Skyline Champion Corporation (NYSE:SKY) (“Skyline Champion”) announced earnings for its fiscal first quarter ended June 30, 2018 of the fiscal year ending March 30, 2019 (“fiscal 2019”).
In an August release to the Daily Business News on MHProNews, per their statement:
“On June 1, 2018, Skyline Corporation (“Skyline”) and Champion Enterprises Holdings, LLC (“Champion”), the parent company of Champion Home Builders, Inc., completed the previously announced combination of their operations (the “Combination”). The combined company operates as Skyline Champion Corporation and is traded on the New York Stock Exchange under the ticker symbol “SKY”. Due to the timing of the Combination and the adoption of Champion’s fiscal year reporting period, the first quarter fiscal 2019 results for Skyline Champion include three months of Champion’s results and Skyline’s results for the month of June. Results for the first quarter ended July 1, 2017 of the fiscal year ended March 31, 2018 (“fiscal 2018”) are the results of Champion.”
First Quarter Fiscal 2019 Highlights (compared to First Quarter Fiscal 2018)
- Net sales increased 32% to $322.3 million
- Total homes sold increased 19% to 4,898
- Gross margin expanded by 230 basis points to 17.1%
- Net loss of $0.9 million, compared to net income of $5.3 million, the year-over-year decline was due to increased SG&A and tax expense associated with the Combination
- Adjusted EBITDA increased 109% to $22.7 million
- Adjusted EBITDA margin expanded by 260 basis points to 7.1%
“I am excited to be reporting our results for the first time as Skyline Champion. The business performed well during the quarter driven by strong demand in most of our U.S. markets as well as Canada,” said Keith Anderson, Skyline Champion’s Chief Executive Officer.
“I am pleased with our progress on the integration of our business and with the blending of our complementary cultures, providing a great opportunity to expand our role as one of the industry’s leaders. We are making progress toward achieving our targeted synergies,” said Anderson.
The statement came with the usual legal disclaimers required by publicly traded companies. “As we look forward and the market remains healthy, we are well positioned with $222 million of backlog at June 2018. In addition, we continue to see positive developments on the financing front, with more competitive retail financing programs for both chattel and land home segments that should help drive improved order rates.”
First Quarter Fiscal 2019 Results, Per Skyline Champion (SKY)
Net sales for the first quarter fiscal 2019 increased by 32% to $322.3 million compared to the prior-year period. The increase in net sales was driven by an increase in the number of homes sold as well as an increase in average selling price (“ASP”) per home sold. The number of U.S. factory-built homes sold by Skyline Champion in the first quarter fiscal 2019 increased by 20% to 4,536 with ASPs increasing by 15% to $58,600. Unit volume increased due to added capacity from the Skyline facilities in June 2018, as well as improved operating efficiencies throughout the organization. Home sales prices increased in order to offset rising material cost inflation while remaining price competitive and continuing to offer affordable housing alternatives to our customers. The number of Canadian factory-built homes sold increased by 13%.
Gross profit increased by 53% to $55.2 million compared to the prior-year period. Gross margin was 17.1% for the first quarter fiscal 2019, which was a 230-basis point improvement compared to 14.8% in the first quarter fiscal 2018. Our gross margin expansion was driven by increased volumes of homes sold and an increase in the average selling prices of homes sold. Skyline Champion also drove an increase in gross profit margins by offsetting a rise in material prices and labor costs with operational improvements and product rationalization.
Selling, general and administrative expenses (“SG&A”) in the first quarter fiscal 2019 increased to $45.1 million from $26.8 million in the same period last year, primarily due to an increase in non-cash, equity-based compensation, transaction fees, integration and restructuring costs associated with the Combination. SG&A as a percent of net sales increased to 14.0% from 11.0% in the prior year period.
The net loss for the first quarter fiscal 2019 was $0.9 million, compared to net income of $5.3 million during the same period from the prior year. The decline in net income was driven by an increase in income tax expense as well as SG&A expenses related to the Combination. Skyline Champion’s effective income tax rate for the first quarter fiscal 2019 was impacted by the non-deductibility of certain transaction-related expenses and non-cash equity compensation.
Adjusted EBITDA for the first quarter fiscal 2019 increased by 109% to $22.7 million compared to the first quarter fiscal 2018. The increase was primarily caused by higher sales volumes, improved gross profit and leveraging of fixed costs. The Adjusted EBITDA margin expanded by 260 basis points to 7.1%
As of June 30, 2018, Skyline Champion had $80.9 million of cash and cash equivalents and $30.5 million of unused borrowing capacity under its revolving credit facility.
Notice. The graphics above are from elements of the Skyline Champion IR presentation, available, at this link here. This article should not be construed as an endorsement for or against their stock.
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