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American Woodmark Corporation Announces First Quarter Results

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American Woodmark Corporation Announces First Quarter Results

PR Newswire

WINCHESTER, Va., Aug. 27, 2018 /PRNewswire/ -- American Woodmark Corporation (NASDAQ:AMWD) (the "Company") today announced results for its first fiscal quarter ended July 31, 2018.

Fiscal First Quarter 2019

Net sales for the first fiscal quarter increased 55% to $429.0 million compared with the same quarter of the prior fiscal year.  The current first fiscal quarter results include three months of results from the Company's acquisition of RSI Home Products, Inc. ("RSI"), which closed December 29, 2017.  Excluding the impact of the RSI acquisition, net sales for the first fiscal quarter increased 8% to $299.0 million compared with the same quarter of the prior fiscal year.  Excluding the impact of the RSI acquisition, the Company experienced growth in all channels during the first quarter of fiscal year 2019.

Net income was $24.8 million ($1.41 per diluted share) for the first quarter of the current fiscal year compared with $22.3 million ($1.36 per diluted share) in the same quarter of the prior fiscal year.  Net income was positively impacted by the RSI acquisition and additional sales volumes which were partially offset by restructuring charges of $2.4 million, intangible amortization of $12.3 million and raw material inflation.  Adjusted EPS per diluted share was $2.04 for the first quarter of the current fiscal year compared with $1.36 in the same quarter of the prior fiscal year.

Adjusted EBITDA was $68.1 million, or 15.9% of net sales compared to $37.4 million, or 13.5% of net sales for the same quarter of the prior fiscal year.  The increase is primarily due to sales growth in the quarter and the inclusion of three months of results for RSI.

"We are very pleased with our solid performance for the first quarter of our new fiscal year", said Cary Dunston, Chairman and CEO.  "We experienced growth in all channels, over-indexing the market as a whole.  Our integration work remains on plan as we have come together as one team with a clear vision for success."

Cash provided by operating activities for the first fiscal quarter was $52.9 million.  Free cash flow totaled $41.4 million for the first fiscal quarter.  Additionally, the Company paid down $63.0 million of its term loan facility during the first fiscal quarter.

On August 23, 2018, the Company's Board of Directors reinstated the Company's previously suspended stock repurchase program, subject to the approval of certain changes to the Company's existing credit facility currently being negotiated with lenders.  The Company previously announced the suspension of its stock repurchase program in December 2017 in connection with its then-proposed acquisition of RSI.  Approximately $36 million remains available under the program for repurchases.

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 July 31, 2018, the Company operated eighteen manufacturing facilities in the United States and Mexico and seven 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




July 31




2018


2017







Net sales


$

428,962



$

276,827


Cost of sales & distribution


333,226



218,469



Gross profit


95,736



58,358


Sales & marketing expense


22,938



18,198


General & administrative expense


29,830



9,527


Restructuring charges


2,441





Operating income


40,527



30,633


Interest expense & other income


7,988



(739)


Income tax expense


7,772



9,091



Net income


$

24,767



$

22,281








Earnings Per Share:





Weighted average shares outstanding - diluted


17,618,943



16,355,045








Net income per diluted share


$

1.41



$

1.36


 

 

Condensed Consolidated Balance Sheet

(Unaudited)




July 31


 April 30




2018


2018







Cash & cash equivalents


$

50,186



$

78,410


Investments - certificates of deposit


7,250



8,000


Customer receivables


131,398



136,355


Inventories


113,547



104,801


Income taxes receivable


17,964



25,996


Other current assets


10,023



10,805



Total current assets


330,368



364,367


Property, plant & equipment, net


216,300



218,102


Investments - certificates of deposit


500



1,500


Trademarks, net


8,056



8,889


Customer relationship intangibles, net


247,361



258,778


Goodwill


767,914



767,451


Other assets


26,514



26,258



Total assets


$

1,597,013



$

1,645,345








Current portion - long-term debt


$

4,264



$

4,143


Accounts payable & accrued expenses


156,199



166,312



Total current liabilities


160,463



170,455


Long-term debt


747,381



809,897


Deferred income taxes


69,924



71,563


Other liabilities


9,338



11,765



Total liabilities


987,106



1,063,680


Stockholders' equity


609,907



581,665



Total liabilities & stockholders' equity


$

1,597,013



$

1,645,345


 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Three Months Ended




July 31




2018


2017







Net cash provided by operating activities


$

52,937



$

26,570


Net cash used by investing activities


(16,406)



(21,178)


Net cash used by financing activities


(64,755)



(6,773)


Net decrease in cash and cash equivalents


(28,224)



(1,381)


Cash and cash equivalents, beginning of period


78,410



176,978








Cash and cash equivalents, end of period


$

50,186



$

175,597


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, (2) inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI acquisition, (3) the amortization of intangible assets, and (4) the tax benefit of RSI acquisition expenses and the inventory step-up and intangible amortization.  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 (income) 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) inventory step-up amortization, (7) stock-based compensation expense, (8) gain/loss on asset disposal and (9) unrealized gain/loss on foreign exchange forward contracts.  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 sales excluding RSI sales

To better understand and compare the performance of our core American Woodmark business by our management and our investors, we believe it is helpful to subtract the amount of sales from our recently acquired and now wholly-owned subsidiary, RSI, from our net sales and report this amount with our quarterly earnings announcements.  We may discontinue using this non-GAAP financial measure at a later juncture once RSI has become fully integrated into our Company and the quarter to quarter comparisons of our core business are no longer as helpful to compare performance.

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 Net Sales and Percentage of Net Sales Excluding RSI



Three Months Ended



July 31

(in thousands)


2018


2017


Percent Change








Net sales excluding RSI


$

299,036



$

276,827



8

%

RSI sales


129,926






Net Sales


$

428,962



$

276,827



55

%

 

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



Three Months Ended



July 31

(in thousands)


2018


2017






Net income (GAAP)


$

24,767



$

22,281


Add back:





      Income tax expense


7,772



9,091


      Interest (income) expense, net


9,425



(517)


      Depreciation and amortization expense


10,768



5,536


      Amortization of customer relationship intangibles and trademarks


12,250




EBITDA (Non-GAAP)


$

64,982



$

36,391


Add back:





      Acquisition related expenses (1)


2,761




      Unrealized gain on foreign exchange forward contracts (2)


(794)




      Stock compensation expense


786



945


      Loss on asset disposal


354



32


Adjusted EBITDA (Non-GAAP)


$

68,089



$

37,368







Net Sales


$

428,962



$

276,827


Adjusted EBITDA margin (Non-GAAP)


15.9

%


13.5

%



(1) 

Acquisition related expenses are comprised of expenses related to the RSI acquisition 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 income in the operating results.


 

 


Reconciliation of Net Income to Adjusted Net Income



Three Months Ended



July 31

(in thousands, except share data)


2018


2017






Net income (GAAP)


$

24,767



$

22,281


Add back:





      Acquisition related expenses


2,761




      Amortization of customer relationship intangibles and trademarks


12,250




      Tax benefit of add backs


(3,798)




Adjusted net income (Non-GAAP)


$

35,980



$

22,281







Weighted average diluted shares


17,618,943



16,355,045


Adjusted EPS per diluted share (Non-GAAP)


$

2.04



$

1.36



Free Cash Flow



Three Months Ended



July 31



2018


2017






Cash provided by operating activities


$

52,937



$

26,570


Less: Capital expenditures (1)


11,563



11,680


Free cash flow


$

41,374



$

14,890




(1)

Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During the first quarter of fiscal 2019 and 2018, approximately $4.5 million and $3.6 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

 

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SOURCE American Woodmark Corporation

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