Champion Homes, Inc 8-K/A, filed Dec 28, 2023
Champion Homes, Inc. (SKY)
About this 8-K/A
Champion Homes, Inc filed this 8-K/A on December 28, 2023, reporting on events of October 13, 2023.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Trading |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
Introductory Note
As previously reported by Skyline Champion Corporation (the “Company”) in its Current Report on Form 8-K filed on October 19, 2023 (the “Original Filing”), on October 13, 2023, the Company completed the acquisition of 100% of the equity interests (the “Transaction”) of Regional Enterprises, LLC and related companies (collectively, “Regional Homes”), which prior to the Transaction were subsidiaries of Regional Holdings Corporation.
The Company is filing this Current Report on Form 8-K/A (this “Amendment”) to amend and supplement the Original Filing to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.
Except as described above, no other changes have been made to the Original Filing and this Amendment does not modify or update any other information in the Original Filing. Information in the Original Filing not affected by the inclusion of the financial information described above and attached hereto remains unchanged. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Company’s filings with the Securities and Exchange Commission dated subsequent to the date of the Original Filing.
Item 9.01 Financial Statements and Exhibits.
a) |
Financial statements of the businesses acquired |
The audited consolidated financial statements of Regional Holdings Corporation as of and for the year ended December 31, 2022, which include the financial information of Regional Homes (in addition to certain subsidiaries not acquired in the Transaction), are filed as exhibit 99.1 to this Amendment and incorporated by reference herein.
The unaudited consolidated financial statements of Regional Holdings Corporation as of and for the six months ended June 30, 2023, which include the financial information of Regional Homes (in addition to certain subsidiaries not acquired in the Transaction), are filed as exhibit 99.2 to this Amendment and incorporated by reference herein.
b) |
Pro forma financial information |
(i) the Company’s unaudited pro forma condensed combined balance sheet as of September 30, 2023, after giving effect to the Transaction as if it had been completed on September 30, 2023; (ii) the Company’s unaudited pro forma condensed combined income statements for the six months ended September 30, 2023 and the year ended April 1, 2023 after giving effect to the Transaction, in each case, as if it had been completed on April 3, 2022; and (iii) the related notes to the unaudited pro forma financial information, filed as Exhibit 99.3 to this Amendment and incorporated by reference herein.
c) |
Exhibits |
The following exhibits are furnished herewith:
Exhibit No. |
Description |
23.1 |
Consent of BMSS, LLC (as successor in interest to Haddox Reid Eubank Betts PLLC). |
99.1 |
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99.2 |
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99.3 |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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 hereunto duly authorized.
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Skyline Champion Corporation |
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Date: |
December 28, 2023 |
By: |
/s/ Robert Spence |
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Robert Spence |
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-227539) of Skyline Champion Corporation of our report dated May 18, 2023 with respect to the consolidated financial statements of Regional Holdings Corporation and subsidiaries as of and for the year ended December 31, 2022 appearing in the Current Report on Form 8-K/A of Skyline Champion Corporation.
Please be advised that Haddox Reid Eubank Betts PLLC merged with and into BMSS, LLC effective December 1, 2023. Consequently, any references to Haddox Reid Eubank Betts PLLC in our report should now be read as a reference to BMSS, LLC.
/s/ BMSS, LLC
Ridgeland, Mississippi
December 28, 2023
REGIONAL HOLDINGS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR’S REPORT
December 31, 2022
CONTENTS
DESCRIPTION |
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3 |
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3 |
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5 |
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6 |
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9 |
INDEPENDENT AUDITOR’S REPORT
To the Shareholder
Regional Holdings Corporation and subsidiaries
Flowood, Mississippi
Opinion
We have audited the accompanying consolidated financial statements of Regional Holdings Corporation and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2022, and the related consolidated statements of income, changes in shareholder’s equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Regional Holdings Corporation and subsidiaries as of December 31, 2022, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Regional Holdings Corporation and subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Regional Holdings Corporation and subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore,
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is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Haddox Reid Eubank Betts PLLC
Ridgeland, Mississippi
May 18, 2023
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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2022
ASSETS |
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2022 |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
33,552,914 |
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Accounts receivable, net of allowances |
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9,646,039 |
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Floorplan loans receivable |
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3,304,112 |
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Prepaid expenses and other |
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1,053,781 |
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Inventories |
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187,522,216 |
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Due from related party |
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204,022 |
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Total current assets |
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235,283,084 |
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PROPERTY AND EQUIPMENT, |
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net of accumulated depreciation |
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70,439,162 |
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OTHER ASSETS: |
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Notes receivable |
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2,329,359 |
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Operating lease right-of-use assets |
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2,985,249 |
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Investments in equity securities |
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591,443 |
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Investments in affiliates |
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14,149,243 |
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Software and intangible assets |
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843,703 |
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Goodwill |
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3,087,312 |
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Total other assets |
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23,986,309 |
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Total assets |
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$ |
329,708,555 |
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LIABILITIES AND SHAREHOLDER'S EQUITY |
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2022 |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
4,013,853 |
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Customer deposits |
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4,336,139 |
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Sales tax payable |
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754,023 |
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Commissions payable |
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4,176,824 |
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Accrued interest |
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928,909 |
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Current maturities of notes payable |
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4,176,298 |
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Current portion of operating lease liabilities |
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664,518 |
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Current portion of floorplan loans |
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55,941,631 |
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Other current liabilities |
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545,329 |
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Total current liabilities |
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75,537,524 |
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The accompanying notes are an integral part of these financial statements.
3
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - CONTINUED
DECEMBER 31, 2022
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Notes payable, net of current maturities |
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96,540,459 |
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Floorplan loans, net of current portion |
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58,855,872 |
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Operating lease liabilities, net of current portion |
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2,401,562 |
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Other |
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5,877,030 |
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Total other liabilities |
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163,674,923 |
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Total liabilities |
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239,212,447 |
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SHAREHOLDER'S EQUITY |
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Controlling interest: |
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Class A voting common stock, no par; 10,000 |
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10,000 |
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Additional paid-in capital |
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24,370,120 |
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Retained earnings |
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65,590,347 |
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Noncontrolling interest |
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525,641 |
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Total equity |
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90,496,108 |
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Total liabilities and shareholder's equity |
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$ |
329,708,555 |
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The accompanying notes are an integral part of these financial statements.
4
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2022
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2022 |
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SALES: |
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Home sales |
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$ |
400,663,628 |
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Land sales |
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13,739,320 |
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414,402,948 |
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COST OF SALES: |
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Home sales |
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299,464,723 |
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Land sales |
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11,701,951 |
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311,166,674 |
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GROSS PROFIT |
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103,236,274 |
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RENTAL INCOME |
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7,454,134 |
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OTHER OPERATING INCOME |
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1,175,057 |
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TOTAL INCOME |
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111,865,465 |
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OPERATING EXPENSES: |
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Selling, general, and administrative expenses |
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61,157,292 |
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Captive insurance premiums |
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4,349,150 |
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Charitable contributions |
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679,068 |
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Depreciation and amortization |
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2,144,623 |
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Total operating expenses |
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68,330,133 |
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OPERATING INCOME |
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43,535,332 |
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OTHER INCOME (EXPENSE): |
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Gain on sale of fixed assets |
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920,374 |
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Interest expense |
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(10,107,031 |
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Interest expense - related party |
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(332,134 |
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Equity in income of affiliates |
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12,782,153 |
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Investment (loss) |
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(184,422 |
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Total other income |
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3,078,940 |
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CONSOLIDATED NET INCOME |
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$ |
46,614,272 |
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NET INCOME ATTRIBUTABLE |
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639,417 |
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NET INCOME ATTRIBUTABLE |
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$ |
45,974,855 |
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The accompanying notes are an integral part of these financial statements.
5
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2022
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Class A |
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Voting |
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Additional |
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Total |
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Common |
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Paid-In |
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Retained |
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Controlling |
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Noncontrolling |
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Stock |
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Capital |
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Earnings |
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Interest |
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Interests |
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Total |
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BALANCE, |
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$ |
10,000 |
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$ |
23,360,643 |
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$ |
36,815,771 |
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$ |
60,186,414 |
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$ |
758,320 |
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$ |
60,944,734 |
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Cash contributed |
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- |
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1,009,477 |
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- |
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1,009,477 |
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102,500 |
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1,111,977 |
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Net income |
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- |
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- |
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45,974,855 |
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45,974,855 |
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639,417 |
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46,614,272 |
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Dividends and distributions |
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- |
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- |
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(17,200,279 |
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(17,200,279 |
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(974,596 |
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(18,174,875 |
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BALANCE, |
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$ |
10,000 |
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$ |
24,370,120 |
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$ |
65,590,347 |
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$ |
89,970,467 |
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$ |
525,641 |
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$ |
90,496,108 |
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The accompanying notes are an integral part of these financial statements.
6
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2022
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2022 |
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INCREASE (DECREASE) IN CASH AND CASH |
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EQUIVALENTS: |
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Cash flows from operating activities: |
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Net income |
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$ |
46,614,272 |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Equity in income of affiliates |
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(12,782,153 |
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Investment losses |
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230,309 |
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Depreciation expense |
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2,144,623 |
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Noncash operating lease expense |
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660,932 |
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Amortization of debt issuance costs |
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35,382 |
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Gain on disposal of fixed asset |
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(920,374 |
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Increase in assets: |
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Accounts receivable |
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(6,596,874 |
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Prepaid expenses and other assets |
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(784,009 |
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Inventories |
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(41,927,721 |
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Increase (decrease) in liabilities: |
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Customer deposits |
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(1,823,192 |
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Accounts payable |
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(137,167 |
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Commissions payable |
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1,388,230 |
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Unearned revenue |
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(4,122,396 |
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Accrued expenses |
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479,123 |
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Other current liabilities |
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71,224 |
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Operating lease liabilities |
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(580,101 |
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Other noncurrent liabilities |
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(714,392 |
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Net cash used in operating activities, net |
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(18,764,284 |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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(14,160,361 |
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Proceeds from sale of property and equipment |
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3,209,807 |
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Purchases of investments |
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(327,950 |
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Proceeds from sale of investments |
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152,055 |
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Issuances on notes receivable |
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(38,250 |
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Collections on notes receivable |
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1,196,596 |
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Distributions from affiliates |
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11,318,108 |
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Net decrease in floorplan loans receivable |
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1,257,979 |
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Additions to intangible assets |
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(698,824 |
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Due from related parties, net |
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(167,656 |
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Net cash provided by investing activities |
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1,741,504 |
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The accompanying notes are an integral part of these financial statements.
7
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
YEAR ENDED DECEMBER 31, 2022
Cash flows from financing activities: |
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Notes payable payments |
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(21,877,418 |
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Notes payable proceeds |
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43,213,629 |
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Floorplan lines of credit - payments |
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(200,073,216 |
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Floorplan lines of credit - proceeds |
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220,777,434 |
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Dividends and distributions |
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(18,174,875 |
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Capital contributions |
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1,111,977 |
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Net cash provided by financing activities |
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24,977,531 |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
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7,954,751 |
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CASH AND CASH EQUIVALENTS AT BEGINNING |
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25,598,163 |
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CASH AND CASH EQUIVALENTS AT END OF YEAR |
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$ |
33,552,914 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
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INFORMATION: |
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Cash paid during the year for interest |
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$ |
9,924,660 |
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SUPPLEMENTAL DISCLOSURE OF NONCASH |
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INVESTING AND FINANCING ACTIVITIES: |
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Operating lease right-of-use assets and lease liabilities |
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$ |
3,646,181 |
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Operating lease right-of-use assets and lease liabilities |
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$ |
50,233 |
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The accompanying notes are an integral part of these financial statements.
8
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Regional Holdings Corporation (the Company) operations consist of retail, manufacturing, and leasing of manufactured homes, modular homes, and recreational vehicles primarily in the Southeastern United States. The Company also engages in commercial and recreational real estate investing. At December 31, 2022, the Company operated 43 home centers in Mississippi (19), Louisiana (8), Alabama (7), Florida (3), South Carolina (3), North Carolina (2), and Texas (1) and a 900+ manufactured housing unit lease portfolio. The Company’s manufacturing division consists of 4 facilities in northwest Alabama through a 33% interest. Subsequent to December 31, 2022, the Company effectively purchased the other two thirds membership as disclosed further in Note 10.
Retail
The Company’s retail division operates primarily under the Regional Homes and Town & Country Homes brands (Regional Enterprises). In addition to the 43 home centers, it also conducts commercial operations. The commercial division of Retail supplies homes to various manufactured home communities, with locations stretching from Kansas to Florida.
In support of the retail operations, the Company owns the commercial property on which several of its home centers operate and two commercial office buildings, including the Company’s headquarters located in Flowood, Mississippi. The Company also provides inventory floorplan financing to Regional Enterprises and various other independent dealers who purchase homes from the Company’s manufacturing division. The Company also performs last-mile delivery and setup for some of its home centers.
Manufacturing
The Company’s manufacturing division operates under the Hamilton Homebuilders and Winston Homebuilders brands and constructs factory-built manufactured and modular homes sold to the Company’s retail division, other independent home centers, and manufactured home communities. Hamilton Homebuilders produces a mid-range price point home while Winston Homebuilders produces a high-end product. The retail division of the Company accounted for 63% of production in 2022. The Company is a one-third (1/3) owner in the manufacturing division which is presented as an equity investment in the consolidated financial statements.
Leasing
The Company’s leasing division is engaged in the purchasing, leasing, and management of individual and commercial manufactured home residential rental units in Mississippi, Alabama, Louisiana, Georgia, South Carolina, and Florida. The leasing division also includes a commercial real estate in Mississippi.
Other Operations
The Company engages in recreational real estate investing. These investments are typically held for 0-2 years and are sold to both individual and commercial customers. The Company is also a one-third (1/3)
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REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
owner in an entity which owns and operates an aircraft used by Company management. The aircraft entity is presented as an equity investment in the consolidated financial statements.
Basis of Accounting and Principles of Consolidation
The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles accepted in the United States of America. The consolidated financial statements include the accounts of Regional Holdings Corporation and all majority-owned subsidiaries as of December 31, 2022. All significant intercompany transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all checking accounts, undeposited cash and checks, and certificates of deposit with maturities of ninety days or less to be cash and cash equivalents.
Accounts Receivable
The Company’s receivables arise in the normal course of business and are accounted for under the reserve method whereby an allowance for doubtful accounts is utilized to reduce the receivables to the net realizable value. The allowance is based upon management’s review of outstanding receivables, historical collection information, and existing economic conditions. Receivables are charged to the allowance account when they are deemed to be uncollectible. As of December 31, 2022, the Company had an allowance for doubtful accounts of $335,000.
Floor Plan Loans Receivable
Generally, the majority of a mobile home dealership’s inventory is financed through a financing institution, such as is offered by the Company through one of its subsidiaries. That arrangement is often referred to as being floor planned and is covered by a written contract between the Company and the dealership that establishes the maximum that can be borrowed under the plan.
Floor plan loans are secured by the dealership’s inventory and normally will be settled within a year as the related inventory is sold. The floor plan loans bear interest at effective rates that vary depending on the terms of each dealership's respective loan agreement(s).
The Company provides an allowance for uncollectible loans that is maintained at a level that, in management’s opinion, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio on an individual loan basis, including the nature of the portfolio, changes in its risk profile, credit concentrations, historical trends and existing economic conditions, as well as the balance of impaired loans. As of December 31, 2022, all floor plan loans receivables not eliminated through divisional or company consolidation were issued to third party borrowers, and the Company had no non- accrual loans, no impaired loans, and no allowance for loan losses. No concessions have been granted on repayment terms.
- 10 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Inventories
Inventories of new and used manufactured or modular housing and recreational vehicles are valued using the specific cost identification method, not to exceed market values.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation using the straight-line method over the estimated useful lives of the various classes of property, ranging from 5 to 39 years. Expenditures for renovations and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. At the time of retirement or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.
Intangible Assets
Intangible assets subject to amortization consist primarily of an internally developed enterprise resource planning system (ERP). ERP costs are amortized using the straight-line method over the estimated period benefited, which is generally 5 years.
Goodwill represents the excess of the purchase price of businesses acquired over the fair value of net tangible and identifiable assets acquired. The Company evaluates the recoverability of goodwill by estimating the future cash flows of the business reporting segments to which the intangible relates. This evaluation is made annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Management of the Company has determined that no impairment losses exist as of December 31, 2022.
Impairment of Long-Lived Assets
It is the Company’s policy to evaluate the recoverability of long-lived assets, such as property, plant, and equipment, operating lease right-of-use assets and amortizable intangible assets, whenever events and changes in circumstances indicate that the carrying amount of assets may not be recoverable. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon a combination of market and cost approaches, as appropriate. No impairment losses were recorded in the year ended December 31, 2022.
Long-lived assets expected to be sold or otherwise disposed of within one year are classified as assets held for sale and included in other current assets in the consolidated balance sheet. The Company had no assets classified as held for sale at December 31, 2022.
- 11 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Investments in Affiliated Entities
The Company’s investments in affiliated entities are accounted for under the equity method if the Company has the ability to exert significant influence over the affiliate’s operating and financial policies (generally defined as an ownership interest greater than twenty percent but not more than fifty percent of the affiliate). The investments in affiliated entities accounted for under the equity method are recorded at cost and adjusted for the Company’s share of undistributed earnings and losses.
Revenue Recognition
The Company recognizes revenue for the transfer of goods or services to customers in an amount that reflects the consideration the Company has received for those goods or services. The Company’s Retail operation recognizes revenues when products are available for customer possession and substantially all proceeds related to the sale are received or upon the satisfaction of all contractual obligations. The performance obligations related to these services are considered satisfied at the time the products are available for customer possession or upon the satisfaction of all contractual obligations. Any performance obligations related to warranties and repairs are the responsibility of the manufacturers and not the Company. Revenues from rentals are recorded as they accrue. Land sales are recorded at the time the title and risk of ownership pass.
Customer Deposits
Customer deposits for the Retail division of the Company are down payments received from a customer for the purchase of a manufactured or modular home. Once the home is delivered to the customer’s site and the sale is finalized, the deposit is recognized as revenue.
Leases
In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-02 “Leases” (Topic 842), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Lease liabilities are recognized at the present value at the future minimum lease payments over the lease term as of the commencement date plus any option periods that are probable of being exercised at the lease inception. Lease assets are recognized at the present value of future minimum lease payments over the lease term as of the commencement date, plus any initial direct costs incurred and lease payments made, less any lease incentives received. After the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis. The accounting applied by a lessor is substantially equivalent to the previous guidance.
Topic 842 requires entities to use a modified retrospective transition method. The Company elected to apply the effective date adoption method with an effective date of January 1, 2022, and has elected to use the available package of practical expedients. There was no impact to retained earnings as a result of the adoption. The recognized balance of the ROU assets and liabilities were approximately $3,000,000 as of the effective date.
- 12 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The Company determines if an arrangement contains a lease at inception. If an arrangement is considered a lease, the Company determines at the commencement date whether the lease is an operating or finance lease. The Company only has operating leases and therefore, after the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis. The Company has made a policy election to classify leases with an initial lease term of 12 months or less as short-term leases, and these leases are not recorded in the accompanying consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised. Lease cost related to short-term leases is recognized on a straight-line basis over the lease term.
Income Taxes
The Company has elected to be taxed as a “small business corporation” under federal and state statutes and is therefore, not subject to federal and state income taxes and is considered a partnership for income tax purposes. The shareholder is liable for individual federal and state income taxes on his respective portions of the Company’s taxable income.
Management does not anticipate any adjustments from any tax authorities that would result in a material change to the Company’s financial position. The Company has not recognized a provision for any unrecognized tax benefits, or interest or penalties thereon, in the accompanying consolidated balance sheet.
Recently Issued Accounting Pronouncements Pending Adoption
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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 2022:
|
|
|
|
||
|
|
|
2022 |
|
|
Land |
|
|
$ |
34,329,021 |
|
Buildings/Office units |
|
|
|
43,598,399 |
|
Vehicles and equipment |
|
|
|
1,915,379 |
|
|
|
|
|
79,842,799 |
|
Less accumulated depreciation |
|
|
|
9,403,637 |
|
|
|
|
$ |
70,439,162 |
|
- 13 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Depreciation expense for the year ended December 31, 2022 was $2,005,421.
NOTE 3 - INVESTMENTS IN AFFILIATED ENTITIES
The Company’s ownership interest in these affiliated entities is comprised of the following as of December 31, 2022
Hamilton Home Builders and Affiliates |
|
|
33 |
% |
Aviation Group, LLC |
|
|
33 |
% |
The summarized financial position, results of operations and composition of the Company’s total investment in these affiliated entities as of December 31, 2022 and for the year then ended are as follows:
|
|
|
|
|||||||||
|
|
Hamilton Home |
|
|
Aviation Group |
|
|
Total |
|
|||
Combined entities: |
|
|
|
|
|
|
|
|
|
|||
Assets |
|
$ |
89,366,674 |
|
|
$ |
836,330 |
|
|
$ |
90,203,004 |
|
Liabilities |
|
|
32,837,465 |
|
|
|
- |
|
|
|
32,837,465 |
|
Shareholder's equity |
|
|
56,529,209 |
|
|
|
836,330 |
|
|
|
57,365,539 |
|
Revenue |
|
|
327,799,000 |
|
|
|
73,621 |
|
|
|
327,872,621 |
|
Net income |
|
|
45,430,978 |
|
|
|
(429,605 |
) |
|
|
45,001,373 |
|
Company's investment: |
|
|
|
|
|
|
|
|
|
|||
Shareholder's equity |
|
|
13,929,094 |
|
|
|
220,149 |
|
|
|
14,149,243 |
|
Net income |
|
|
13,056,931 |
|
|
|
(274,778 |
) |
|
|
12,782,153 |
|
The Company purchases certain inventories from its related manufacturing activities, Hamilton Homebuilders and Winston Homebuilders (Manufacturing). Manufacturing sells these inventories to the Company at market prices and recognizes gross profit on these sales. Inventories held by the Company at December 31, 2022 include purchases from Manufacturing, for which the Company’s share of Manufacturing’s gross profit is not realized until sold to an unrelated party. As such, the Company’s investment in affiliates, as shown on the consolidated balance sheet, related to Manufacturing at December 31, 2022 has been reduced by $4,925,503. Likewise, the Company’s share of equity in income of affiliates, as shown on the consolidated statement of income, related to Manufacturing has been reduced by $2,051,214. This reduction represents the change in the Company’s unrealized share of Manufacturing’s gross profit from December 31, 2021 to December 31, 2022.
- 14 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 4 - CREDIT FACILITIES AND DEBT
The Company’s debt at December 31, 2022, consists of notes payable to banks and other financial institutions as follows:
|
|
2022 |
|
|
Revolving lines of credit with interest due monthly; fixed, capped variable, and variable rates ranging from 4.75% to 9.00% at December 31, 2022, based on benchmark interest rate(s) plus or minus applicable spread(s); maturing from May 2024 to January 2027; secured by inventory. |
|
$ |
121,914,588 |
|
Revolving line of credit with interest rates of 5% at December 31, 2022 secured by real estate. |
|
|
3,093,899 |
|
Notes payable with interest payments due quarterly at fixed rates ranging from 5.50% to 7.00%; matures December 31, 2024. |
|
|
33,739,000 |
|
Notes payable with fixed and variable interest rates adjusted in 2026 based on benchmark interest rate(s) plus or minus applicable spread(s); Rates ranging from 2.99% to 5.00%; maturing from March 2026 to February 2036; secured by real estate. |
|
|
11,130,276 |
|
Note payable to related party with interest rate of 6.00%; interest due monthly; principal matures December 2029. |
|
|
5,459,740 |
|
Notes payable with fixed and capped variable interest rates ranging from 4.25% to 7.00% based on benchmark interest rate(s) plus applicable spread(s); maturing from June 2024 to June 2031; secured by real estate and manufactured homes leased to customers. |
|
|
11,771,276 |
|
Note payable with an interest rate of 3.25% monthly payments of $23,136; matures January 2026; secured by real estate. |
|
|
2,945,275 |
|
Notes payable with interest rates ranging from 2.70% to 7.50%; maturing from June 2023 to October 2033; secured by real estate. |
|
|
22,262,652 |
|
Revolving line of credit with interest due monthly based on prime; maturing November 2024; secured by real estate. |
|
|
3,197,554 |
|
Total long-term debt |
|
|
215,514,260 |
|
Less current maturities |
|
|
60,117,929 |
|
Amounts due in more than one year |
|
$ |
155,396,331 |
|
Approximate maturities of long-term debt for the years subsequent to December 31, 2022 are as follows:
2023 |
$ |
60,117,929 |
|
2024 |
|
73,580,105 |
|
2025 |
|
13,057,999 |
|
2026 |
|
8,057,646 |
|
2027 |
|
38,825,077 |
|
Thereafter |
|
21,875,504 |
|
|
$ |
215,514,260 |
|
NOTE 5 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed Federally insured limits. The Company has never experienced any losses related to these balances.
- 15 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 6 - LEASES
As discussed in Note 1, the Company adopted the new lease accounting standard effective January 1, 2022. The Company’s financial results for reporting periods beginning on or after January 1, 2022, are presented under the new standard, while financial results for prior periods continue to be reported in accordance with the prior standard and the Company’s historical accounting policy.
The Company leases office space in various locations under operating leases. The basic lease period is generally two to five years and most leases contain renewal options which give the Company the right to extend the lease for varying periods. Rent expense for 2022 totaled $1,311,126. Future minimum rental payments due under operating leases for fiscal years subsequent to December 31, 2022, are as follows:
2023 |
$ |
803,999 |
|
2024 |
|
709,289 |
|
2025 |
|
584,053 |
|
2026 |
|
537,289 |
|
2027 |
|
327,466 |
|
Thereafter |
|
548,924 |
|
Total lease payments |
|
3,511,020 |
|
Less imputed interest |
|
(444,940 |
) |
Total lease liabilities |
$ |
3,066,080 |
|
The weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2022 was 6.59 years. The weighted-average discount rate related to the Company’s lease liabilities as of December 31, 2022 was 5.13%. The Company has elected to use its incremental borrowing rate which reflects the fixed rate at which the Company would borrow a similar amount.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has pending legal claims incurred in the normal course of business. The claims, in the opinion of management, can be disposed of without material adverse effect on the financial position or results of operations of the Company.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company utilizes two captive insurers, Regional Underwriters, Inc. and JC Underwriters, Inc. to insure various aspects of the Company’s operations. A captive insurer is generally defined as an insurance company that is wholly-owned and controlled by its insureds to insure the risk of its owners and insureds. The captive insurers and the Company have common owners. In 2022, the Company paid and expensed insurance premiums totaling $4,349,150, to these related party captives for insurance against uninsured or underinsured properties.
NOTE 9 - SUBSEQUENT EVENTS
On January 27, 2023, the other two-thirds membership interests in Hamilton were redeemed for a total purchase price of $30,000,000 with an effective date of January 1, 2023. Of the total purchase price,
- 16 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
$29,550,000 was redeemed by Hamilton and $450,000 was redeemed by the Company and a related entity held 100% by the Company’s owner. The purchase agreement stipulated that $10,000,000 was payable in cash at the closing date and the remaining $20,000,000 is payable pursuant to promissory notes entered into between Hamilton and the selling members. Principal and interest payments are payable in ten semi-annual payments beginning July 27, 2023 and ending January 27, 2028. The notes bear interest at 3.84%. These notes are subordinate to existing and future indebtedness of the Company and are subject to the right to offset as defined in the purchase agreement. In the event there is a change of control of Hamilton, any outstanding principal and interest is payable immediately upon consummation of the change in control.
The Company has evaluated subsequent events through May 18, 2023, the date the financial statements were approved by management and thereby available to be issued and except as discussed above has determined that there are no subsequent events of a material nature requiring adjustment to or disclosure in the accompanying consolidated financial statements
- 17 -
REGIONAL HOLDINGS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR’S REVIEW REPORT
JUNE 30, 2023
CONTENTS
DESCRIPTION |
PAGE |
|
|
|
|
|
1 |
|
|
2 |
|
|
|
2 |
|
|
4 |
|
Consolidated Statement of Changes in Shareholder’s Equity (unaudited) |
5 |
|
|
6 |
|
|
8 |
Independent Auditor's Review Report
To the Shareholder
Regional Holdings Corporation and Subsidiaries
Flowood, Mississippi
Results of Review of Interim Financial Information
We have reviewed the accompanying financial statements of Regional Holdings Corporation and subsidiaries which comprise the consolidated balance sheet as of June 30, 2023, and the related consolidated statements of income, changes in shareholder’s equity and cash flows for the six months then ended, and the related notes to the consolidated financial statements (collectively referred to as the interim financial information).
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.
Basis for Review Results
We conducted our review in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Regional Holdings Corporation and subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.
Responsibilities of Management for the Interim Financial Information
Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.
/s/ BMSS, LLC
Ridgeland, Mississippi
December 28, 2023
- 1 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS |
|
|||
|
|
June 30, |
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash equivalents |
|
$ |
70,219,266 |
|
Accounts receivable, net of allowances |
|
|
49,506,363 |
|
Floorplan receivable |
|
|
2,058,798 |
|
Investments |
|
|
30,000 |
|
Prepaid expenses and other current assets |
|
|
2,181,692 |
|
Inventory |
|
|
163,449,403 |
|
Due from related party |
|
|
3,699,324 |
|
Total current assets |
|
|
291,144,846 |
|
PROPERTY AND EQUIPMENT, |
|
|
|
|
net of accumulated depreciation |
|
|
112,506,098 |
|
OTHER ASSETS: |
|
|
|
|
Investments in affiliates |
|
|
220,148 |
|
Notes receivable |
|
|
7,643,328 |
|
Operating lease right-of-use assets |
|
|
4,494,184 |
|
Software and intangible assets, net of accumulated amortization |
|
|
19,697,358 |
|
Goodwill |
|
|
125,233,376 |
|
Total other assets |
|
|
157,288,394 |
|
Total assets |
|
$ |
560,939,338 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDER'S EQUITY |
|
|||
|
|
June 30, |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
Accounts payable |
|
$ |
10,194,306 |
|
Customer deposits |
|
|
7,397,989 |
|
Sales tax payable |
|
|
1,134,487 |
|
Commissions payable |
|
|
2,361,356 |
|
Accrued warranty obligations |
|
|
9,465,771 |
|
Accrued interest |
|
|
1,822,987 |
|
Current maturities of long-term debt |
|
|
4,545,182 |
|
Current portion of operating lease liabilities |
|
|
731,418 |
|
Current portion of floorplan debt |
|
|
56,870,323 |
|
Other current liabilities |
|
|
8,900,165 |
|
Total current liabilities |
|
|
103,423,984 |
|
The accompanying notes are an integral part of these statements.
- 2 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - CONTINUED
(Unaudited)
NONCURRENT LIABILITIES: |
|
|
|
|
Notes payable, net of current maturities |
|
|
141,289,168 |
|
Floorplan loans, net of current portion |
|
|
34,943,529 |
|
Operating lease liabilities, net of current portion |
|
|
3,618,098 |
|
Other noncurrent liabilities |
|
|
6,139,312 |
|
Total noncurrent liabilities |
|
|
185,990,107 |
|
Total liabilities |
|
|
289,414,091 |
|
SHAREHOLDER'S EQUITY |
|
|
|
|
Controlling interest: |
|
|
|
|
Class A voting common stock, no par; 10,000 |
|
|
10,000 |
|
Additional paid-in capital |
|
|
24,541,593 |
|
Retained earnings |
|
|
245,624,420 |
|
Noncontrolling interest |
|
|
1,349,234 |
|
Total equity |
|
|
271,525,247 |
|
Total liabilities and shareholder's equity |
|
$ |
560,939,338 |
|
The accompanying notes are an integral part of these statements.
- 3 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 2023
(Unaudited)
|
|
June 30, |
|
|
SALES: |
|
|
|
|
Home sales |
|
$ |
248,931,261 |
|
Land sales |
|
|
8,228,217 |
|
|
|
|
257,159,478 |
|
COST OF SALES: |
|
|
|
|
Home sales |
|
|
174,221,851 |
|
Land sales |
|
|
7,190,003 |
|
|
|
|
181,411,854 |
|
GROSS PROFIT |
|
|
75,747,624 |
|
RENTAL INCOME |
|
|
4,768,501 |
|
OTHER OPERATING INCOME |
|
|
420,629 |
|
TOTAL INCOME |
|
|
80,936,754 |
|
OPERATING EXPENSES: |
|
|
|
|
Selling, general, and administrative expenses |
|
|
38,931,986 |
|
Captive insurance premiums |
|
|
2,175,720 |
|
Charitable contributions |
|
|
474,799 |
|
Depreciation and amortization |
|
|
3,867,165 |
|
Total operating expenses |
|
|
45,449,670 |
|
OPERATING INCOME |
|
|
35,487,084 |
|
OTHER INCOME (EXPENSE): |
|
|
|
|
Loss on sale of fixed assets |
|
|
(242,120 |
) |
Gain on consolidation of affiliate |
|
|
153,001,509 |
|
Interest expense |
|
|
(6,860,084 |
) |
Interest expense - related party |
|
|
(215,202 |
) |
Investment income |
|
|
451,095 |
|
Total other income |
|
|
146,135,198 |
|
CONSOLIDATED NET INCOME |
|
$ |
181,622,282 |
|
NET INCOME ATTRIBUTABLE |
|
|
39,201 |
|
NET INCOME ATTRIBUTABLE |
|
$ |
181,583,081 |
|
The accompanying notes are an integral part of these statements.
- 4 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FOR SIX MONTHS ENDED JUNE 30, 2023
(Unaudited)
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Voting |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
||||||
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Controlling |
|
|
Noncontrolling |
|
|
|
|
||||||
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Interest |
|
|
Interests |
|
|
Total |
|
||||||
BALANCE, |
|
$ |
10,000 |
|
|
$ |
24,370,120 |
|
|
$ |
65,590,347 |
|
|
$ |
89,970,467 |
|
|
$ |
525,641 |
|
|
$ |
90,496,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash contributed |
|
|
- |
|
|
|
171,473 |
|
|
|
- |
|
|
|
171,473 |
|
|
|
820,000 |
|
|
|
991,473 |
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
181,583,081 |
|
|
|
181,583,081 |
|
|
|
39,201 |
|
|
|
181,622,282 |
|
Dividends and distributions |
|
|
- |
|
|
|
- |
|
|
|
(1,549,008 |
) |
|
|
(1,549,008 |
) |
|
|
(35,608 |
) |
|
|
(1,584,616 |
) |
BALANCE, |
|
$ |
10,000 |
|
|
$ |
24,541,593 |
|
|
$ |
245,624,420 |
|
|
$ |
270,176,013 |
|
|
$ |
1,349,234 |
|
|
$ |
271,525,247 |
|
The accompanying notes are an integral part of these statements.
- 5 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2023
(Unaudited)
|
|
June 30, |
|
|
INCREASE (DECREASE) IN CASH AND CASH |
|
|
|
|
EQUIVALENTS: |
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
Net income |
|
$ |
181,622,282 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
Gain on consolidation of affiliate |
|
|
(153,001,509 |
) |
Investment gains |
|
|
(49,481 |
) |
Depreciation and amortization expense |
|
|
3,867,165 |
|
Amortization of debt issuance costs |
|
|
35,986 |
|
Loss on sale of fixed asset |
|
|
242,120 |
|
Changes in operating assets and liabilities, net of effect of consolidation of affiliate: |
|
|
|
|
(Increase) decrease in assets: |
|
|
|
|
Accounts receivable |
|
|
(35,254,616 |
) |
Prepaid expenses and other current assets |
|
|
(412,092 |
) |
Inventory |
|
|
43,911,702 |
|
Operating right-of-use asset, net |
|
|
(26,727 |
) |
Increase (decrease) in liabilities: |
|
|
|
|
Customer deposits |
|
|
2,136,756 |
|
Accounts payable |
|
|
4,025,032 |
|
Commissions payable |
|
|
(1,815,468 |
) |
Accrued warranty obligations |
|
|
512,361 |
|
Other accrued expenses |
|
|
(173,844 |
) |
Other current liabilities |
|
|
4,931,100 |
|
Other noncurrent liabilities |
|
|
262,282 |
|
Net cash provided by operating activities |
|
|
50,813,049 |
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property and equipment |
|
|
(18,644,075 |
) |
Proceeds from sale of property and equipment |
|
|
757,361 |
|
Proceeds from sale of investments |
|
|
610,924 |
|
Cash acquired in consolidation of affiliate, net of cash paid |
|
|
19,601,156 |
|
Net decrease in floorplan loans receivable |
|
|
1,245,314 |
|
Additions to software |
|
|
(134,500 |
) |
Due from affiliated entities, net |
|
|
(3,495,302 |
) |
Net cash used in investing activities |
|
|
(59,122 |
) |
The accompanying notes are an integral part of these statements.
- 6 -
REGIONAL HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR SIX MONTHS ENDED JUNE 30, 2023
(Unaudited)
Cash flows from financing activities: |
|
|
|
|
Principal payments received on notes receivable |
|
|
79,781 |
|
Principal proceeds issued on notes receivable |
|
|
(80,000 |
) |
Notes payable - payments |
|
|
(20,930,251 |
) |
Notes payable - proceeds |
|
|
30,419,689 |
|
Floorplan lines of credit - payments |
|
|
(103,747,034 |
) |
Floorplan lines of credit - proceeds |
|
|
80,763,383 |
|
Member distributions |
|
|
(1,584,616 |
) |
Member contributions |
|
|
991,473 |
|
Net cash used in financing activities |
|
|
(14,087,575 |
) |
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
36,666,352 |
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING |
|
|
33,552,914 |
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
|
$ |
70,219,266 |
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH |
|
|
|
|
INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets and lease liabilities |
|
$ |
907,257 |
|
The accompanying notes are an integral part of these statements.
- 7 -
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Regional Holdings Corporation (the Company) operations consist of retail, manufacturing, and leasing of manufactured homes, modular homes, and recreational vehicles primarily in the Southeastern United States. The Company also engages in commercial and recreational real estate investing. As of June 30, 2023, the Company operated 43 home centers in Mississippi (19), Louisiana (8), Alabama (7), Florida (3), South Carolina (3), North Carolina (2), and Texas (1) and a 900+ manufactured housing unit lease portfolio. The Company’s manufacturing division consists of 4 facilities in northwest Alabama.
Retail
The Company’s retail division operates primarily under the Regional Homes and Town & Country Homes brands (Regional Enterprises). In addition to the 43 home centers, it also conducts both governmental and commercial operations. The commercial division of Retail supplies homes to various manufactured home communities, with locations stretching from Kansas to Florida.
In support of the retail operations, the Company owns the commercial property on which several of its home centers operate and two commercial office buildings, including the Company’s headquarters located in Flowood, Mississippi. The Company also provides inventory floorplan financing to various independent dealers who purchase homes from the Company’s manufacturing division. The Company also performs last-mile delivery and setup for some of its home centers.
Manufacturing
The Company’s manufacturing division operates under the Hamilton Homebuilders and Winston Homebuilders brands and constructs factory-built manufactured and modular homes sold to the Company’s retail division, other independent home centers, and manufactured home communities. Hamilton Homebuilders produces a mid-range price point home while Winston Homebuilders produces a high-end product. The retail division of the Company accounted for 76% of production for the six months ended June 30, 2023.
Leasing
The Company’s leasing division is engaged in the purchasing, leasing, and management of individual and commercial manufactured home residential rental units in Mississippi, Alabama, Louisiana, Georgia, South Carolina, and Florida. The leasing division also includes commercial real estate in Mississippi.
Other Operations
The Company engages in recreational real estate investing. These investments are typically held for 0-2 years and are sold to both individual and commercial customers. The Company is also a one-third (1/3) owner in an entity which owns and operates an aircraft used by Company management. The aircraft entity is presented as an equity investment in the consolidated financial statements.
Basis of Accounting and Principles of Consolidation
The accompanying unaudited consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles accepted in the United States of America. The
- 8 -
consolidated financial statements include the accounts of Regional Holdings Corporation and all majority-owned subsidiaries as of June 30, 2023. All significant intercompany transactions and balances have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited financial statements for the Company's audited consolidated financial statements and independent auditor's report as of and for the year ended December 31, 2022.
Cash and Cash Equivalents
The Company considers all checking accounts, undeposited cash and checks, and certificates of deposit with maturities of ninety days or less to be cash and cash equivalents. Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed Federally insured limits. The Company has never experienced any losses related to these balances.
Notes Receivable
The Company has notes receivable predominantly related to New Market Tax Credit (''NMTC'') (See Note 6) and retail. The note receivable related to NMTC is collateralized by a limited liability company membership interest and is stated at the principal amount. Management assesses the credit quality of the notes receivable based on indicators such as collection experience as well as collateralization in relation to the NMTC note receivable. There was no allowance on notes receivable recorded as of June 30, 2023.
Accounts Receivable
The Company’s receivables arise in the normal course of business and are accounted for under the reserve method whereby an allowance for doubtful accounts is utilized to reduce the receivables to the net realizable value. Effective January 1, 2023, the Company adopted Accounting Standard Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which replaced the existing incurred credit loss model with the current expected credit loss model ("CECL"). The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements. The Company's allowance for credit losses reflects management's estimate of credit losses over the remaining expected life of the receivables and is based upon management’s review of outstanding receivables, historical collection information, and existing economic conditions. Receivables are charged to the allowance account when they are deemed to be uncollectible. As of June 30, 2023, the Company had allowance for doubtful accounts of $335,000. On a continuing basis, management analyzes delinquent receivables and, once these receivables are determined to be uncollectible, they are written off through a charge against an existing allowance account or against earnings.
Floor Plan Loans Receivable
Generally, the majority of a mobile home dealership’s inventory is financed through a financing institution, such as is offered by the Company through one of its subsidiaries. That arrangement is often referred to as being floor planned and is covered by a written contract between the Company and the dealership that establishes the maximum that can be borrowed under the plan.
Floor plan loans are secured by the dealership’s inventory and normally will be settled within a year as the related inventory is sold. The floor plan loans bear interest at effective rates that vary depending on the terms of each dealership's respective loan agreement(s).
The Company provides an allowance for uncollectible loans that is maintained at a level that, in management’s opinion, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the
- 9 -
allowance is based on management’s evaluation of the collectability of the loan portfolio on an individual loan basis, including the nature of the portfolio, changes in its risk profile, credit concentrations, historical trends and existing economic conditions, as well as the balance of impaired loans. As of June 30, 2023, all floor plan loans receivables not eliminated through divisional or company consolidation were issued to third party borrowers, and the Company had no non- accrual loans, no impaired loans, and no allowance for loan losses. No concessions have been granted on repayment terms.
Inventories
Inventories of new and used manufactured or modular housing and recreational vehicles are valued using the specific cost identification method, not to exceed market values. Inventories are stated at the lower of cost or net realizable value. Cost of inventories is computed by the first-in, first-out method.
Inventories consisted of the following as at June 30, 2023:
|
June 30, |
|
|
Raw materials |
$ |
12,431,373 |
|
Work in process |
|
1,443,516 |
|
Finished goods |
|
149,574,514 |
|
|
$ |
163,449,403 |
|
At June 30, 2023 reserves for obsolete inventory were immaterial.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation using the straight-line method over the estimated useful lives of the various classes of property, ranging from 5 to 40 years. Expenditures for renovations and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. At the time of retirement or disposition of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations.
Intangible Assets
Intangible assets subject to amortization consist primarily of an internally developed enterprise resource planning system (ERP), customer relationships and trade names. Intangible assets are amortized using the straight-line method over the estimated period benefited, which is generally 5 years for ERP and 10 years for customer relationships and trade names.
Goodwill represents the excess of the purchase price of businesses acquired over the fair value of net tangible and identifiable intangible assets acquired. The Company evaluates the recoverability of goodwill by estimating the future cash flows of the business reporting units to which the intangible relates. This evaluation is made annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Management of the Company has determined that no impairment losses exist as of June 30, 2023. At June 30, 2023, there are no accumulated impairment losses related to goodwill.
- 10 -
Impairment of Long-Lived Assets
It is the Company’s policy to evaluate the recoverability of long-lived assets, such as property, plant, and equipment, operating lease right-of-use assets and amortizable intangible assets whenever events and changes in circumstances indicate that the carrying amount of assets may not be recoverable. If impairment indicators exist, the Company performs the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon a combination of market and cost approaches, as appropriate. No impairment losses were recorded in the six months ended June 30, 2023.
Long-lived assets expected to be sold or otherwise disposed of within one year are classified as assets held for sale and included in other current assets in the consolidated balance sheet. The Company had no assets classified as held for sale at June 30, 2023.
Investments in Affiliated Entities
The Company’s investments in affiliated entities are accounted for under the equity method if the Company has the ability to exert significant influence over the affiliate’s operating and financial policies (generally defined as an ownership interest greater than twenty percent but not more than fifty percent of the affiliate). The investments in affiliated entities accounted for under the equity method are recorded at cost and adjusted for the Company’s share of undistributed earnings and losses.
Revenue Recognition
The Company recognizes revenue for the transfer of goods or services to customers in an amount that reflects the consideration the Company has received for those goods or services. The Company’s Retail operation recognizes revenues when products are available for customer possession and substantially all proceeds related to the sale are received or upon satisfaction of all contractual obligations. The performance obligations related to these services are considered satisfied at the time the products are available for customer possession or upon the satisfaction of all contractual obligations. The Company's manufacturing division records revenue when the related product has shipped. Revenues from rentals are recorded as they accrue. Land sales are recorded at the time the title and risk of ownership pass.
Revenue is measured based on consideration specified in contracts with customers. The nature of the Company's business gives rise to variable considerations, which are discussed in the following paragraphs.
A single customer represented 19% of the Company’s net home sales and 87% of the Company's accounts receivable as of and for the six months ended June 30, 2023.
- 11 -
Customer Deposits
Customer deposits are down payments received from a customer for the purchase of a manufactured or modular home. Once the home is delivered to the customer’s site and the sale is finalized, the deposit is recognized as revenue.
Warranties
The manufacturing division provides a warranty for a period of one year from the date of retail sale that the product complies with agreed upon specifications. Estimated warranty costs are accrued as cost of sales at the time of sale. The Company maintains a liability of estimated warranty costs based on historical experience. Changes in accrued warranty obligations were as follows:
|
|
June 30, 2023 |
|
|
|
Balance at beginning of period |
|
$ |
8,953,000 |
|
|
Warranty expense |
|
|
7,452,000 |
|
|
Cash warranty payments |
|
|
(6,759,229 |
) |
|
Balance at end of period |
|
$ |
9,645,771 |
|
|
Debt Issuance Costs
The Company has incurred debt issuance costs totaling $774,255 related to debt outstanding as of June 30, 2023. These costs were capitalized and are expensed over the term of the related debt agreements. Accumulated amortization totaled $352,561 as at June 30, 2023. Amortization expense of the debt issuance cost totaled $35,986 for the six months ended June 30, 2023. Debt issuance costs are shown as a reduction of the carrying amount of the debt.
Income Taxes
The Company has elected to be taxed as a “small business corporation” under federal and state statutes and is therefore, not subject to federal and state income taxes and is considered a partnership for income tax purposes. The shareholder is liable for individual federal and state income taxes on his respective portions of the Company’s taxable income.
Management does not anticipate any adjustments from any tax authorities that would result in a material change to the Company’s financial position. The Company has not recognized a provision for any unrecognized tax benefits, or interest or penalties thereon, in the accompanying consolidated balance sheet.
Recently Issued Accounting Pronouncements Pending Adoption
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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
- 12 -
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of June 30, 2023:
|
|
June 30, |
|
|
Land |
|
$ |
36,825,806 |
|
Buildings/Office units |
|
|
94,806,713 |
|
Vehicles and equipment |
|
|
2,018,379 |
|
|
|
|
133,650,898 |
|
Less accumulated depreciation |
|
|
(21,144,800 |
) |
|
|
$ |
112,506,098 |
|
Depreciation expense for the six months ended June 30, 2023, was $2,774,480.
NOTE 3 - INVESTMENTS IN AFFILIATED ENTITIES
As of December 31, 2022, the Company had a one-third ownership interest in Hamilton Homebuilders, LLC and Affiliates (“Hamilton”). Effective January 1, 2023, the Company gained control of Hamilton when the remaining two-thirds membership interests were redeemed via $10,000,000 cash payment and $20,000,000 promissory notes entered into between Hamilton and the selling members. Prior to the redemption, the Company’s investment in Hamilton was accounted for under the equity method. This transaction was accounted for as a business combination achieved without the transfer of consideration, and accordingly, the acquisition date fair value of the Company’s interest in Hamilton was substituted for the acquisition date fair value of consideration transferred to measure Goodwill. The enterprise value of Hamilton was determined to be $216.9 million based upon an independent appraisal resulting in a gain on consolidation of Hamilton of $153.0 million, which includes a gain of $58.4 million from the remeasurement of the Company’s one-third ownership interest to fair value as of January 1, 2023.
A preliminary summary of the fair value of the assets acquired and liabilities assumed in the transaction is shown below:
|
|
|
|
|
Cash |
|
$ |
29,922,151 |
|
Trade receivables |
|
|
4,214,358 |
|
Inventory |
|
|
22,457,127 |
|
Property, plant and equipment |
|
|
27,336,318 |
|
Other assets |
|
|
7,578,699 |
|
Accounts payable and accrued liabilities |
|
|
(26,701,716 |
) |
Long-term debt |
|
|
(36,012,105 |
) |
Intangibles |
|
|
19,900,000 |
|
Goodwill |
|
|
122,146,064 |
|
|
|
$ |
170,840,895 |
|
Goodwill is primarily attributable to assembled workforce, expected synergies, and other intangibles that do not qualify for separate recognition. Intangible assets include $16.0 million in customer relationships and $3.9 million associated with trade names and were based on an independent appraisal related to the Company's subsequent events. The fair value of the customer relationships was determined using the
- 13 -
multi-period excess earnings method and the fair value of the trade name was determined using the relief-from-royalty method. The Company estimates that each intangible asset has a weighted average useful life of ten years from the acquisition date.
The fair values of assets acquired and liabilities assumed are based on preliminary estimates using currently available information. The final fair values of the assets acquired and liabilities assumed and the resulting effect on the Company’s financial position and results of operations could materially differ from these preliminary estimates.
NOTE 4 - NOTE PAYABLE, CREDIT FACILITIES AND DEBT
The Company’s debt at June 30, 2023, consists of notes payable to banks and other financial institutions as follows:
|
|
June 30, |
|
|
Revolving lines of credit with interest due monthly; fixed, capped variable, and variable rates ranging from 4.75% to 9.65% at June 30, 2023, based on benchmark interest rate(s) plus or minus applicable spread(s); maturing from May 2024 to January 2027; secured by inventory. |
|
$ |
116,510,625 |
|
Revolving line of credit with interest rates of 5% at June 30, 2023 secured by real estate. |
|
|
3,093,899 |
|
Notes payable with interest payments due quarterly at fixed rates ranging from 5.50% to 6.00%; matures December 31, 2024. |
|
|
22,155,000 |
|
Notes payable with fixed and variable interest rates adjusted in 2026 based on benchmark interest rate(s) plus or minus applicable spread(s); Rates ranging from 2.99% to 5.00%; maturing from March 2026 to February 2036; secured by real estate. |
|
|
10,731,319 |
|
Note payable with an interest rate of 6.5%: interest due monthly; principal matures in March 2026 |
|
|
8,610,000 |
|
Note payable with an interest rate of 8.5%: interest due monthly; principal matures in March 2026 |
|
|
1,230,000 |
|
Note payable to related party with interest rate of 6.00%; interest due monthly; principal matures December 2029. |
|
|
8,459,741 |
|
Notes payable with fixed and capped variable interest rates ranging from 4.25% to 7.00% based on benchmark interest rate(s) plus applicable spread(s); maturing from June 2024 to June 2031; secured by real estate and manufactured homes leased to customers. |
|
|
10,701,103 |
|
Note payable with an interest rate of 3.25% monthly payments of $23,136; matures January 2026; secured by real estate. |
|
|
2,854,224 |
|
Notes payable with interest rates ranging from 3.70% to 6.00%; maturing from February 2024 to October 2033; secured by real estate. |
|
|
18,122,297 |
|
Revolving line of credit with interest due monthly based on prime; maturing November 2024; secured by real estate. |
|
|
3,197,554 |
|
Notes payable to Romeo Juliet, LLC, interest at 5.41546% on June 30, 2023, secured by real estate, assignment of rents, inventory, accounts receivable, and equipment, due December 31 2026 (Note A's); interest payments are due quarterly through maturity |
|
|
5,313,750 |
|
Notes payable to Romeo Juliet, LLC, interest at 5.41546% on June 30, 2023, secured by real estate, assignment of rents, inventory, accounts receivable, and equipment, due September 30, 2039 (Note B's); interest payments are due quarterly through maturity |
|
|
2,036,250 |
|
Note payable to a bank, interest at 3.85% and 6.75% on June 30, 2023, respectively, secured by a note receivable to the Company, due December 3 1, 2026 (Source Loan); principal and interest payments of $123,513 due quarterly through maturity |
|
|
5,054,134 |
|
Promissory note with an interest rate of 3.84%; principal and all unpaid interest is due on January 27, 2028. |
|
|
20,000,000 |
|
Unamortized debt issuance costs |
|
|
(421,694 |
) |
Total long-term debt |
|
|
237,648,202 |
|
Less current maturities |
|
|
61,415,505 |
|
Amounts due in more than one year |
|
$ |
176,232,697 |
|
- 14 -
The Company's long-term debt obligations contain certain non-financial and financial covenants that include limiting distributions and requiring minimum levels of cash flow (as defined in the underlying debt agreements). The Company was in compliance with these covenants as of June 30, 2023. Cash outlays for interest amounted to $7,213,144 for the six months ended June 30, 2023.
Approximate maturities of long-term debt for the years subsequent to June 30, 2023, are as follows:
2024 |
$ |
61,415,505 |
|
2025 |
|
56,562,125 |
|
2026 |
|
17,607,350 |
|
2027 |
|
47,760,106 |
|
2028 |
|
2,397,246 |
|
Thereafter |
|
52,327,564 |
|
|
$ |
238,069,896 |
|
On September 4, 2019, Hamilton entered into a New Market Tax Credit ("NMTC") financing transaction to pay off existing debt and partially fund capital improvements. As part of this transaction, Liberty NMTC, LCC (''Liberty'') was formed and entered into a source loan and security agreement with United Bank of Alabama. The proceeds of the source loan were used to fund Liberty's loan to the HHB Investment Fund LLC ("Investment"), an unrelated party. Investment's sole investor, Wells Fargo Community Investment Holdings Inc. ("WFC"), contributed capital to Investment. WFC's contribution which represents its purchase of the tax credits through Investment's subsidiary, Romeo Juliet, LLC ("RJ"). A summary of the proceeds received by RJ follows:
Liberty's note proceeds |
$ |
5,313,750 |
|
WFC capital contribution |
|
2,486,250 |
|
Professional fees |
|
(450,000 |
) |
|
$ |
7,350,000 |
|
Hamilton entered into the following note agreements with RJ:
Note A |
$ |
5,313,750 |
|
Note B |
|
2,036,250 |
|
|
$ |
7,350,000 |
|
There is a put and call agreement between Hamilton and WFC. If WFC does not exercise their put option, Hamilton has the ability to call the ownership in the interest in the Investment for fair market value. It is anticipated that WFC will put their option and Hamilton will own the Investment at the end of the compliance period. However, if WFC does not put their interest, management plans to exercise its option to call. By acquiring the ownership interest, Hamilton will be in a position whereby it can forgive the NMTC notes payable, resulting in the elimination of $7,350,000 in outstanding debt at that point in time and recognize the benefits from the NMTC program. In turn, it is expected that Liberty would forgive the NMTC $5,313,750 note receivable described in Note 6.
- 15 -
NOTE 5 - INTANGIBLE ASSETS
The components of intangible assets are as follows:
|
Customer Relationships |
|
|
Trade |
|
|
Total |
|
|||
Gross carrying amount |
$ |
17,101,982 |
|
|
$ |
3,900,000 |
|
|
$ |
21,001,982 |
|
Accumulated amortization |
|
(1,109,624 |
) |
|
|
(195,000 |
) |
|
$ |
(1,304,624 |
) |
Amortizable Intangibles, net |
$ |
15,992,358 |
|
|
$ |
3,705,000 |
|
|
$ |
19,697,358 |
|
Weighted average remaining amortization period, in years |
|
|
|
|
|
|
|
9.4 |
|
||
Amortization of intangible assets was $1,092,685 for the six months ended June 30, 2023. Amortization expense of intangible assets over the next five years is estimated to be:
2024 |
$ |
2,129,200 |
|
2025 |
|
2,129,200 |
|
2026 |
|
2,129,200 |
|
2027 |
|
2,129,200 |
|
2028 |
|
2,129,200 |
|
NOTE 6 - NOTE RECEIVABLE
In September 2019, Hamilton made a note receivable to HBB Investment Fund, LLC (an unrelated party) linked to the Hamilton's financing obtained through the NMTC program described in Note 4. The note accrues interest at a rate of 6.9% per annum beginning September 4, 2019, through December 31, 2026 (Compliance period) at which point the entire principal balance is due. The balance on June 30, 2023 was $5,313,750.
The interest income on the note receivable was $193,624 for the six months ended June 30, 2023.
NOTE 7 - COMMITMENTS, CONTINGENCIES AND SIGNIFICANT ESTIMATES
The Company warrants its products for a period of one year from the date of retail sale by a dealer. These financial statements include estimated liabilities for the cost of such warranties. Although the estimates are based on management's best judgments, actual cash settlements of warranty claims will likely vary from estimated liabilities accrued.
The Company has pending legal claims incurred in the normal course of business. The Company also has pending legal claims regarding the purchase of the remaining two thirds of Hamilton. The claims, in the opinion of management, can be disposed of without material adverse effect on the financial position or results of operations of the Company.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company utilizes two captive insurers, Regional Underwriters, Inc. and JC Underwriters, Inc. to insure various aspects of the Company’s operations. A captive insurer is generally defined as an insurance company that is wholly owned and controlled by its insureds to insure the risk of its owners and insureds. The captive insurers and the Company have common owners. For the six months ended June 30, 2023, the Company
- 16 -
paid and expensed insurance premiums totaling $2,175,720 to these related party captives for insurance against uninsured or underinsured properties.
NOTE 9- REPURCHASE AGREEMENTS
The Company has entered into repurchase agreements with lending institutions that provide financing to dealers that market the Company's products. Generally, the agreements provide for the repurchase of the manufactured homes from the lenders in the event of a repossession of a dealer's inventory upon default. The risk of loss from these agreements is significantly reduced by the potential resale value of any products that are subject to repurchase. At June 30, 2023, the total amount under repurchase to lending institutions under these repurchase agreements was $18,600,000. The Company has not recorded a loss reserve for repurchase agreements as of June 30, 2023.
NOTE 10 - SUBSEQUENT EVENTS
On August 25, 2023, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with Skyline Champion Corporation ("Champion") wherein Champion would acquire all of the outstanding equity interests of the entities comprising the retail and manufacturing operations of the Company. The purchase price, as defined in the purchase agreement, was $428.0 million, plus cash acquired, less assumed indebtedness, plus an earnout provision and an aggregate number of shares of Skyline Champion stock equal to approximately $30.0 million.
The Company has evaluated subsequent events through December 28, 2023, the date the financial statements were approved by management and thereby available to be issued and except as discussed above has determined that there are no subsequent events of a material nature requiring adjustment to or disclosure in the accompanying consolidated financial statements.
- 17 -
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements (“pro forma financial statements”) have been prepared based on the historical consolidated financial statements of Skyline Champion Corporation (“Skyline Champion”, the "Company”) to give effect to the following transaction (the “Transaction”):
On August 25, 2023, Champion Home Builders (“CHB”) and Champion Retail Housing (together with CHB, the “Buyers”), subsidiaries of the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Regional Holdings Corporation (“Regional Holdings”), Regional Underwriters, Inc. (“Regional Underwriters”), Heath Jenkins, as beneficial owner of the outstanding equity interests of Regional (collectively, with Regional and Regional Underwriters, the “Sellers”), Dana Jenkins, as beneficial owner of the outstanding equity interests of Helicon Insurance, LLC, and party thereto solely with respect to the sale of Helicon Insurance, LLC (“Dana Jenkins”), and Heath Jenkins, solely in his capacity as the representative of the Sellers (the “Sellers’ Representative”), pursuant to which Buyers have agreed to acquire all of the outstanding equity interests in Regional Enterprises, LLC and related companies (collectively, “Regional Homes”).
On October 13, 2023 (the "Closing Date"), the Company, through the Buyers, paid to Sellers approximately $317 million and assumed debt, primarily related to inventory floor plan liabilities, of approximately $93 million. In addition, the Company issued 379,248 shares of common stock in Skyline Champion, par value $0.0277 per share (the “Skyline Common Stock”), equal to approximately $23 million, to Sellers. The transaction is subject to an earnout provision as well as customary net working capital adjustments. The Company also issued 75,850 shares of Skyline Common Stock, equal to approximately $5 million, to Dana Jenkins (the “D. Jenkins Stock Consideration”) for Helicon Insurance, LLC. The Skyline Champion Common Stock was issued to the Sellers and Dana Jenkins in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act (the “Private Placement”).
The pro forma financial statements have been prepared to reflect the accounting adjustments to Skyline Champion’s historical consolidated financial information to account for the Transaction. The unaudited pro forma condensed combined balance sheet as of September 30, 2023, gives effect as if the Transaction had been completed on September 30, 2023. The unaudited pro forma condensed combined income statements for the six months ended September 30, 2023, and the year ended April 1, 2023, give effect to the Transaction, in each case, as if it had been completed on April 3, 2022.
The pro forma financial statements are provided for illustrative purposes only and are not intended to represent what Skyline Champion’s financial position or results of operations would have been had the Transaction been consummated on the assumed dates, nor do they purport to project the future operating results or the financial position of the Company following the Transaction. The actual financial position and results of operations of Skyline Champion after consummation of the Transaction may differ significantly from the pro forma amounts reflected herein due to a variety of factors. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements. In Skyline Champion’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The pro forma financial statements do not include any pro forma adjustments to reflect certain expected financial benefits of the Transaction, such as revenue and cost synergies, or the anticipated costs to achieve those benefits.
As of the date of this filing, the Company has not completed the detailed valuation study necessary to arrive at the required final estimates of the fair value of the assets acquired and the liabilities assumed and the related allocations of purchase price, nor has it identified all adjustments necessary to conform Regional Homes’ accounting policies to the Company's accounting policies. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.
The condensed combined pro forma financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial information in addition to the following:
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2023
(In thousands) |
|
Historical |
|
|
Historical |
|
|
Historical Regional Holdings Businesses Not Acquired |
|
|
Pro Forma Adjustments for Acquisition |
|
|
Notes |
|
Pro Forma Combined |
|
|||||
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
|
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
701,155 |
|
|
$ |
70,219 |
|
|
$ |
(949 |
) |
|
$ |
(317,191 |
) |
|
(b) |
|
$ |
453,234 |
|
Trade accounts receivable, net |
|
|
55,097 |
|
|
|
49,506 |
|
|
|
(225 |
) |
|
|
— |
|
|
|
|
|
104,378 |
|
Floor plan loans receivable |
|
|
— |
|
|
|
2,059 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
2,059 |
|
Inventories, net |
|
|
182,239 |
|
|
|
163,449 |
|
|
|
(22,367 |
) |
|
|
3,721 |
|
|
(c) |
|
|
327,042 |
|
Other current assets |
|
|
39,447 |
|
|
|
5,881 |
|
|
|
16,514 |
|
|
|
— |
|
|
|
|
|
61,842 |
|
Total current assets |
|
|
977,938 |
|
|
|
291,114 |
|
|
|
(7,027 |
) |
|
|
(313,470 |
) |
|
|
|
|
948,555 |
|
Long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Property, plant, and equipment, net |
|
|
191,766 |
|
|
|
113,298 |
|
|
|
(54,545 |
) |
|
|
21,568 |
|
|
(d) |
|
|
272,087 |
|
Goodwill |
|
|
196,574 |
|
|
|
125,233 |
|
|
|
— |
|
|
|
29,275 |
|
|
(e) |
|
|
351,082 |
|
Amortizable intangible assets, net |
|
|
40,299 |
|
|
|
18,905 |
|
|
|
— |
|
|
|
23,895 |
|
|
(f) |
|
|
83,099 |
|
Deferred tax assets |
|
|
19,798 |
|
|
|
— |
|
|
|
— |
|
|
|
840 |
|
|
(g) |
|
|
20,638 |
|
Investments in affiliates |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
Other noncurrent assets |
|
|
242,800 |
|
|
|
12,388 |
|
|
|
(363 |
) |
|
|
— |
|
|
|
|
|
254,825 |
|
Total assets |
|
$ |
1,669,175 |
|
|
$ |
560,938 |
|
|
$ |
(61,935 |
) |
|
$ |
(237,892 |
) |
|
|
|
$ |
1,930,286 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current portion of floorplan loans |
|
$ |
— |
|
|
$ |
56,870 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
$ |
56,870 |
|
Current portion of long-term debt |
|
|
— |
|
|
|
4,545 |
|
|
|
(3,740 |
) |
|
|
— |
|
|
|
|
|
805 |
|
Accounts payable |
|
|
50,829 |
|
|
|
10,194 |
|
|
|
1,070 |
|
|
|
— |
|
|
|
|
|
62,093 |
|
Other current liabilities |
|
|
192,322 |
|
|
|
31,814 |
|
|
|
358 |
|
|
|
— |
|
|
|
|
|
224,494 |
|
Total current liabilities |
|
|
243,151 |
|
|
|
103,423 |
|
|
|
(2,312 |
) |
|
|
— |
|
|
|
|
|
344,262 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt |
|
|
12,430 |
|
|
|
141,289 |
|
|
|
(40,786 |
) |
|
|
(12,793 |
) |
|
(h) |
|
|
100,140 |
|
Notes payable, net of current portion |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
Floorplan loans, net of current portion |
|
|
— |
|
|
|
34,944 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
34,944 |
|
Deferred tax liabilities |
|
|
6,417 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
6,417 |
|
Other liabilities |
|
|
66,984 |
|
|
|
9,757 |
|
|
|
(6,139 |
) |
|
|
5,876 |
|
|
(i) |
|
|
76,478 |
|
Total long-term liabilities |
|
|
85,831 |
|
|
|
185,990 |
|
|
|
(46,925 |
) |
|
|
(6,917 |
) |
|
|
|
|
217,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
|
1,587 |
|
|
|
10 |
|
|
|
(10 |
) |
|
|
13 |
|
|
(j) |
|
|
1,600 |
|
Additional paid-in capital |
|
|
530,645 |
|
|
|
24,542 |
|
|
|
(24,542 |
) |
|
|
27,839 |
|
|
(j)(k) |
|
|
558,484 |
|
Retained earnings |
|
|
821,628 |
|
|
|
245,624 |
|
|
|
13,077 |
|
|
|
(258,701 |
) |
|
(k) |
|
|
821,628 |
|
Noncontrolling interest |
|
|
— |
|
|
|
1,349 |
|
|
|
(1,223 |
) |
|
|
(126 |
) |
|
(k) |
|
|
— |
|
Accumulated other comprehensive loss |
|
|
(13,667 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
(13,667 |
) |
Total equity |
|
|
1,340,193 |
|
|
|
271,525 |
|
|
|
(12,698 |
) |
|
|
(230,975 |
) |
|
|
|
|
1,368,045 |
|
Total liabilities and equity |
|
$ |
1,669,175 |
|
|
$ |
560,938 |
|
|
$ |
(61,935 |
) |
|
$ |
(237,892 |
) |
|
|
|
$ |
1,930,286 |
|
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023
(In thousands, except per share amounts) |
|
Historical |
|
|
Historical |
|
|
Historical Regional Holdings Businesses Not Acquired |
|
|
Pro Forma Adjustments for Acquisition |
|
|
Notes |
|
Pro Forma Combined |
|
|||||
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
929,005 |
|
|
$ |
257,159 |
|
|
$ |
(7,702 |
) |
|
$ |
(4,634 |
) |
|
(l) |
|
$ |
1,173,828 |
|
Cost of sales |
|
|
682,843 |
|
|
|
183,148 |
|
|
|
(7,190 |
) |
|
|
(2,427 |
) |
|
(d)(l)(m) |
|
|
856,374 |
|
Gross profit |
|
|
246,162 |
|
|
|
74,011 |
|
|
|
(512 |
) |
|
|
(2,207 |
) |
|
|
|
|
317,454 |
|
Selling, general and administrative expenses |
|
|
134,893 |
|
|
|
43,956 |
|
|
|
(4,350 |
) |
|
|
1,405 |
|
|
(d)(n) |
|
|
175,904 |
|
Operating income |
|
|
111,269 |
|
|
|
30,055 |
|
|
|
3,838 |
|
|
|
(3,612 |
) |
|
|
|
|
141,550 |
|
Interest (income) expense |
|
|
(19,781 |
) |
|
|
7,075 |
|
|
|
(1,100 |
) |
|
|
(1,559 |
) |
|
(o) |
|
|
(15,365 |
) |
Other expense (income) |
|
|
2,065 |
|
|
|
(158,642 |
) |
|
|
157,545 |
|
|
|
500 |
|
|
(p) |
|
|
1,468 |
|
Income before income taxes and noncontrolling interest |
|
|
128,985 |
|
|
|
181,622 |
|
|
|
(152,607 |
) |
|
|
(2,553 |
) |
|
|
|
|
155,447 |
|
Income tax expense |
|
|
32,047 |
|
|
|
— |
|
|
|
— |
|
|
|
6,575 |
|
|
(q) |
|
|
38,622 |
|
Net income before noncontrolling interest |
|
|
96,938 |
|
|
|
181,622 |
|
|
|
(152,607 |
) |
|
|
(9,128 |
) |
|
|
|
|
116,825 |
|
Noncontrolling interest |
|
|
— |
|
|
|
1,349 |
|
|
|
(1,223 |
) |
|
|
(126 |
) |
|
|
|
|
— |
|
Net income attributable to controlling interest |
|
$ |
96,938 |
|
|
$ |
180,273 |
|
|
$ |
(151,384 |
) |
|
$ |
(9,002 |
) |
|
|
|
$ |
116,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
|
57,224 |
|
|
|
|
|
|
|
|
|
455 |
|
|
(s) |
|
|
57,679 |
|
||
Diluted |
|
|
57,695 |
|
|
|
|
|
|
|
|
|
455 |
|
|
|
|
|
58,150 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income per share applicable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
$ |
1.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2.03 |
|
|||
Diluted |
|
$ |
1.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2.01 |
|
|||
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED APRIL 1, 2023
(In thousands, except per share amounts) |
|
Historical |
|
|
Historical |
|
|
Historical Regional Holdings Businesses Not Acquired |
|
|
Pro Forma Adjustments for Acquisition |
|
|
Notes |
|
Pro Forma Combined |
|
|||||
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
2,606,560 |
|
|
$ |
414,403 |
|
|
$ |
(12,821 |
) |
|
$ |
85,456 |
|
|
(l)(r) |
|
$ |
3,093,598 |
|
Cost of sales |
|
|
1,787,879 |
|
|
|
311,167 |
|
|
|
(11,702 |
) |
|
|
52,759 |
|
|
(d)(l)(m)(r) |
|
|
2,140,103 |
|
Gross profit |
|
|
818,681 |
|
|
|
103,236 |
|
|
|
(1,119 |
) |
|
|
32,697 |
|
|
|
|
|
953,495 |
|
Selling, general and administrative expenses |
|
|
300,396 |
|
|
|
67,410 |
|
|
|
(6,412 |
) |
|
|
10,168 |
|
|
(d)(n)(r) |
|
|
371,562 |
|
Operating income |
|
|
518,285 |
|
|
|
35,826 |
|
|
|
5,293 |
|
|
|
22,529 |
|
|
|
|
|
581,933 |
|
Interest (income) expense |
|
|
(14,977 |
) |
|
|
10,439 |
|
|
|
(1,637 |
) |
|
|
(2,728 |
) |
|
(o)(r) |
|
|
(8,903 |
) |
Other (income) expense |
|
|
(634 |
) |
|
|
(21,227 |
) |
|
|
19,849 |
|
|
|
319 |
|
|
(p)(r) |
|
|
(1,693 |
) |
Income before income taxes and noncontrolling interest |
|
|
533,896 |
|
|
|
46,614 |
|
|
|
(12,919 |
) |
|
|
24,938 |
|
|
|
|
|
592,529 |
|
Income tax expense |
|
|
132,094 |
|
|
|
— |
|
|
|
— |
|
|
|
14,630 |
|
|
(q) |
|
|
146,724 |
|
Net income before noncontrolling interest |
|
|
401,802 |
|
|
|
46,614 |
|
|
|
(12,919 |
) |
|
|
10,308 |
|
|
|
|
|
445,805 |
|
Noncontrolling interest |
|
|
— |
|
|
|
526 |
|
|
|
288 |
|
|
|
— |
|
|
|
|
|
814 |
|
Net income attributable to controlling interest |
|
$ |
401,802 |
|
|
$ |
46,088 |
|
|
$ |
(13,207 |
) |
|
$ |
10,308 |
|
|
|
|
$ |
444,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
|
56,987 |
|
|
|
|
|
|
|
|
|
455 |
|
|
(s) |
|
|
57,442 |
|
||
Diluted |
|
|
57,395 |
|
|
|
|
|
|
|
|
|
455 |
|
|
|
|
|
57,850 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income per share applicable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic |
|
$ |
7.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7.76 |
|
|||
Diluted |
|
$ |
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7.71 |
|
|||
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X, as amended, including pursuant to SEC Final Rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, release number 33-10786 dated May 20, 2020 (“Article 11”), using the acquisition method of accounting under U.S. GAAP. Transaction accounting adjustments have been made to show the effects of the Transaction on the historical financial statements of Skyline Champion and Regional Homes. The pro forma adjustments are preliminary and based on estimates of the purchase consideration and estimates of fair value and useful lives of the assets acquired and liabilities assumed. Certain reclassifications have been made to the historical financial statements of Regional Homes in order to conform with classifications used by Skyline Champion.
Skyline Champion's fiscal year ends on the Saturday nearest March 31. Regional Homes fiscal year ends December 31. Pursuant to Regulation S-X for companies with different fiscal year ends, the pro forma financial information has been prepared utilizing periods that differ by one quarter. As such, Skyline Champion's historical results for the unaudited pro forma condensed combined financial statements are derived from the Company's unaudited consolidated balance sheet as of September 30, 2023, unaudited consolidated income statement for the six months ended September 30, 2023, and audited consolidated income statement for the year ended April 1, 2023. Regional Homes' historical results are derived from Regional Homes' unaudited consolidated balance sheet as of June 30, 2023, unaudited consolidated income statement for the six months ended June 30, 2023, and audited consolidated income statement for the year ended December 31, 2022.
Note 2. Acquisition of Regional Homes
On August 25, 2023, Champion Home Builders (“CHB”) and Champion Retail Housing (together with CHB, the “Buyers”), subsidiaries of the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Regional Holdings Corporation (“Regional”), Regional Underwriters, Inc. (“Regional Underwriters”), Heath Jenkins, as beneficial owner of the outstanding equity interests of Regional (collectively, with Regional and the Regional Underwriters, the “Sellers”), Dana Jenkins, as beneficial owner of the outstanding equity interests of Helicon Insurance, LLC, and party thereto solely with respect to the sale of Helicon Insurance, LLC (“Dana Jenkins”), and Heath Jenkins, solely in his capacity as the representative of the Sellers (the “Sellers’ Representative”), pursuant to which Buyers agreed to acquire all of the outstanding equity interests in Regional Enterprises, LLC and related companies (collectively, “Regional Homes”).
On October 13, 2023 (the "Closing Date"), the Company, through the Buyers, paid to Sellers approximately $317 million and assumed debt, primarily related to inventory floor plan liabilities, of approximately $93 million. In addition, the Company issued 379,248 shares of common stock in Skyline Champion, par value $0.0277 per share (the “Skyline Common Stock”), equal to approximately $23 million, to Sellers. The transaction is subject to an earnout provision as well as customary net working capital adjustments. The Company also issued 75,850 shares of Skyline Common Stock, equal to approximately $5 million, to Dana Jenkins (the “D. Jenkins Stock Consideration”) for Helicon Insurance, LLC. The Skyline Champion Common Stock was issued to the Sellers and Dana Jenkins in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act (the “Private Placement”).
Note 3. Preliminary Purchase Price Allocation
The allocation of the preliminary estimated purchase price is based upon Skyline Champion’s estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of September 30, 2023, using currently available information. Because the pro forma financial statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on Skyline Champion’s financial position and results of operations may materially differ from the pro forma amounts included in this filing.
The preliminary purchase price allocation is subject to adjustment as the purchase accounting is not finalized. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocations used in the pro forma adjustments.
The following is an allocation of purchase price based upon a preliminary estimate of the fair value of the assets acquired and the liabilities assumed by Skyline Champion in the Transaction, amounts except share and per share in thousands:
Description |
|
Amount |
|
|
Fair value of consideration transferred |
|
|
|
|
Fair value of Skyline Champion common stock issued as consideration (455,098 shares at $61.20) |
|
$ |
27,852 |
|
Cash consideration |
|
|
317,191 |
|
Estimated earn out consideration |
|
|
5,876 |
|
Total consideration |
|
$ |
350,919 |
|
Preliminary purchase price allocations: |
|
|
|
|
Cash and cash equivalents |
|
$ |
67,557 |
|
Trade accounts receivable, net |
|
|
49,281 |
|
Floor plan loans receivable |
|
|
2,059 |
|
Inventories, net |
|
|
144,803 |
|
Other current assets |
|
|
22,542 |
|
Property, plant, and equipment, net |
|
|
80,321 |
|
Amortizable intangible assets, net |
|
|
42,800 |
|
Deferred tax assets |
|
|
840 |
|
Other noncurrent assets |
|
|
12,025 |
|
Accounts payable |
|
|
(10,101 |
) |
Other current liabilities |
|
|
(32,172 |
) |
Long-term debt |
|
|
(88,515 |
) |
Floorplan loans, net of current portion |
|
|
(91,814 |
) |
Other liabilities |
|
|
(3,215 |
) |
Identifiable net assets acquired |
|
|
196,411 |
|
Goodwill |
|
|
154,508 |
|
Total purchase price |
|
$ |
350,919 |
|
Note 4. Pro Forma Adjustments
Adjustments included in the column labeled “Pro Forma Adjustments for Acquisition” in the pro forma balance sheet and income statements are as follows:
Description |
|
Estimated life in years |
|
Amount (in thousands) |
|
|
Trade names |
|
10 |
|
$ |
24,900 |
|
Customer relationships |
|
10 |
|
|
17,900 |
|
Total identifiable intangible assets |
|
|
|
$ |
42,800 |
|
Description |
|
For the six months ended September 30, 2023 |
|
|
For the year ended April 1, 2023 |
|
||
Reduction of net sales |
|
$ |
4,634 |
|
|
$ |
12,929 |
|
Reduction of cost of sales |
|
|
3,522 |
|
|
|
9,826 |
|
Description |
|
For the six months ended September 30, 2023 |
|
|
For the year ended April 1, 2023 |
|
||
Removal of historical amortization expense |
|
$ |
(995 |
) |
|
$ |
— |
|
Pro forma amortization expense |
|
|
2,140 |
|
|
|
4,280 |
|
Pro forma adjustment for amortization expense |
|
$ |
1,145 |
|
|
$ |
4,280 |
|
Description |
|
Amount (in thousands) |
|
|
|
|
|
|
|
Net sales |
|
$ |
98,385 |
|
Cost of sales |
|
|
53,750 |
|
Gross profit |
|
|
44,635 |
|
Selling, general and administrative expenses |
|
|
5,209 |
|
Operating income |
|
|
39,426 |
|
Interest expense |
|
|
508 |
|
Other income |
|
|
(181 |
) |
Income before taxes |
|
|
39,099 |
|
Income tax expense |
|
|
— |
|
Net income |
|
$ |
39,099 |
|