American Woodmark Corporation Announces Second Quarter Results

WINCHESTER, Va., Nov. 26, 2019 /PRNewswire/ -- American Woodmark Corporation AMWD (the "Company") today announced results for its second fiscal quarter ended October 31, 2019.

Net sales for the second fiscal quarter increased 0.7% to $428.0 million compared with the same quarter of the prior fiscal year.  Net sales for the first six months of the current fiscal year increased 0.2% to $855.4 million from the comparable period of the prior fiscal year.  The Company experienced growth in the builder channel during the second quarter and first six months of fiscal year 2020, which was offset by declines in the home center and independent dealers and distributors channels.

Net income was $22.2 million ($1.31 per diluted share) for the second quarter of the current fiscal year compared with $18.5 million ($1.05 per diluted share) in the same quarter of the prior fiscal year.  Net income for the current quarter was positively impacted by higher sales, lower selling and marketing expense and lower interest expense.  Net income for the first six months of the current fiscal year was $49.0 million ($2.90 per diluted share) compared with $43.3 million ($2.46 per diluted share) for the same period of the prior fiscal year.  Adjusted EPS per diluted share was $1.84 for the second quarter of the current fiscal year compared with $1.60 in the same quarter of the prior fiscal year and $3.97 for the first six months of the current fiscal year compared with $3.64 for the same period of the prior fiscal year.

Adjusted EBITDA for the second fiscal quarter was $62.9 million, or 14.7% of net sales, compared to $60.8 million, or 14.3% of net sales, for the same quarter of the prior fiscal year.  Adjusted EBITDA for the first six months of the fiscal year was $132.5 million, or 15.5% of net sales, compared to $128.9 million, or 15.1% of net sales, for the same period of the prior fiscal year.

"Relative to the overall market, we are pleased with our revenue and margin performance in the second fiscal quarter," said Cary Dunston, Chairman and CEO.  "Our new construction and stock home center business net sales growth was strong.  Adjusted EBITDA margins improved over the prior year as our operational performance allowed us to continue to offset much of the cost headwinds we are facing."

Cash provided by operating activities for the first six months of the current fiscal year was $86.2 million and free cash flow totaled $66.1 million.  The Company paid down $72.0 million of its term loan facility during the first six months of the current fiscal year.

About American Woodmark

American Woodmark Corporation manufactures and distributes kitchen, bath and home organization products for the remodeling and new home construction markets. Its products are sold on a national basis directly to home centers, builders and through a network of independent dealers and distributors. At October 31, 2019, the Company operated eighteen manufacturing facilities in the United States and Mexico and eight primary service centers located throughout the United States.

Use of Non-GAAP Financial Measures

We have presented certain financial measures in this press release which have not been prepared in accordance with U.S. generally accepted accounting principles (GAAP).  Definitions of our non-GAAP financial measures and a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP are provided below following the financial highlights under the heading "Non-GAAP Financial Measures."

Safe harbor statement under the Private Securities Litigation Reform Act of 1995: All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors that may be beyond the Company's control.  Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements.  Such factors include, but are not limited to, those described in the Company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.  The Company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

 

AMERICAN WOODMARK CORPORATION





















Unaudited Financial Highlights





















(in thousands, except share data)





















Operating Results



























Three Months Ended



Six Months Ended







October 31



October 31







2019



2018



2019



2018





















Net sales



$

428,016





$

424,878





$

855,381





$

853,840



Cost of sales & distribution



340,966





338,116





673,812





671,342





Gross profit



87,050





86,762





181,569





182,498



Sales & marketing expense



20,451





22,986





41,138





45,924



General & administrative expense



29,900





28,718





59,332





58,548



Restructuring charges



(188)





(406)





(207)





2,035





Operating income



36,887





35,464





81,306





75,991



Interest expense, net



7,436





8,943





15,524





18,368



Other (income) expense, net



(527)





1,112





(534)





(325)



Income tax expense



7,815





6,921





17,272





14,693





Net income



$

22,163





$

18,488





$

49,044





$

43,255























Earnings Per Share:

















Weighted average shares outstanding - diluted



16,955,835





17,588,449





16,932,236





17,589,767























Net income per diluted share



$

1.31





$

1.05





$

2.90





$

2.46



 

Condensed Consolidated Balance Sheet

(Unaudited)









October 31



 April 30







2019



2019













Cash & cash equivalents



$

51,435





$

57,656



Investments - certificates of deposit







1,500



Customer receivables



120,118





125,901



Inventories



119,758





108,528



Income taxes receivable



2,704





1,009



Other current assets



15,009





11,441





Total current assets



309,024





306,035



Property, plant & equipment, net



206,899





208,263



Operating lease assets, net



89,662







Trademarks, net



3,889





5,555



Customer relationship intangibles, net



190,278





213,111



Goodwill



767,612





767,612



Other assets



31,300





29,355





Total assets



$

1,598,664





$

1,529,931















Current portion - long-term debt



$

2,320





$

2,286



Accounts payable & accrued expenses



167,089





147,304





Total current liabilities



169,409





149,590



Long-term debt



617,930





689,205



Deferred income taxes



59,636





64,749



Long-term operating lease liabilities



72,067







Other liabilities



4,714





6,034





Total liabilities



923,756





909,578



Stockholders' equity



674,908





620,353





Total liabilities & stockholders' equity



$

1,598,664





$

1,529,931



 

Condensed Consolidated Statements of Cash Flows

(Unaudited)







Six Months Ended







October 31







2019



2018













Net cash provided by operating activities



$

86,232





$

107,667



Net cash used by investing activities



(18,288)





(19,717)



Net cash used by financing activities



(74,165)





(108,498)



Net decrease in cash and cash equivalents



(6,221)





(20,548)



Cash and cash equivalents, beginning of period



57,656





78,410















Cash and cash equivalents, end of period



$

51,435





$

57,862



 

Non-GAAP Financial Measures

We have reported our financial results in accordance with generally accepted accounting principles (GAAP).  In addition, we have discussed our financial results using the non-GAAP measures described below.

Management believes all of these non-GAAP financial measures provide an additional means of analyzing the current period's results against the corresponding prior period's results.  However, these non-GAAP financial measures should be viewed in addition, and not as a substitute for, the Company's reported results prepared in accordance with GAAP.  Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Adjusted EPS per diluted share

We use Adjusted EPS per diluted share in evaluating the performance of our business and profitability.  Management believes that this measure provides useful information to investors by offering additional ways of viewing the Company's results by providing an indication of performance and profitability excluding the impact of unusual and/or non-cash items.  We define Adjusted EPS per diluted share as diluted earnings per share excluding the per share impact of (1) expenses related to the RSI acquisition and subsequent restructuring charges, (2) the amortization of customer relationship intangibles and trademarks, (3) net gain on debt forgiveness and modification and (4) the tax benefit of RSI acquisition expenses and subsequent restructuring charges, the net gain on debt forgiveness and modification and the amortization of customer relationship intangibles and trademarks.  The amortization of intangible assets is driven by the RSI acquisition and will recur in future periods.  Management has determined that excluding amortization of intangible assets from our definition of Adjusted EPS per diluted share will better help it evaluate the performance of our business and profitability and we have also received similar feedback from some of our investors regarding the same.

Adjusted EBITDA and Adjusted EBITDA margin

We use Adjusted EBITDA and Adjusted EBITDA margin in evaluating the performance of our business, and we use each in the preparation of our annual operating budgets and as indicators of business performance and profitability.  We believe Adjusted EBITDA and Adjusted EBITDA margin allow us to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance.

We define Adjusted EBITDA as net income adjusted to exclude (1) income tax expense, (2) interest expense, net, (3) depreciation and amortization expense, (4) amortization of customer relationship intangibles and trademarks, (5) expenses related to the RSI acquisition and subsequent restructuring charges, (6) stock-based compensation expense, (7) gain/loss on asset disposals, (8) change in fair value of foreign exchange forward contracts and (9) net gain on debt forgiveness and modification.  We believe Adjusted EBITDA, when presented in conjunction with comparable GAAP measures, is useful for investors because management uses Adjusted EBITDA in evaluating the performance of our business.

We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net sales.

Free cash flow

To better understand trends in our business, we believe that it is helpful to subtract amounts for capital expenditures consisting of cash payments for property, plant and equipment and cash payments for investments in displays from cash flows from continuing operations which is how we define free cash flow.  Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment.  It also provides a measure of our ability to repay our debt obligations.

Net leverage

Net leverage is a performance measure that we believe provides investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt.

We define net leverage as net debt (total debt less cash and cash equivalents) divided by the trailing 12 months Adjusted EBITDA.

A reconciliation of these non-GAAP financial measures and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on the following tables:

Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents















Three Months Ended



Six Months Ended





October 31



October 31

(in thousands)



2019



2018



2019



2018



















Net income (GAAP)



$

22,163





$

18,488





$

49,044





$

43,255



Add back:

















      Income tax expense



7,815





6,921





17,272





14,693



      Interest expense, net



7,436





8,943





15,524





18,368



      Depreciation and amortization expense



12,164





11,458





24,027





22,226



      Amortization of customer relationship intangibles

















         and trademarks



12,250





12,250





24,500





24,500



EBITDA (Non-GAAP)



$

61,828





$

58,060





$

130,367





$

123,042



Add back:

















      Acquisition related expenses (1)



(130)





649





(89)





3,410



      Change in fair value of foreign exchange forward

















         contracts (2)



(152)





993





(96)





199



      Stock-based compensation expense



1,178





836





2,075





1,622



      Loss on asset disposal



151





230





217





584



Adjusted EBITDA (Non-GAAP)



$

62,875





$

60,768





$

132,474





$

128,857





















Net Sales



$

428,016





$

424,878





$

855,381





$

853,840



Adjusted EBITDA margin (Non-GAAP)



14.7

%



14.3

%



15.5

%



15.1

%



(1)  Acquisition related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc. and the subsequent restructuring charges that the Company incurred.

(2)  In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange rates.  The Company manages these risks through the use of foreign exchange forward contracts.  The changes in the fair value of the forward contracts are recorded in other expense (income) in the operating results.

 



Reconciliation of Net Income to Adjusted Net Income















Three Months Ended



Six Months Ended





October 31



October 31

(in thousands, except share data)



2019



2018



2019



2018



















Net income (GAAP)



$

22,163





$

18,488





$

49,044





$

43,255



Add back:

















      Acquisition related expenses



(130)





649





(89)





3,410



      Amortization of customer relationship intangibles

















         and trademarks



12,250





12,250





24,500





24,500



      Tax benefit of add backs



(3,103)





(3,291)





(6,200)





(7,089)



Adjusted net income (Non-GAAP)



$

31,180





$

28,096





$

67,255





$

64,076





















Weighted average diluted shares



16,955,835





17,588,449





16,932,236





17,589,767



Adjusted EPS per diluted share (Non-GAAP)



$

1.84





$

1.60





$

3.97





$

3.64







Free Cash Flow











Six Months Ended





October 31





2019



2018











Cash provided by operating activities



$

86,232





$

107,667



Less: Capital expenditures (1)



20,101





18,150



Free cash flow



$

66,131





$

89,517





(1)  Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During the first six months of fiscal 2020 and 2019, approximately $0.6 million and $4.6 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

Net Leverage











Twelve Months

Ended





October 31

(in thousands)



2019







Net income (GAAP)



$

89,477



Add back:





      Income tax expense



29,779



      Interest expense, net



32,808



      Depreciation and amortization expense



47,247



      Amortization of customer relationship intangibles





         and trademarks



49,000



EBITDA (Non-GAAP)



$

248,311



Add back:





      Acquisition related expenses (1)



619



      Change in fair value of foreign exchange forward contracts (2)



(295)



      Net gain on debt forgiveness and modification (3)



(5,266)



      Stock-based compensation expense



3,493



      Loss on asset disposal



1,605



Adjusted EBITDA (Non-GAAP)



$

248,467













As of October 31





2019

Current maturities of long-term debt



$

2,320



Long-term debt, less current maturities



617,930



Total debt



620,250



Less: cash and cash equivalents



(51,435)



Net debt



$

568,815









Net leverage (4)



2.29





(1)  Acquisition related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc. and the subsequent restructuring charges that the Company incurred.

(2)  In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange rates.  The Company manages these risks through the use of foreign exchange forward contracts.  The changes in the fair value of the forward contracts are recorded in other expense (income) in the operating results.

(3)  The Company had loans and interest forgiven relating to four separate economic development loans totaling $5.5 million for fiscal year 2019, and the Company incurred $0.3 million in loan modification expense in connection with an amendment to the credit agreement during fiscal year 2019.

(4)  Net debt divided by Adjusted EBITDA for the twelve months ended October 31, 2019.

 

Cision View original content:http://www.prnewswire.com/news-releases/american-woodmark-corporation-announces-second-quarter-results-300964911.html

SOURCE American Woodmark Corporation

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