Filing summary
Reporting period and entity: This is Skyline Champion Corporation’s Form 10-K for the fiscal year ended April 2, 2022 (fiscal 2022, 52 weeks). The prior year ended April 3, 2021 and included 53 weeks. Although the request metadata says “Champion Homes, Inc.” and “2021 Q4,” the filing identifies the registrant as Skyline Champion Corporation (NYSE: SKY) and reports a full fiscal year, not a quarterly period.
The company manufactures factory-built homes and modular structures in the U.S. and western Canada, and also operates retail, installation and transportation businesses. It reported 41 manufacturing facilities, 18 U.S. retail centers and approximately 8,400 employees at fiscal year-end.
Key financial results
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Net sales | $2,207.2 million | $1,420.9 million |
| Gross profit / gross margin | $589.1 million / 26.7% | $287.7 million / 20.2% |
| Operating income / margin | $332.9 million / 15.1% | $108.8 million / 7.7% |
| Net income / net margin | $248.0 million / 11.2% | $84.9 million / 6.0% |
| Diluted earnings per share | $4.33 | $1.49 |
| Adjusted EBITDA / margin | $353.9 million / 16.0% | $134.8 million / 9.5% |
| Cash from operating activities | $224.5 million | $153.9 million |
Sales increased 55.3%. U.S. manufacturing and retail home sales rose 57.2%, with units sold up 23.5% and average selling price up 27.3%. Canadian manufacturing sales rose 57.0%, with units up 20.1% and average price up 30.7%. The company attributed growth to strong demand, ScotBilt acquisition contributions, pricing actions and a richer product mix. Gross-margin gains reflected pricing and improved production and labor efficiencies.
Cash and cash equivalents were $435.4 million at year-end, versus $262.6 million a year earlier. Current assets were $782.3 million and current liabilities were $350.1 million. Long-term debt was $12.4 million, consisting of industrial revenue bonds; retail floor-plan borrowings were $35.5 million. The company had a $200 million revolving facility, with $169.6 million available at year-end, and reported covenant compliance. It had no scheduled long-term debt maturities in the following 12 months.
Material changes and notable items
- Backlog increased to approximately $1.6 billion from $858.6 million. Management said orders substantially outpaced production; orders can be cancelled before production begins.
- Inventory rose to $241.3 million from $166.1 million, partly reflecting higher material costs and increased stocking to address supply disruption.
- Capital expenditures were $32.0 million, compared with $8.0 million in fiscal 2021. Cash used in investing activities was $32.0 million, down from $56.8 million, which included the prior-year ScotBilt acquisition.
- The company acquired two idle facilities in Navasota, Texas, and began production at one in fiscal Q4. It was renovating a North Carolina facility for anticipated production in late fiscal 2023. A May 2022 acquisition of Manis operating assets for approximately $10 million occurred after year-end.
- A February 2022 FEMA disaster-relief order represented approximately $200 million of revenue, with completion expected by September 2022.
- Fiscal 2021 included $6.2 million of Canadian wage subsidies and $0.7 million of U.S. payroll subsidies, which did not recur at comparable levels in fiscal 2022. The company repaid $5.9 million of deferred payroll taxes in fiscal 2022 and expected to repay the remaining $5.9 million in December 2022.
Outlook, risks and contingencies
Management said demand for affordable housing remained robust and stated that cash balances and expected operating cash flows should cover working capital, capital expenditures and strategic investments for the next year. It provided no specific forward revenue or earnings guidance. Management expects to pursue facility capacity improvements, automation and digital investments, and balanced organic and acquisition-led growth.
Key risks include supply shortages and inflation in materials, labor and freight; labor availability and production capacity constraints; higher interest rates or tighter consumer and retailer financing; cancellations from extended lead times or higher prices; housing-market cyclicality; and execution risks from acquisitions and a multi-year cloud-system implementation. Management generally passed higher input costs to customers but cautioned that continued cost increases or price competition could limit its ability to do so. The company also cited pandemic-related disruption, product quality and warranty exposure, cybersecurity risks, regulatory and zoning constraints, and foreign-exchange exposure.
Contingent repurchase obligations for retailer floor-plan financing were approximately $339.5 million before considering resale value; the related reserve was $2.3 million, and recent losses were described as insignificant. Letters of credit totaled $30.4 million and surety bonds $35.6 million. Management did not expect pending ordinary-course legal matters to have a material adverse effect. The company paid no dividend and said it expected to retain earnings for the foreseeable future.
The filing reports effective disclosure controls and internal control over financial reporting. Ernst & Young issued unqualified opinions on the financial statements and internal controls; workers’ compensation reserves of $19.8 million were identified as a critical audit matter.
Investor verification priorities
- Check whether the $1.6 billion backlog converted to shipments and revenue, and monitor cancellations, production lead times and the expected completion of the FEMA order.
- Assess whether price increases continue to offset material, freight and labor inflation without weakening demand or margins.
- Review working-capital needs, inventory levels, capital spending and available revolver capacity as the company expands production and implements its new systems.
- Evaluate the potential cash and loss exposure from the $339.5 million repurchase commitments, alongside the $2.3 million reserve and collateral resale values.
- Track facility ramp-ups, the Manis acquisition, and execution of the digital-platform and cloud-system investments.