation.

INTEREST (INCOME), NET

The following table summarizes the components of interest (income) expense, net for the three months ended September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Interest expense	$	362		$	992		$	(630	)		(63.5	%)
Less: interest income		(10,842	)		(2,966	)		(7,876	)		265.5	%
Interest (income), net	$	(10,480	)	$	(1,974	)	$	(8,506	)	*
Average outstanding floor plan payable	$	—		$	37,086
Average outstanding long-term debt	$	12,430		$	12,430

* indicates that the calculated percentage is not meaningful

Interest income, net was $10.5 million for the three months ended September 30, 2023, compared to $2.0 million in the same period of the prior fiscal year. The change was primarily due to higher interest income from higher average invested cash balances, higher interest rates earned on those cash balances, and the repayment of floor plan payables in the third quarter of fiscal 2023.

OTHER EXPENSE (INCOME)

The following table summarizes other income for the three months ended September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023		October 1, 2022		$ Change		% Change
Other expense (income)	$	2,065	$	—	$	2,065		100.0	%

Other expense of $2.1 million for the three months ended September 30, 2023 represents transaction costs incurred for the acquisition of Regional.

INCOME TAX EXPENSE

The following table summarizes income tax expense for the three months ended September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Income tax expense	$	14,781		$	48,073		$	(33,292	)		(69.3	%)
Effective tax rate		24.5	%		25.0	%

Income tax expense for the three months ended September 30, 2023 was $14.8 million, representing an effective tax rate of 24.5%, compared to income tax expense of $48.1 million, representing an effective tax rate of 25.0% for the three months ended October 1, 2022.

The Company’s effective tax rate for the three months ended September 30, 2023 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, and results in foreign jurisdictions. The Company’s effective tax rate for the three months ended October 1, 2022 differed 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, 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 September 30, 2023 and October 1, 2022:


	Three months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Net income	$	45,669		$	144,092		$	(98,423	)		(68.3	%)
Income tax expense		14,781			48,073			(33,292	)		(69.3	%)
Interest (income), net		(10,480	)		(1,974	)		(8,506	)	*
Depreciation and amortization		6,786			6,941			(155	)		(2.2	%)
Transaction costs		2,065			—			2,065		*
Adjusted EBITDA	$	58,821		$	197,132		$	(138,311	)		(70.2	%)

* indicates that the calculated percentage is not meaningful

Adjusted EBITDA for the three months ended September 30, 2023 was $58.8 million, a decrease of $138.3 million from the same period of the prior fiscal year. The decrease is primarily a result of lower operating income due to decreases in sales volume, average selling prices and gross margins, partially offset by lower SG&A expenses primarily related to incentive compensation on sales and profit levels.

UNAUDITED INCOME STATEMENTS FOR THE FIRST HALF OF FISCAL 2024 VS. 2023


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022
Income Statements Data:
Net sales	$	929,005		$	1,532,706
Cost of sales		682,843			1,029,265
Gross profit		246,162			503,441
Selling, general, and administrative expenses		134,893			156,197
Operating income		111,269			347,244
Interest (income), net		(19,781	)		(1,884	)
Other expense (income)		2,065			(634	)
Income before income taxes		128,985			349,762
Income tax expense		32,047			88,519
Net income	$	96,938		$	261,243

Reconciliation of Adjusted EBITDA:
Net income	$	96,938		$	261,243
Income tax expense		32,047			88,519
Interest (income), net		(19,781	)		(1,884	)
Depreciation and amortization		14,378			12,557
Transaction costs		2,065			338
Other		—			(973	)
Adjusted EBITDA	$	125,647		$	359,800
As a percent of net sales:
Gross profit		26.5	%		32.8	%
Selling, general, and administrative expenses		14.5	%		10.2	%
Operating income		12.0	%		22.7	%
Net income		10.4	%		17.0	%
Adjusted EBITDA		13.5	%		23.5	%

NET SALES

The following table summarizes net sales for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023		October 1, 2022		$ Change			% Change
Net sales	$	929,005	$	1,532,706	$	(603,701	)		(39.4	%)
U.S. manufacturing and retail net sales	$	856,917	$	1,415,318	$	(558,401	)		(39.5	%)
U.S. homes sold		9,659		14,087		(4,428	)		(31.4	%)
U.S. manufacturing and retail average home selling price	$	88.7	$	100.5	$	(11.8	)		(11.7	%)
Canadian manufacturing net sales	$	55,376	$	84,260	$	(28,884	)		(34.3	%)
Canadian homes sold		453		655		(202	)		(30.8	%)
Canadian manufacturing average home selling price	$	122.2	$	128.6	$	(6.4	)		(5.0	%)
Corporate/Other net sales	$	16,712	$	33,128	$	(16,416	)		(49.6	%)
U.S. manufacturing facilities in operation at end of period		39		37
U.S. retail sales centers in operation at end of period		31		31
Canadian manufacturing facilities in operation at end of period		5		5

Net sales for the six months ended September 30, 2023 were $929.0 million, a decrease of $603.7 million, or 39.4%, compared to the six months ended October 1, 2022. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations decreased by $558.4 million, or 39.5%, for the six months ended September 30, 2023 compared to the six months ended October 1, 2022. The decrease was primarily due to a 31.4% decrease in the number of homes sold during the period, as well as an 11.7% decrease in the average home selling price. The decrease in the number of homes sold was due to lower customer demand and lower production volume compared to the prior year. The average selling price decrease was due, in part, to

the impact of disaster relief housing sales of $200.3 million to FEMA in the first half of fiscal 2023, as well as customers choosing smaller homes with fewer or lower cost options and a reduction in material surcharges. FEMA units generally have more specifications than our typical products and therefore drive a higher average selling price per home. The decline in sales was partially offset by sales from the start-up of new plants.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales decreased by $28.9 million, or 34.3% for the six months ended September 30, 2023 compared to the same period in the prior fiscal year, primarily due to a 30.8% decrease in homes sold and a 5.0% decrease in average home selling price. The decrease in homes sold is due to slowing demand. We also reduced prices on certain models in order to respond to changes in demand. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $2.6 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the six months ended September 30, 2023 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 six months ended September 30, 2023, net sales decreased $16.4 million, or 49.6%, primarily attributable to the decrease in recreational vehicle shipments.

GROSS PROFIT

The following table summarizes gross profit for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Gross profit:
U.S. Factory-built Housing	$	223,508		$	466,381		$	(242,873	)		(52.1	%)
Canadian Factory-built Housing		15,035			27,965			(12,930	)		(46.2	%)
Corporate/Other		7,619			9,095			(1,476	)		(16.2	%)
Total gross profit	$	246,162		$	503,441		$	(257,279	)		(51.1	%)
Gross profit as a percent of net sales		26.5	%		32.8	%

Gross profit as a percent of sales during the six months ended September 30, 2023 was 26.5% compared to 32.8% during the six months ended October 1, 2022. 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 decreased by $242.9 million, or 52.1%, during the six months ended September 30, 2023 compared to the same period in the prior fiscal year. Gross profit was 26.1% as a percent of segment net sales for the six months ended September 30, 2023 compared to 33.0% in the same period of the prior fiscal year. The decrease in gross profit as a percent of segment net sales is being driven by lower unit volume and changes in product mix including the decrease in FEMA sales which are generally at higher prices than our core products.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment decreased by $12.9 million, or 46.2% during the six months ended September 30, 2023 compared to the same period in the prior fiscal year. The decrease in gross profit is primarily due to lower sales volumes and production. Gross profit as a percent of net sales was 27.2% for the six months ended September 30, 2023, compared to 33.2% in the same period of the prior year, primarily the result of decreased leverage of fixed manufacturing costs.

Corporate/Other:

Gross profit for the Corporate/Other segment decreased $1.5 million, or 16.2%, during the six months ended September 30, 2023 compared to the same period of the prior fiscal year. Gross profit increased as a percent of segment net sales to 45.6% from 27.5% due to revenue mix in the Company's transportation business.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	97,893		$	116,795		$	(18,902	)		(16.2	%)
Canadian Factory-built Housing		5,220			7,122			(1,902	)		(26.7	%)
Corporate/Other		31,780			32,280			(500	)		(1.5	%)
Total selling, general, and administrative expenses	$	134,893		$	156,197		$	(21,304	)		(13.6	%)
Selling, general, and administrative expense as a percent of net sales		14.5	%		10.2	%

Selling, general, and administrative expenses were $134.9 million for the six months ended September 30, 2023, a decrease of $21.3 million, or 13.6%, 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 decreased $18.9 million, or 16.2%, during the six months ended September 30, 2023 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 11.4% for the six months ended September 30, 2023 compared to 8.3% during the comparable period of the prior fiscal year primarily due to lower sales volume in relation to certain fixed costs and the investment in new plant operations and the acquisition of Factory Expo. The decrease in selling, general, and administrative expenses resulted from lower sales commissions and incentive compensation which is generally based on sales volume or a measure of profitability, partially offset by expenses for business acquired in fiscal 2023 and investments in new capacity.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment decreased $1.9 million, or 26.7%, for the six months ended September 30, 2023 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increased to 9.4% for the six months ended September 30, 2023 compared to 8.5% during the comparable period of the prior fiscal year due to less absorption of fixed costs caused by lower sales. The decrease in selling, general, and administrative expenses is due primarily to a reduction in incentive compensation which is based on sales volume and 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 decreased $0.5 million, or 1.5%, during the six months ended September 30, 2023 as compared to the same period of the prior fiscal year due primarily to lower incentive compensation, more favorable currency translation adjustments for Canadian denominated cash offset in part by higher equity-based compensation.

INTEREST (INCOME) EXPENSE, NET

The following table summarizes the components of interest (income) expense, net for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Interest expense	$	739		$	1,895		$	(1,156	)		(61.0	%)
Less: interest income		(20,520	)		(3,779	)		(16,741	)	*
Interest (income), net	$	(19,781	)	$	(1,884	)	$	(17,897	)	*
Average outstanding floor plan payable	$	—		$	37,522
Average outstanding long-term debt	$	12,430		$	12,430

* indicates that the calculated percentage is not meaningful

Interest income, net was $19.8 million for the six months ended September 30, 2023, compared to $1.9 million in the same period of the prior fiscal year. The change was primarily due to higher interest income from higher average invested cash balances and higher interest rates earned on those cash balances, as well as lower interest expense due to the repayment of floor plan payables in the third quarter of fiscal 2023.

OTHER EXPENSE (INCOME)

The following table summarizes other income for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023		October 1, 2022			$ Change		% Change
Other expense (income)	$	2,065	$	(634	)	$	2,699		(425.7	%)

Other expense of $2.1 million for the six months ended September 30, 2023 represents transaction costs incurred for the acquisition of Regional. Other income of $0.6 million for the six months ended October 1, 2022 was a result of insurance proceeds for partial settlement of certain Champion Home Builders’ pre-bankruptcy workers compensation claims, which was partially offset by transaction costs incurred for the acquisition of Manis.

INCOME TAX EXPENSE

The following table summarizes income tax expense for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Income tax expense	$	32,047		$	88,519		$	(56,472	)		(63.8	%)
Effective tax rate		24.8	%		25.3	%

Income tax expense for the six months ended September 30, 2023 was $32.0 million, representing an effective tax rate of 24.8%, compared to income tax expense of $88.5 million, representing an effective tax rate of 25.3% for the six months ended October 1, 2022.

The Company’s effective tax rate for the six months ended September 30, 2023 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, and results in foreign jurisdictions. The Company’s effective tax rate for the six months ended October 1, 2022 differed 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, 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 six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022			$ Change			% Change
Net income	$	96,938		$	261,243		$	(164,305	)		(62.9	%)
Income tax expense		32,047			88,519			(56,472	)		(63.8	%)
Interest (income), net		(19,781	)		(1,884	)		(17,897	)	*
Depreciation and amortization		14,378			12,557			1,821			14.5	%
Transaction costs		2,065			338			1,727		*
Other		—			(973	)		973		*
Adjusted EBITDA	$	125,647		$	359,800		$	(234,153	)		(65.1	%)

* indicates that the calculated percentage is not meaningful

Adjusted EBITDA for the six months ended September 30, 2023 was $125.6 million, a decrease of $234.2 million from the same period of the prior fiscal year. The decrease is primarily a result of lower operating income due to decreases in sales volume, average selling prices and gross margins, partially offset by lower SG&A expenses.

The Company defines Adjusted EBITDA as net income or loss plus expense or minus income: (a) the provision for income taxes; (b) interest (income) expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) non-cash restructuring charges and impairment of assets; and (f) other non-operating income and costs, including but not limited to those costs for the acquisition and integration or disposition of businesses and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. 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.

Adjusted EBITDA is presented as a supplemental measure of the Company’s financial performance that management believes is useful to investors, because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company’s operating activities across reporting periods. Management believes Adjusted EBITDA is useful to an investor in evaluating operating performance for the following reasons: (i) Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest income and expense, taxes, depreciation and amortization and equity-based compensation, which can vary substantially from company to company depending upon accounting methods and the book value of assets, capital structure and the method by which assets were acquired; and (ii) analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry.

Management uses Adjusted EBITDA for planning purposes, including the preparation of internal annual operating budget and periodic forecasts: (i) in communications with the Board of Directors and investors concerning financial performance; (ii) as a factor in determining bonuses under certain incentive compensation programs; and (iii) as a measure of operating performance used to determine the ability to provide cash flows to support investments in capital assets, acquisitions and working capital requirements for operating expansion.

BACKLOG

Although orders from customers can be canceled 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 September 30, 2023 totaled $257.8 million compared to $814.0 million at October 1, 2022. The decrease in backlog is due to the reduction in overall housing demand. In addition, many of our community customers have reduced order rates in response to excess inventory in their sales channels. Cancellation of end-customer orders, at the retail level, has been minimal.

Liquidity and Capital Resources

Sources and Uses of Cash

The following table presents summary cash flow information for the six months ended September 30, 2023 and October 1, 2022:


	Six months ended
(Dollars in thousands)	September 30, 2023			October 1, 2022
Net cash provided by (used in):
Operating activities	$	129,138		$	278,566
Investing activities		(174,639	)		(32,291	)
Financing activities		(758	)		2,260
Effect of exchange rate changes on cash, cash equivalents		(39	)		(6,944	)
Net (decrease) increase in cash and cash equivalents		(46,298	)		241,591
Cash and cash equivalents at beginning of period		747,453			435,413
Cash and cash equivalents at end of period	$	701,155		$	677,004

The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements, capital expenditures, and strategic initiatives and investments. The Company has an Amended Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At September 30, 2023, $166.0 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 and beyond. 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 its operating strategies.

Cash provided by operating activities was $129.1 million for the six months ended September 30, 2023 compared to $278.6 million for the six months ended October 1, 2022. The decrease was primarily driven by lower net income in fiscal 2024, partially offset by more favorable changes in working capital items during the first six months of fiscal 2024.

Cash used in investing activities was $174.6 million for the six months ended September 30, 2023 compared to $32.3 million for the six months ended October 1, 2022. The increase in cash used for investing activities was related to the Company's investment in ECN common and preferred stock in fiscal 2024 and the Company's investment in floor plan loans in fiscal 2024, net of payments received.

Cash used in financing activities was $0.8 million for the six months ended September 30, 2023 compared to cash provided by financing activities of $2.3 million for the six months ended October 1, 2022. The change in cash between periods was primarily due to borrowings on floor plan financing in fiscal 2023 that did not reoccur in fiscal 2024.

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 2023 Annual Report, under the heading “Critical Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal 2023 Annual Report, other than those included in Note 1, "Basis of Presentation".

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:

•

supply-related issues, including prices and availability of materials;

•

labor-related issues;

•

inflationary pressures in the North American economy;

•

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, including as a result of actual or anticipated increases in homeowner borrowing rates;

•

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, cyber security 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 our supply chain, 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 all or part of our investment in ECN might become impaired;

•

the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks;

•

the potential disruption to our business caused by public health issues, such as an epidemic or pandemic, and resulting government actions; and

•

other risks described in Part I — Item 1A, "Risk Factors," included in the Fiscal 2023 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 (the “SEC”).

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.

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 2023 Annual Report, under the heading "Quantitative and Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since April 1, 2023.

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 Rule 13a-15(e) of the Exchange Act at September 30, 2023. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.

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.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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.

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.

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	November 1, 2023
Mark Yost	(Principal Executive Officer)

/s/ Laurie Hough	Executive Vice President, Chief Financial Officer and Treasurer	November 1, 2023
Laurie Hough	(Principal Financial Officer)