SKY 10-K & 10-Q changes, risk factors and insider trading

Certain materials used in the construction of homes such as lumber, insulation, steel, drywall, oil-based products and fuel, among others, can become scarce during periods of high demand for new home construction as well as renovation and remodeling of existing homes. We depend on timely and sufficient delivery of raw materials from our suppliers. In addition, a few key components of our products are produced by a small group of quality suppliers that have the capacity to supply large quantities. Disruption to the supply chain of these key components, including as a result of changes in U.S. trade policies, could have an adverse impact on our production output. Raw material shortages from these and other suppliers can be more severe during periods following natural disastersdisasters, geopolitical conflicts or other broader economic disruptions.

Pricing for raw materials can be affected by national, regional, local, economic and political factors, including tariffs and periods of high inflation. We obtain raw materials through various supply channels, some of which involve importing materials from foreign countries. In fiscal 2025, the United States imposed increased tariffs on foreign imports into the United States from certain countries as well as additional proposed tariffs on other countries. The tariff policy environment has been and is expected to continue to be dynamic, and we cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations. As a result, we may be required to, among other things, take steps to mitigate the impact of tariffs on our business, including by raising the prices on products subject to such tariffs to share these costs with our customers and/or by making changes to our supply chain practices, sources of supply, or manufacturing locations, which could also have significant impacts on our financial results. Changes in U.S. trade policies could also lead to higher inflation, which would negatively impact consumers' purchasing power and demand for our products. Raw material shortages and price increases could cause delays in and increases to our costs of construction which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We cannot be certain that historical consumer preferences for factory-built homes in general, and for our products in particular, will remain unchanged. Our ability to remain competitive depends heavily on our ability to provide a continuing and timely introduction of innovative product offerings. We believe that the introduction of new features, designs, and models will be critical to the future success of our operations. Managing frequent product introductions poses inherent risks. Delays in the introduction or market acceptance of new models, designs, or product features could have a material adverse effect on our business. Products may not be accepted for a number of reasons, including changes in consumer preferences or our failure to properly gauge consumer preferences. Further, we cannot be certain that new product introductions will not reduce net sales from existing models and adversely affect our results of operations. Competitors could leverage artificial intelligence to develop new products or methods of enhancing their operations to gain consumer advantages. In addition, our net sales may be adversely affected if our new models and products are not introduced to the market on time or are not successful when introduced. Finally, our competitors’ products may obtain better market acceptance despite our efforts to lead the market.

Increased attention and evolving expectations relating to environmental, social and governancesustainability matters may impact our business, financial results or stock price.

Increased attention continues to be directed to publicly traded companies and their activities related to environmental, social and governance (“ESG”)sustainability matters. Advocacy groups have campaigned for action to promote change at public companies related to ESGsustainability matters. These activities include increasing action related to climate change and the use of energy efficient building products. Different stakeholder groups have divergent views on ESGsustainability matters, which increases the risk that any action or lack thereof with respect to ESGsustainability matters may be perceived negatively and adversely impact our reputation and business. In addition, organizations that provide information to investors on corporate governance and other matters have developed ratings systems for evaluating companies on their approach to ESG.sustainability. Unfavorable ESGsustainability ratings may lead to negative investor sentiment which could have a negative impact on our stock price.

We rely on qualified drivers to deliver homes from our manufacturing facilities to retail centers and customer home sites. A lack of qualified drivers to deliver manufactured homes could result in an increase in our cost of goods sold and operating expenses. Additionally, delays in the shipment of completed homes due to lack of qualified drivers could impact our ability to meet customer demand on a timely basis. Shortages or increased transportation costs from rising fuel prices could also have an adverse impact to our operations.

Although we maintain our own factory direct retail business in select markets, we conduct a majority of our business through independent distributors. OverApproximately 75% of our shipments of homes in fiscal 20252026 were made to independent customers throughout the U.S. and western Canada. We may not be able to establish relationships with new independent customers or maintain good relationships with independent distributors that sell our homes. Even if we establish and maintain relationships with independent distributors, these customers are not obligated to sell our homes exclusively and may choose to sell competitors’ homes instead. The independent customers with whom we have relationships can cancel these relationships on short notice. In addition, these customers may not remain financially solvent, as they are subject to industry, economic, demographic, and seasonal trends similar to those faced by us. If we do not establish and maintain relationships with solvent independent distributors in the markets we serve, sales in those markets, if we cannot offset by sales through an expanded factory-direct retail business, could decline and our results of operations and cash flows could suffer.

Cyber threats are ongoing, rapidly evolving and becoming increasingly sophisticated. As the breadth and complexity of the technologies we use continue to grow, the risk of security breaches and cyber attacks also increases. Despite our security measures, our information technology and infrastructure may be vulnerable to cybersecurity attacks by hackers or breached due to employee error, malfeasance, or other disruptions, particularly with employees and others on data networks working increasingly from home. We, our partners, vendors, and other third-party providers could be susceptible to third-party attacks on our and their information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups. Furthermore, advancements in artificial intelligence could be used by threat actors to attack our systems by using increasingly sophisticated and effective techniques to access our data. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, expose us to liability under laws that protect the privacy of personal information, disrupt our operations,operations and divert our management's attention, increase the costs required to prevent, respond to or mitigate an incident and damage our reputation, any of which could adversely affect our business.

A large portion of the people who buy our homes finance their home purchases through third-party lenders. Increases in interest rates or decreases in the availability of consumer financing have affected and could continue to adversely affect the market for homes. Interest rates were near historical lows for several years, which made purchasing new factory-built homes more affordable. However, inIn early 2022, the U.S. Federal Open Market Committee began raising the target rate for the federal funds rate in response to rising inflation. TheWhile the federal funds rate stabilizedbegan to decrease in fiscal 2024; however,2026, it still remains significantly higher than historic lows and the rate could increase in the future if rates of inflation increase. Potential manufactured housing customers have been and may continue to be less willing or able to pay the increased monthly costs that result from higher loan rates. In addition, recent increases in the prices of homes resulting from inflation, combined with higher loan rates, have limited and may continue to limit consumers’ ability to obtain financing to purchase a home. In addition, lendersLenders may also increase the qualifications needed for financing or adjust their terms to address any increased credit risk. These factors could continue to adversely affect the sales or pricing of our factory-built homes. These developments have historically had, and may once again have, an adverse effect on the overall demand for factory-built housing and its competitiveness with other forms of housing and could continue to adversely affect our results of operations and financial condition.

Inflation adversely affects us by increasing costs of raw materials, labor and transportation. Inflation also adversely affects our customers by decreasing purchasing power and ability to afford a new home. The U.S. economy recently experienced a period of higher inflation, stemming from efforts by the U.S. government to stimulate the economy and other factors. The increased rate of inflation has also leadled to higher interest rates, which has had and continue to have a negative impact on the housing industry, as well as increases in our borrowing rates. While we have historically been able to pass along price increases to our customers, in a persistently inflationary environment, we may not be able to raise prices sufficiently in order to maintain our margins.

The availability of wholesale financing for retailers is limitedconstrained due to a limited number of floor plan lenders and reduced lending limits.

We identifiedpreviously had a material weakness in our internal control over financial reporting which,and if notwe remediatedhave appropriatelyadditional ormaterial timely,weaknesses in the future it could affect our ability to report financial information timely and accurately, negatively affect investor confidence, and cause reputational harm.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. As disclosed in Part II, Item 9A "Controls and Procedures," management determined that there isidentified a material weakness in its internal control over financial reporting as of March 29, 2025 due to the lack of effectiveness of internal controls in the Regional Homes retail operations acquired in October 2023. As a result, the Company’s disclosure controls and procedures and internal control over financial reporting are not considered effective as of March 29, 2025. While the Company is actively engaged in the planning for, and implementation of, remediation efforts to addressAlthough the material weakness,weakness was remediated in fiscal 2026, there can be no assuranceassurances that theadditional effortsmaterial weaknesses will fullynot remediateoccur in the material weakness in a timely manner.future. If we are unable to remediate thea material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, it could adversely affect our ability to accurately report our financial results in a timely manner, resulting in material misstatements in our financial statements or causing us to fail to meet our reporting obligations, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and cause reputational harm.

The Company is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including manufactured construction, company-owned retail locations, construction services, and transportation logistics. The Company is the largest independent publicly traded factory-built solutions provider in North America based on revenue, and markets its homes under several nationally recognized brand names including Champion Homes, Genesis Homes, Skyline Homes, Regional Homes, Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, New Era, J. Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S. and Moduline and SRI Homes in western Canada. The Company operates 4342 manufacturing facilities throughout the U.S. and 5four manufacturing facilities in western Canada that primarily construct factory-built, timber-framed manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 7284 sales centers that sell manufactured homes to consumers across the U.S. while the construction services business installs and sets up factory-built homes. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

The Company is focused on operational improvements to increase capacity utilization and profitability at its existing manufacturing facilities as well as measured expansion of its manufacturing and retail footprint through facility and equipment investments and acquisitions. Those investments will help improve the Company's ability to satisfy demand for affordable housing. During fiscal 2023, robust demand for housing began to slow as inflation and higher interest rates made housing less affordable. The current economic environment drives an even greater need for attainable housing solutions. As a result, the Company continues to focus on growing in strong housing markets across the U.S. and Canada, as well as expanding products and services to provide more holistic and affordable solutions to homebuyers.

In addition to those acquisitions, the Company is also focused on enhancing its U.S. manufacturing production capacitycapacity, as well as redeployment of capital and resources through various plant start-ups in strategic locations.actions Asat aspecific result,plants. During the first half of fiscal 2026, the Company beganidled production inat the Bartow, Florida manufacturing plant and ceased operations at the Kelowna, British Columbia manufacturing plant. The Company believes those actions will ultimately lead to greater operating efficiency and profitability. In addition, the Company sold a previously idled or acquired facilities in Decatur, Indiana and Bartow, Florida in fiscal 2024 and amanufacturing facility in Pembroke, North Carolina induring the fourthsecond quarter of fiscal 2023.2026. The Company ownscontinues to own six idle manufacturing facilities that could be used for further manufacturing capacity expansion in future periods.

During fiscal 2024, the Company made an equity investment in ECN.ECN Capital Corporation ("ECN"). The investment, in part, facilitated the creation of a captive finance company in partnership with Triad.Triad Financing Services, Inc. ("Triad"), a subsidiary of ECN. The captive finance company, Champion Financing, through Triad, provides factory-built home floor plan and consumer loans to manufactured home retailers and homebuyers. The Company believes this offering will provide customers needed financing solutions and improve the Company's market share. On November 13, 2025, ECN entered into a definitive arrangement to be acquired by a private investor group for CAD $3.10 per share, plus any accrued but unpaid dividends. The transaction closed on April 24, 2026, which resulted in the liquidation of the Company's investment in ECN common and preferred shares in the first quarter of fiscal 2027. The liquidation of the Company's investment in ECN common and preferred shares will not impact the future operations of Champion Financing.

The Canadian Factory-built Housing segment net sales decreasedincreased by $14.9$16.8 million, or 13.7%17.9% in fiscal 20252026 compared to the prior year, primarily due to aan 11.9%increase decreaseof 15.2% in homes sold.sold and an increase in average selling price. The decreaseincrease in homes sold is due to slowinghigher demand in thecertain Canadian housing market.markets. Net sales for the Canadian segment were also unfavorablyfavorably impacted by approximately $3.1$0.6 million as the Canadian dollar weakened relative to the U.S. dollar during fiscal 20252026 as compared to the prior year.

Net sales for Corporate/Other includes the Company’s transportation business, financing activities and the elimination of intersegment sales. During fiscal 2025,2026, net sales for the segment increased by $1.1$5.5 million, or 3.7%,17.4%, compared to fiscal 2024. The decrease was2025, primarily attributabledue to increased operating activities in Champion Financing, partially offset by a decrease in recreational vehicle shipments by our transportation operations, offset in part by net sales from the initiation of the Champion Financing operations in fiscal 2025.shipments.

Gross profit for the U.S. Factory-built Housing segment increased by $177.2$24.3 million, or 40.2%,3.9%, during fiscal 20252026 compared to the prior year. As a percent of net sales, gross profit was 26.2%25.5% for fiscal 20252026 compared to 23.3%26.2% in the prior fiscal year. The increase in gross profit was primarily driven by higher unitrevenue volumeas duediscussed to higher customer demand and the addition of Regional Homes for the entirety of fiscal 2025.above. The increasedecrease in gross profit as a percent of segment net sales iswas driven, in part,driven by ahigher greater percentage of homes sold through our company-owned retail sales centersmaterial and lowerlabor manufacturing input costs. The increase in gross profitcosts and gross profit percent in fiscal 2025 is also positively impacted by the $34.5$8.4 million charge in the fourth quarter of fiscal 20242026 forto adjust our estimated costs to remediate water intrusion in certain homes built in one of our manufacturing facilitiesfacilities, partially offset by $3.5 million of reimbursements received from fiscalthe 2016material throughdistributor fiscalfor 2021.the Company's remediation costs incurred.

Gross profit for the Canadian Factory-built Housing segment decreasedincreased by $6.7$8.3 million, or 21.8%,34.7%, during fiscal 20252026 compared to the prior year. The decreaseincrease in gross profit was due to lowerhigher sales volumes caused by declining consumer demand.volumes. Gross profit decreasedincreased to 25.3%28.9% as a percent of segment net sales from 27.9%25.3% in the prior year due to decreasedincreased leverage of fixed manufacturing costs and production inefficiency caused by lower production rates.costs.

Gross profit for the Corporate/Other segment increased by $7.7 million, or 51.0%,33.7%, during fiscal 20252026 compared to the same period in the prior year. Gross profit increased as a result of theincreased inclusionoperating activity of Champion Financing.

SG&A expenses for the U.S. Factory-built Housing segment increased by $94.7$17.3 million, or 40.7%,5.3%, during fiscal 20252026 as compared to the prior year. SG&A expenses, as a percent of segment net sales, increaseddecreased to 13.7% in fiscal 2026 compared to 13.9% in fiscal 2025 compared to 12.3% during fiscal 2024.2025. The increasesincrease werein SG&A expenses was primarily due to higher salaries and incentive compensation costs, which are generally based on sales volume or measures of profitability, the inclusion of RegionalIseman HomesHomes, forand $1.0 million of costs associated with the entiretyidling of the Bartow, Florida plant, partially offset by a $3.7 million gain on the sale of an idle facility in the second quarter of fiscal 20252026 comparedand to 5.5 months in the prior-year period, as well as a charge of $8.6$4.1 million inless fiscal 2025charges related to the change in fair value of the contingent consideration from the acquisition. Additionally, incentive compensation costs increased in the current period as a result of increased sales volumes and profitability. SG&A as a percent of sales for our company-owned retail sales centers is generally higher than in our manufacturing operations as a result of the overall compensation structures.acquisitions.

SG&A expenses for the Canadian Factory-built Housing segment increased $0.3$5.7 million, or 3.0%52.7% compared to the prior year, primarily due to higher allocated corporate costs, partially offset by lower incentive compensation which is based on sales volume or profitability, and reductions in wages due to staffing adjustments.year. SG&A expenses, as a percent of segment net sales, were 11.6%15.0% during fiscal 20252026 compared to 9.7%11.6% in fiscal 2024.2025. The increaseincreases inwere SG&Adue asto a$5.2 percentmillion of netcosts salesassociated iswith the resultKelowna, ofBC lessplant absorption of certain fixed costs.closure.

SG&A expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. SG&A expenses for Corporate/Other increased by $21.4$2.6 million, or 31.7%,2.9%, during fiscal 20252026 as compared to the prior year due primarily to higher incentivestock compensation as a result of achievement of performance metrics in fiscal 2025 compared to fiscal 2024, and investmentsprofessional madefees, inpartially peopleoffset andby informationlower systemsIT to support future growth.costs.

INTEREST (INCOME),INCOME, NET

The following table summarizes the components of interest (income),income, net for fiscal 20252026 and 20242025:

Interest (income),income, net was $17.0$16.4 million during fiscal 2025,2026, compared to $28.3$17.0 million in the prior year. The change was primarily due to lower interest incomerates from lower averageon invested cash balances and higher interest expense from higher average floor plan payables and long-term debt balances assumed in the acquisition of Regional Homes.payables.

OTHER (INCOME) EXPENSE, NET

The following table summarizes other (income) expense, net for fiscal 20252026 and 20242025:

Other income of $2.4 million for fiscal 2026 represents dividend income from the investment in ECN Preferred shares. Other income of $3.4 million for fiscal 2025 represents dividend income of $2.4 million from the investment in ECN Preferred shares and $1.0 million of insurance proceeds for partial settlement of certain Champion Home Builders’ pre-bankruptcy workers' compensation claims. Other expense of $2.6 million for fiscal 2024 represents transaction costs incurred for the acquisition of Regional Homes of $3.3 million, partially offset by dividend income of $0.6 million from the investment in ECN Preferred Shares.

The following table summarizes equity in net (income) loss of affiliates for fiscal 20252026 and 20242025:

The Company's investment in ECN is accounted for under the equity method and the Company’s share of the earnings or losses of ECN are recorded on a three-month lag. Equity in net income of affiliates of $0.4 million in fiscal 2026 represents net income on the equity method investment in ECN of $1.2 million and net losses from other unconsolidated affiliates of $0.8 million. Equity in net loss of affiliates of $2.0 million infor fiscal 2025 representsrepresented net losses on the equity method investment in ECN of $0.4 million and net losses from other unconsolidated affiliates of $1.6 million. Equity in net loss of affiliates of $7.0 million for fiscal 2024 represented a loss on the equity method investment in ECN.

* indicates that the calculated percentage is not meaningful Net income attributable to non-controlling interest, which is a reduction to net income attributable to Champion Homes, Inc., represents the minority partner's 49% share of the results of operations of Champion Financing.

* indicates that the calculated percentage is not meaningful Adjusted EBITDA for fiscal 20252026 was $285.1$308.2 million, an increase of $39.8$23.2 million from fiscal 2024.2025. The increase is a result of higher sales volumes and gross profit, partially offset by higher SG&A expenses, primarily driven by the inclusion of Regional Homes for the entirety of fiscal 2025 compared to 5.5 months of operations in the prior year period.expenses. See the definition of Adjusted EBITDA under “Non-GAAP Financial Measures” below for additional information regarding the definition and use of this metric in evaluating the Company’s results.

Although orders from customers can be cancelled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at March 29,28, 20252026 totaled $343.4$316.0 million compared to $315.8$343.4 million at March 30,29, 2024.2025. The increasedecrease in backlog wasis primarilya drivenfunction byof higherproduction netrates orders.exceeding order rates during fiscal 2026 compared to fiscal 2025.

The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements, capital expenditures, maturities of long-term debt, and strategic initiatives and investments. The CompanyCompany's does not have any scheduled long-term debt maturities in the next twelve months. The Company has anSecond Amended and Restated Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility ("Second Amended Credit Agreement"). At March 29,28, 2025,2026, there were no borrowings under the Second Amended Credit Agreement and letters of credit issued under the Second Amended Credit Agreement totaled $31.5$27.5 million. Total available borrowings under the Second Amended Credit Agreement as of March 30,29, 20242025 were $168.5$172.5 million. The Company’s revolving credit facility includes (i) a maximum consolidated total net leverage ratio of 3.25 to 1.00, subject to an upward adjustment upon the consummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to 1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year and beyond. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise its operating strategies.

Cash provided by operating activities was $303.9 million in fiscal 2026 compared to $240.9 million in fiscal 2025 compared to $222.7 million in fiscal 2024.2025. The increase was driven by higherchanges netin income,deferred partiallytaxes offset by lessand favorable changes in working capital items primarily a result of the increasedecrease in finished goods inventories at the company-owedcompany-owned retail sales centers.

Cash used in investing activities was $57.2 million in fiscal 2026 versus $46.2 million in fiscal 2025 versus $485.7 million in fiscal 2024.2025. The decreaseincrease in cash used forin investing activities was related to the Company's acquisition of RegionalIseman Homes, an investmentHomes in floorthe planfirst loans,quarter of fiscal 2026, offset in part by a reduction in expenditures for property, plant and the purchase of ECN common and preferred stock in fiscal 2024 which did not reoccur in fiscal 2025.equipment.

Cash used in financing activities was $222.2 million in fiscal 2026 versus $73.0 million in fiscal 2025 versus $10.9 million provided by financing activities in fiscal 2024.2025. The increase in fiscalcash 2025used isin financing activities was primarily a result of commonan stockincrease in repurchases of $80.0 million. Fiscal 2025 was the firstCompany's yearstock in fiscal 2026 and reduction of thefloor repurchaseplan activity.payables.

The Second Amended Credit Agreement matures in July 20262030 and has no scheduled amortization. The interest rate on borrowings under the Second Amended Credit Agreement is based on the Secured Overnight Financing Rate ("SOFR") plusor aan benchmarkAlternative ReplacementBase Rate Adjustment ("Replacement RateABR"), plus an interest rate spread. The interest rate spread adjusts based on the consolidated total net leverage of the CompanyCompany. The interest rate ranges from a high of SOFR plus 1.875% or the ABR plus 0.875% (when the consolidated total net leverage ratio is equal to or greater than 2.25:1.00, to 1.00), to a low of SOFR plus 1.125% or the ABR plus 0.125% (when the consolidated total net leverage is below 0.50:1.00. Alternatively for same day borrowings, the interest rateratio is basedless onthan an Alternative Base Rate ("ABR") plus an interest rate spread that ranges from a high of 0.875%0.50 to a low of 0.125% based on the consolidated total net leverage ratio.1.00). In addition, the Company is obligated to pay an unused line fee ranging between 0.15% and 0.30% depending on the consolidated total net leverage ratio, in respect of unused commitments under the Amended Credit Agreement.

The Company has a letter of credit sub-facility under the Second Amended Credit Agreement. At March 29,28, 2025,2026, letters of credit issued under the sub-facility totaled $31.5$27.5 million.

The Company has received consumer complaints for damages related to water intrusion in homes built in one of its manufacturing facilities prior to fiscal 2022. The Company has investigated, and believes, the cause of the damage is the result of materials that did not perform in accordance with the manufacturer's contractual obligations. The Company has identified that certain homes constructed over that period that may be affected. Based on the results of ongoing investigation and repair efforts, the Company has developed a remediation plan under Subpart I of the HUD code, which was approved in fiscal 2025. The plan callscalled for inspection and repair of affected homes if there is evidence of damage, or procedures to mitigate the opportunity for future damage. As a result of the proposal, the Company recorded chargesa to execute the remediation plancharge of $34.5 million during the fourth quarter of fiscal 2024.2024 related to the estimated costs of the planned remediation efforts. The Company estimated the charges by establishing a range of total expected costs determined by an actuary using a Monte Carlo simulation. The analysis, which was completed at the end of the fourth quarter of fiscal 2024, resulted in a range of losses between $34.5 million and $85.0 million. The Company was not able to determine a value in the range that was more likely than any other value, and as prescribed by U.S. GAAP, recorded the charge for remediation based on the low end of the range of potential losses. TheDuring fiscal 2026, the Company reassessed the total expected remaining estimated costs of the planned remediation efforts and determined, through completed inspection, repair and settlement efforts, that there was sufficient experience such that recording to the low end of a range of losses was no longer appropriate. The actuarial analysis completed in the fourth quarter of fiscal 2025 which2026 resulted in noa changecharge of $8.5 million to the low end ofincrease the rangeremaining ofestimated potential losses and reduction in the high end of the range of potential lossesliability to $77.5$35.6 million.million at March 28, 2026. The Company will continue to monitor the population of affected homes and the results of the inspection and repair activities, including actual repair costs,costs on the affected homes and the number of affected homes to be repaired, and may revise the amount of the estimated liability, which could result in an increase or decrease in the estimated liability in future periods. The liability, net of $0.4 million of remediation payments made during fiscal 2025, is included in other current liabilities in the accompanying Consolidated Balance Sheets.

The Company defines Adjusted Earnings Before Interest Taxes and Depreciation and Amortization (“Adjusted EBITDA”) as net income or loss attributable to Champion Homes, Inc. plus expenses or minus income for: (a) the provision for income taxes; (b) interest income or expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) non-cash restructuring charges and impairment of assets; (f) equity in net earnings or losses of ECN; (g) charges related to the remediation of the water intrusion product liability claims and reimbursement of water intrusion costs; and (h) other non-operating income or expense including but not limited to those costs for the acquisition and integration or disposition of businesses, including the change in fair value of contingent consideration, and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP and should not be considered an alternative to, or more meaningful than, net income or loss prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

The Company is self-insured for a significant portion of its general insurance, product liability, workers’ compensation, auto, health, and property insurance. Insurance coverage is maintained for catastrophic exposures and those risks required to be insured by law. The Company is currently liable for the first $250,000$500,000 of incurred losses for each workers’ compensation incident, $150,000 for each auto liability claim and is responsible for losses up to the first $500,000 per occurrence for general, product liability, and property insurance. Generally catastrophic losses are insured up to $80 million. The Company establishes reserves for reported and unreported losses and insurance company reimbursements under these programs using an actuarial determined value which takes into consideration prior claim experience, estimates of losses for known occurrences and the respective volume of business activity for a given period. The health plan is currently subject to a stop-loss limit of $800,000 per occurrence. Estimated self-insurance costs are accrued for all expected future expenditures for reported and unreported claims based on historical experience.

In fiscal 2025,2026, the Company performed qualitative assessments of its reporting units. The annual assessment was completed on of the first day of fiscal March. The assessments indicated that it was more likely than not that the fair value of each of the reporting units exceeded its respective carrying value. The Company does not believe that any reporting units are at risk for impairment.

Champion Homes, Inc., formerly known as Skyline Champion Corporation (the “Company”),Inc. is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including factory-built home manufacturing, company-owned retail locations, construction services, and transportation logistics services. The Company markets its homes under several nationally recognized brand names including Champion Homes, Genesis Homes, Skyline Homes, Regional Homes, Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, New Era, J. Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 42 manufacturing facilities throughout the U.S. and four manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 8384 sales centers that sell manufactured homes to consumers across the U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

The Company is focused on operational improvements to increase capacity utilization and profitability at its existing manufacturing facilities as well as measured expansion of its manufacturing and retail footprint through facility and equipment investments and acquisitions. Those investments will help improve the Company's ability to satisfy demand for affordable housing. DuringThe fiscal 2023, robust demand for housing began to slow as inflation and higher interest rates made housing less affordable. Thatcurrent economic environment drovedrives an even greater need for attainable housing solutions. As a result, the Company continues to focus on growing in strong housing markets across the U.S. and Canada, as well as expanding products and services to provide more holistic and affordable solutions to homebuyers.

In addition to those acquisitions, the Company is also focused on enhancing its U.S. manufacturing production capacity, as well as redeployment of capital and resources through strategic actions at specific plants. During the first half of fiscal 2026, the Company idled production at the Bartow, Florida manufacturing plant and ceased operations at the Kelowna, British Columbia manufacturing plant. The Company believes those actions will ultimately lead to greater operating efficiency and profitability. In addition, the Company sold a previously idled manufacturing facility during the second quarter of fiscal 2026. The Company continues to own six idle manufacturing facilities that could be used for further manufacturing capacity expansion in future periods.

During fiscal 2024, the Company made an equity investment in ECN. The investment, in part, facilitated the creation of a captive finance company in partnership with Triad, a subsidiary of ECN. The captive finance company, Champion Financing, through Triad, provides factory-built home floor plan and consumer loans to manufactured home retailers and homebuyers. The Company believes this offering will provide customers needed financing solutions and improve the Company's market share. On November 13, 2025, ECN entered into a definitive arrangement to be acquired by a private investor group for CAD $3.10 per share, plus any accrued but unpaid dividends. The agreement,transaction closed on April 24, 2026, which was approved by ECN shareholders in January 2026, is subject to court approval and other customary closing conditions and is expected to close in the first half of fiscal 2027, which will resultresulted in the liquidation of the Company's investment in ECN common and preferred shares.shares in the first quarter of fiscal 2027 and resulted in net cash proceeds of $137.0 million and net gain on investment of $2.5 million. The liquidation of the Company's investment in ECN common and preferred shares will not impact the future operations of Champion Financing.

The Company's manufacturing backlog decreasedincreased to $266.0$421.8 million as of DecemberJune 27, 20252026 compared to $312.6$302.5 million as of DecemberJune 28, 2024.2025. The decreaseincrease in backlog is a function of productionorder rates exceeding orderproduction rates during the three months ended DecemberJune 27, 2025,2026, compared to the same period in the prior lastfiscal year.

For the ninethree months ended DecemberJune 27, 2025,2026, approximately 86.7%87.3% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the U.S. Department of Housing and Urban Development ("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the Manufactured Housing Institute, HUD-code industry home shipments were 69,75726,363 and 71,96827,676 units during the eightthree months ended NovemberMay 30,31, 20252026 and 2024,2025, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 22.5%23.1% and 22.2%,22.5%, for the eightthree months ended NovemberMay 30,31, 20252026 and 2024,2025, respectively. Annual HUD-code industry shipments have generally increased since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, current manufactured housing shipmentsbut are still at lower levels than the long-term historical average of over 200,000 units per year. Manufactured home sales represent approximately 9%11% of all U.S. single family home starts. Our estimated market share in the U.S. total housing market, based on data through OctoberMay 2025,2026, was approximately 2.8%3.0% and 2.5%2.7% for the ninethree months ended DecemberJune 27, 20252026 and DecemberJune 28, 2024,2025, respectively.

ITEDUNAUDITED RESULTS OF OPERATIONS FOR THE THIRDFIRST QUARTER OF FISCAL 20262027 VS. 20252026

The following table summarizes net sales for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

Net sales for the three months ended DecemberJune 27, 20252026 were $656.6$710.2 million, an increase of $11.7$8.9 million, or 1.8%,1.3%, compared to the three months ended DecemberJune 28, 2024.2025. The following is a summary of the change by operating segment.

Net sales for the Company’s U.S. manufacturing and retail operations increased by $11.6$15.4 million, or 1.9%,2.3%, for the three months ended DecemberJune 27, 20252026 compared to the three months ended DecemberJune 28, 2024.2025. The increase was due to a 4.6%1.8% increase in new homes sold and 0.6% increase in the average selling price per new home partially offset by a 2.6% decrease in new homes sold.home. The increase in average selling price was due primarily to a shift in mix to more multi-wide units and increased pricing at our company-owned retail sales centers. The decrease in new homes sold was due to lowerhigher production.new home orders and production rates.

The Canadian Factory-built Housing segment net sales increaseddecreased by $0.1$6.8 million, or 0.4%22.6% for the three months ended DecemberJune 27, 20252026 compared to the same period in the prior fiscal year, primarily due to a 2.9%26.0% increasedecrease in homes sold partially offset by a 2.4%4.6% decreaseincrease in average home selling price. The increasedecrease in homes sold was due to higherlower demand in certain markets.markets and the closure of the Kelowna, BC plant in the second quarter of fiscal 2026. The decreaseincrease in average selling price was due to product mix. On a constant currency basis, net sales for the Canadian segment were unfavorablyfavorably impacted by approximately $0.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended DecemberJune 27, 20252026 as compared to the same period of the prior fiscal year.

Net sales for Corporate/Other includes the Company’s transportation business, financing activities, and the elimination of intersegment sales. Net sales were consistent for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 2024.2025.

The following table summarizes gross profit for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

Gross profit as a percent of sales during the three months ended DecemberJune 27, 20252026 was 26.2%25.2% compared to 28.1%27.1% during the three months ended DecemberJune 28, 2024.2025. The following is a summary of the change by operating segment.

Gross profit for the U.S. Factory-built Housing segment decreased by $9.4 million, or 5.6%,5.4%, during the three months ended DecemberJune 27, 20252026 compared to the same period in the prior fiscal year. Gross profit was 25.4%24.4% as a percent of segment net sales for the three months ended DecemberJune 27, 2025,2026, compared to 27.4%26.3% for the three months ended DecemberJune 28, 2024.2025. The decrease in gross profit as a percent of segment net sales is beingwas driven by higher manufacturing material costsinput and less absorption of fixed costs due to lower sales volumes, partially offset by higher average selling prices on new homes sold through our Company-owned retail locations.costs.

Gross profit for the Canadian Factory-built Housing segment increaseddecreased by $0.1$1.5 million, or 1.5%,18.3%, during the three months ended DecemberJune 27, 20252026 compared to the same period in the prior fiscal year. The decrease in gross profit was due to fewer homes sold in the period compared to the prior year. Gross profit as a percent of net sales was 26.7%29.0% for the three months ended DecemberJune 27, 2025,2026, compared to 26.4%27.5% in the same period of the prior year. The increase in gross profit as a percent of segment net sales was due to higher average selling prices of new homes and the impact of the closure of the Kelowna, BC plant, which reduced segment margin percentage in the prior fiscal year.

Gross profit for the Corporate/Other segment increased $0.5$0.4 million, or 6.9%,4.9%, during the three months ended DecemberJune 27, 20252026 compared to the same period of the prior fiscal year due primarily to increased operating activity at Champion Financing.year.

Selling, general, and administrative expenses include in part costs that are not directly attributable to the manufacture or resale of our products, including foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

Selling, general, and administrative expenses were $109.7$119.0 million for the three months ended DecemberJune 27, 2025,2026, an increase of $1.5$7.7 million, or 1.4%,6.9%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $2.6$1.7 million, or 3.3%,2.0%, during the three months ended DecemberJune 27, 20252026 as compared to the same period in the prior fiscal year. SG&A as a percent of segment net sales increaseddecreased to 13.3%13.0% for the three months ended DecemberJune 27, 20252026 compared to 13.1% during the comparable period of the prior fiscal year. The increase in SG&A was due to the inclusion of Iseman Homes for the entire period in fiscal 2027 versus a partial period in the prior year subsequent to the acquisition.

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increaseddecreased $0.1$2.5 million, or 4.1%,42.9%, for the three months ended DecemberJune 27, 20252026 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increaseddecreased to 10.8%14.0% for the three months ended DecemberJune 27, 20252026 compared to 10.4%19.0% during the comparable period of the prior fiscal year, primarily due to costs associated with the Kelowna, BC plant closure of $2.9 million being included in the prior fiscal year.

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other decreasedincreased $1.2$8.4 million, or 4.8%,44.4%, during the three months ended DecemberJune 27, 20252026 as compared to the same period of the prior fiscal year. The decreaseincrease was primarily due to lowerforeign ITcurrency transaction losses, employee severance costs, partially offset byand higher professionalstock fees.compensation and incentive expense.

The following table summarizes the components of interest income, net for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

The following table summarizes other income for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

The following table summarizes income tax expense for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

Income tax expense for the three months ended DecemberJune 27, 20252026 was $12.4$17.0 million, representing an effective tax rate of 18.3%,25.0%, compared to income tax expense of $16.7$17.7 million, representing an effective tax rate of 21.1%21.0% for the three months ended DecemberJune 28, 2024.2025. The effective tax rate for the three months ended DecemberJune 27, 20252026 was positivelynegatively impacted primarily by ana increasedecrease in recognition of tax credits related to the sale of energy efficient homes.

The Company’s effective tax rate for each of the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 2024,2025, differs from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, and results in foreign jurisdictions.

EQUITY IN NET INCOMELOSS OF AFFILIATES

The following table summarizes equity in net incomeloss of affiliates for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

The Company's investment in ECN is accounted for under the equity method and the Company’s share of the earnings or losses of ECN are recorded on a three-month lag. Equity in net incomeloss of affiliates of $0.9$0.6 million for the three months ended DecemberJune 27, 20252026 represents a gainloss on the equity method investment in ECN of $1.2$0.3 million and net losses from other unconsolidated equity method investments of $0.3 million. Equity in net incomeloss of affiliates of $0.6 million for the three months ended DecemberJune 28, 20242025 represents a gainloss on the equity method investment in ECN of $0.7$0.5 million and net losses from other equity method investments of $0.1 million.

The following table summarizes net income attributable to non-controlling interest for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

The following table reconciles net income attributable to Champion Homes, Inc., the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended DecemberJune 27, 20252026 and DecemberJune 28, 20242025:

* indicates that the calculated percentage is not meaningful Adjusted EBITDA for the three months ended DecemberJune 27, 20252026 was $74.8$73.6 million, a decrease of $8.5$20.6 million from the same period of the prior fiscal year. The decrease is primarily a result of lower operating income as a result of lower gross margins.