Market Overview

Skyline Champion Announces First Quarter Fiscal 2019 Results


Skyline Champion Corporation (NYSE:SKY) ("Skyline Champion"), today
announced earnings for its fiscal first quarter ended June 30, 2018 of
the fiscal year ending March 30, 2019 ("fiscal 2019").

On June 1, 2018, Skyline Corporation ("Skyline") and Champion
Enterprises Holdings, LLC ("Champion"), the parent company of Champion
Home Builders, Inc., completed the previously announced combination of
their operations (the "Combination"). The combined company operates as
Skyline Champion Corporation and is traded on the New York Stock
Exchange under the ticker symbol "SKY". Due to the timing of the
Combination and the adoption of Champion's fiscal year reporting period,
the first quarter fiscal 2019 results for Skyline Champion include three
months of Champion's results and Skyline's results for the month of
June. Results for the first quarter ended July 1, 2017 of the fiscal
year ended March 31, 2018 ("fiscal 2018") are the results of Champion.

First Quarter Fiscal 2019 Highlights (compared to First Quarter
Fiscal 2018)

  • Net sales increased 32% to $322.3 million
  • Total homes sold increased 19% to 4,898
  • Gross margin expanded by 230 basis points to 17.1%
  • Net loss of $0.9 million, compared to net income of $5.3 million, the
    year-over-year decline was due to increased SG&A and tax expense
    associated with the Combination
  • Adjusted EBITDA increased 109% to $22.7 million
  • Adjusted EBITDA margin expanded by 260 basis points to 7.1%

"I am excited to be reporting our results for the first time as Skyline
Champion. The business performed well during the quarter driven by
strong demand in most of our U.S. markets as well as Canada," said Keith
Anderson, Skyline Champion's Chief Executive Officer. "I am pleased with
our progress on the integration of our business and with the blending of
our complementary cultures, providing a great opportunity to expand our
role as one of the industry's leaders. We are making progress toward
achieving our targeted synergies."

"As we look forward and the market remains healthy, we are well
positioned with $222 million of backlog at June 2018. In addition, we
continue to see positive developments on the financing front, with more
competitive retail financing programs for both chattel and land home
segments that should help drive improved order rates."

First Quarter Fiscal 2019 Results

Net sales for the first quarter fiscal 2019 increased by 32% to $322.3
million compared to the prior-year period. The increase in net sales was
driven by an increase in the number of homes sold as well as an increase
in average selling price ("ASP") per home sold. The number of U.S.
factory-built homes sold by Skyline Champion in the first quarter fiscal
2019 increased by 20% to 4,536 with ASPs increasing by 15% to $58,600.
Unit volume increased due to added capacity from the Skyline facilities
in June 2018, as well as improved operating efficiencies throughout the
organization. Home sales prices increased in order to offset rising
material cost inflation while remaining price competitive and continuing
to offer affordable housing alternatives to our customers. The number of
Canadian factory-built homes sold increased by 13%.

Gross profit increased by 53% to $55.2 million compared to the
prior-year period. Gross margin was 17.1% for the first quarter fiscal
2019, which was a 230-basis point improvement compared to 14.8% in the
first quarter fiscal 2018. Our gross margin expansion was driven by
increased volumes of homes sold and an increase in the average selling
prices of homes sold. Skyline Champion also drove an increase in gross
profit margins by offsetting a rise in material prices and labor costs
with operational improvements and product rationalization.

Selling, general and administrative expenses ("SG&A") in the first
quarter fiscal 2019 increased to $45.1 million from $26.8 million in the
same period last year, primarily due to an increase in non-cash,
equity-based compensation, transaction fees, integration and
restructuring costs associated with the Combination. SG&A as a percent
of net sales increased to 14.0% from 11.0% in the prior year period.

The net loss for the first quarter fiscal 2019 was $0.9 million,
compared to net income of $5.3 million during the same period from the
prior year. The decline in net income was driven by an increase in
income tax expense as well as SG&A expenses related to the Combination.
Skyline Champion's effective income tax rate for the first quarter
fiscal 2019 was impacted by the non-deductibility of certain
transaction-related expenses and non-cash equity compensation.

Adjusted EBITDA for the first quarter fiscal 2019 increased by 109% to
$22.7 million compared to the first quarter fiscal 2018. The increase
was primarily caused by higher sales volumes, improved gross profit and
leveraging of fixed costs. The Adjusted EBITDA margin expanded by 260
basis points to 7.1%

As of June 30, 2018, Skyline Champion had $80.9 million of cash and cash
equivalents and $30.5 million of unused borrowing capacity under its
revolving credit facility.

Conference Call and Webcast Information:

Skyline Champion management will host a conference call today, August 8,
2018, at 8 a.m. Eastern Time, to discuss Skyline Champion's financial

Investors and other interested parties can listen to a webcast of the
live conference call by logging onto the Investor Relations section of
Skyline Champion's website at
The online replay will be available on the same website immediately
following the call.

The conference call can also be accessed by dialing (877) 407-4018
(domestic) or (201) 689-8471 (international). A telephonic replay will
be available approximately two hours after the call by dialing (844)
512-2921, or for international callers, (412) 317-6671. The passcode for
the live call and the replay is 13682191. The replay will be available
until 11:59 P.M. Eastern Time on August 21, 2018.

About Skyline Champion Corporation:

Skyline Champion Corporation (NYSE:SKY) was formed in June 2018 as the
result of the Combination of Skyline Corporation and the operating
assets of Champion Enterprises Holdings, LLC. The combined company
employs more than 6,800 people and is the largest independent
factory-built housing company in North America. With more than 65 years
of homebuilding experience and 36 manufacturing facilities throughout
the United States and western Canada, Skyline Champion is well
positioned with a leading portfolio of manufactured and modular homes,
park-models and modular buildings for the multi-family, hospitality,
senior and workforce housing sectors.

In addition to its core home building business, Skyline Champion
operates a factory-direct retail business, Titan Factory Direct, with 21
retail locations spanning the southern United States, and Star Fleet
Trucking, providing transportation services to the manufactured housing
and other industries from 10 dispatch locations across the United States.

Skyline Champion builds homes under some of the most well know brand
names in the factory-built housing industry including Skyline Homes,
Champion Home Builders, Athens Park Models, Dutch Housing, Excel Homes,
Homes of Merit, New Era, Redman Homes, Shore Park, Silvercrest, Titan
Homes in the U.S. and Moduline and SRI Homes in western Canada.

Learn more about our products and services the following company brand

Manufactured and Modular Homes

Park Model RVs

Modular Buildings

Retail Sales Centers

Transportation Services

Presentation of Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. generally
accepted accounting principles ("GAAP") throughout this press release,
Skyline Champion has provided non-GAAP financial measures—Adjusted
EBITDA and Adjusted EBITDA margin—which present operating results on a
basis adjusted for certain items. Skyline Champion uses these non-GAAP
financial measures for business planning purposes and in measuring its
performance relative to that of its competitors. Skyline Champion
believes that these non-GAAP financial measures are useful financial
metrics to assess its operating performance from period-to-period by
excluding certain items that Skyline Champion believes are not
representative of its core business. These non-GAAP financial measures
are not intended to replace, and should not be considered superior to,
the presentation of Skyline Champion's financial results in accordance
with GAAP.

Adjusted EBITDA

Skyline Champion defines Adjusted EBITDA as net income or loss plus (a)
the provision for income taxes, (b) interest expense, net, (c)
depreciation and amortization, (d) gain or loss from discontinued
operations, (e) foreign currency gains and losses, (f) equity based
compensation, (g) restructuring charges and impairment of assets, and
(h) other non-operating costs including those for the acquisition and
integration or disposition of businesses and idle facilities. Adjusted
EBITDA is not a measure of earnings calculated in accordance with GAAP,
and should not be considered an alternative to, or more meaningful than,
net income or loss, net sales, operating income or earnings per share
prepared on a GAAP basis. Skyline Champion believes that Adjusted EBITDA
is commonly used by investors to evaluate its performance and that of
its competitors. However, Skyline Champion's use of Adjusted EBITDA may
vary from that of others in our industry. Adjusted EBITDA is reconciled
from the respective measures under GAAP in the tables below.

Forward-Looking Statements

Statements in this press release regarding the potential benefits
created by the Combination, including potential synergies, the future
performance of Skyline Champion, market demand and backlogs, and the
availability of financing are intended to be covered by the safe harbor
for "forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
generally can be identified by use of words such as "believe," "expect,"
"future," "anticipate," "intend," "plan," "foresee," "may," "should,"
"will," "estimates," "potential," "continue," or other similar words or
phrases. Similarly, statements that describe objectives, plans, or goals
also are forward-looking statements. Such forward-looking statements
involve inherent risks and uncertainties, many of which are difficult to
predict and are generally beyond the control of Skyline Champion.
Skyline Champion cautions readers that a number of important factors
could cause actual results to differ materially from those expressed in,
implied, or projected by such forward-looking statements. Risks and
uncertainties include, but are not limited to: Skyline Champion's
inability to realize the expected benefits from the transaction, general
economic conditions; availability of wholesale and retail financing; the
health of the U.S. housing market as a whole; federal, state, and local
regulations pertaining to the manufactured housing industry; the
cyclical nature of the manufactured housing industry; general or
seasonal weather conditions affecting sales; potential impact of natural
disasters on sales and raw material costs; potential periodic inventory
adjustments by independent retailers; interest rate levels; the impact
of inflation; the impact of high or rising fuel costs; the cost of labor
and raw materials; competitive pressures on pricing and promotional
costs; Skyline Champion's relationships with its shareholders,
customers, and other stakeholders; catastrophic events impacting
insurance costs; the availability of insurance coverage for various
risks to Skyline Champion; market demographics; and management's ability
to attract and retain executive officers and key personnel and other
risks and uncertainties more fully described in Exhibit 99.3 to Skyline
Champion's Current Report on Form 8-K filed with the Securities and
Exchange Commission ("SEC") on July 13, 2018, as well as the other
filings that Skyline Champion makes with the SEC.

If any of these risks or uncertainties materializes or if any of the
assumptions underlying such forward-looking statements proves to be
incorrect, the developments and future events concerning Skyline
Champion set forth in this press release may differ materially from
those expressed or implied by these forward-looking statements. You are
cautioned not to place undue reliance on these statements, which speak
only as of the date of this document. We anticipate that subsequent
events and developments will cause our expectations and beliefs to
change. Skyline Champion assumes no obligation to update such
forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated
events, unless obligated to do so under the federal securities laws.


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

June 30, March 31,
2018 2018
Current assets:
Cash and cash equivalents $ 80,891 $ 113,731
Trade accounts receivable, net 56,006 41,984
Inventories 114,105 98,022
Other current assets   12,530     9,367  
Total current assets   263,532     263,104  

Property, plant and equipment, net



Restricted cash - 22,885
Goodwill 178,041 3,179
Amortizable intangible assets, net 44,357 1,542
Deferred tax assets 38,538 30,290
Other noncurrent assets   12,942     6,438  
Total assets $ 649,358   $ 395,398  
Current liabilities:
Floor plan payable $ 29,501 $ 29,825
Short-term portion of debt - 404
Accounts payable 43,262 36,773
Other current liabilities   113,842     100,112  
Total current liabilities   186,605     167,114  

Long-term liabilities:

Long-term debt 59,330 58,927
Deferred tax liabilities 3,321 3,294
Other long-term liabilities   20,533     12,766  
Total long-term liabilities   83,184     74,987  
Contingent liabilities (Note 17)

Common stock, $0.0277 par value, 115,000 shares authorized, 56,188
issued as of June 30, 2018

1,556 -
Additional paid-in capital 388,854 -
Members' contributed capital - 140,076
Retained earnings (accumulated deficit) (853 ) 22,514
Accumulated other comprehensive loss   (9,988 )   (9,293 )
Total equity   379,569     153,297  
Total liabilities and equity $ 649,358   $ 395,398  


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

Three Months Ended

June 30,


July 1,

Net sales $ 322,261 $ 244,103
Cost of sales   267,101     208,071
Gross profit 55,160 36,032
Selling, general, and administrative expenses   45,088     26,798
Operating income 10,072 9,234
Interest expense, net 1,072 1,101
Other expense   6,413     81
Income before income taxes 2,587 8,052
Income tax expense   3,440     2,789
Net (loss) income $ (853 ) $ 5,263
Comprehensive (loss) income:
Net (loss) income $ (853 ) $ 5,263
Foreign currency translation (loss) gain   (695 )   817
Comprehensive (loss) income $ (1,548 ) $ 6,080

(Dollars in thousands)


Three Months Ended

June 30,

  July 1, 2017
Cash flows from operating activities
Net (loss) income $ (853 ) $ 5,263

Adjustments to reconcile net (loss) income to net cash provided by

Depreciation 2,430 1,842
Amortization of intangible assets 481 126
Amortization of deferred financing fees 159 15
Equity-based compensation 8,088 150
Deferred income taxes 1,251 1,168
(Gain) loss on disposal of property, plant and equipment (1 ) 12
Foreign currency transaction loss (gain) 67 (479 )
(Increase) decrease in assets net of business acquired
Accounts receivable (178 ) (4,656 )
Inventories 2,648 (6,664 )
Prepaid expenses (2,093 ) (2,288 )
Other assets 478 1,158
Increase (decrease) in liabilities net of business acquired
Accounts payable (3,306 ) 3,681
Accrued expenses (5,832 ) (7,372 )
Other liabilities   926     6,147  
Net cash provided by (used in) operating activities   4,265     (1,897 )
Cash flows from investing activities
Additions to property, plant, and equipment (2,020 ) (3,958 )
Cash assumed in business acquisition 9,722 -
Proceeds from disposal of property, plant and equipment 1 388
Decrease in note receivable   35     22  
Net cash provided by (used in) investing activities   7,738     (3,548 )
Cash flows from financing activities
Borrowings on revolving credit facility 46,900 -
Changes in floor plan financing, net (325 ) 2,012
Payments on term loans and capital leases (46,899 ) (109 )
Payments for deferred financing fees (1,901 ) -
Members' capital distributions   (65,277 )   -  
Net cash (used in) provided by financing activities   (67,502 )   1,903  
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
  (226 )   687  
Net decrease in cash, cash equivalents and restricted cash during
the period
(55,725 ) (2,855 )
Cash, cash equivalents and restricted cash at beginning of period   136,616     102,692  
Cash, cash equivalents and restricted cash at end of period $ 80,891   $ 99,837  
Supplemental disclosures of cash flow information
Cash paid for income taxes, net of refunds $ 1,292 $ 1,594
Cash paid for interest $ 1,456 $ 1,398

(Dollars in thousands)


Three Months Ended

June 30,


July 1,




Net (loss) income $ (853 ) $ 5,263 $ (6,116 ) (116.2 %)
Income tax expense 3,440 2,789 651 23.3 %
Interest expense, net 1,072 1,101 (29 ) (2.6 %)
Depreciation and amortization 2,911 1,968 943 47.9 %
Foreign currency loss (gain) 67 (479 ) 546 114.0 %
Transaction costs 6,413 90 6,323 N/M
Acquisition integration costs 1,189 - 1,189 100.0 %
Equity-based compensation 8,088 150 7,938 N/M
Restructuring charges and other   408     7     401   N/M
Adjusted EBITDA $ 22,735   $ 10,889   $ 11,846   108.8 %
"N/M" indicates that the calculated percentage is not meaningful.

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