Market Overview

American Woodmark Corporation Announces First Quarter Results

Share:

WINCHESTER, Va., Aug. 27, 2019 /PRNewswire/ -- American Woodmark Corporation (NASDAQ:AMWD) (the "Company") today announced results for its first fiscal quarter ended July 31, 2019.

Net sales for the first fiscal quarter decreased 0.4% to $427.4 million compared with the same quarter of the prior fiscal year.  The Company experienced growth in the builder channel which was offset by declines in the home center and independent dealers and distributors channels during the first quarter of fiscal year 2020.

Net income was $26.9 million ($1.59 per diluted share) for the first quarter of the current fiscal year compared with $24.8 million ($1.41 per diluted share) in the same quarter of the prior fiscal year.  Net income for the current quarter was positively impacted by lower sales and marketing expense and lower interest expense.  Adjusted EPS per diluted share was $2.13 for the first quarter of the current fiscal year compared with $2.04 in the same quarter of the prior fiscal year.

Adjusted EBITDA for the first fiscal quarter was $69.6 million, or 16.3% of net sales, compared to $68.1 million, or 15.9% of net sales, for the same quarter of the prior fiscal year.

"Despite the difficult market, we are very pleased with our financial performance in our first fiscal quarter," said Cary Dunston, Chairman and CEO.  "Our system is operating very efficiently, overcoming a number of cost headwinds as we continue to capitalize on integration synergies.  Within the market, we once again over indexed in the builder channel, however repair and remodel remained challenging."

Cash provided by operating activities for the first fiscal quarter was $62.6 million and free cash flow totaled $56.0 million for the first fiscal quarter.  The Company paid down $42.0 million of its term loan facility during the current fiscal quarter.

On August 22, 2019, the Board of Directors authorized a stock repurchase program of up to $50 million of the Company's outstanding common shares.

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, 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




July 31




2019


2018







Net sales


$

427,365



$

428,962


Cost of sales & distribution


332,846



333,226



Gross profit


94,519



95,736


Sales & marketing expense


20,687



22,938


General & administrative expense


29,432



29,830


Restructuring charges


(19)



2,441



Operating income


44,419



40,527


Interest expense, net


8,088



9,425


Other (income) expense, net


(7)



(1,437)


Income tax expense


9,457



7,772



Net income


$

26,881



$

24,767








Earnings Per Share:





Weighted average shares outstanding - diluted


16,907,463



17,618,943








Net income per diluted share


$

1.59



$

1.41


 

 

Condensed Consolidated Balance Sheet

(Unaudited)




July 31


April 30




2019


2019







Cash & cash equivalents


$

71,049



$

57,656


Investments - certificates of deposit


500



1,500


Customer receivables


119,999



125,901


Inventories


115,341



108,528


Income taxes receivable




1,009


Other current assets


11,308



11,441



Total current assets


318,197



306,035


Property, plant & equipment, net


204,960



208,263


Operating lease assets, net


95,285




Trademarks, net


4,722



5,555


Customer relationship intangibles, net


201,694



213,111


Goodwill


767,612



767,612


Other assets


30,946



29,355



Total assets


$

1,623,416



$

1,529,931








Current portion - long-term debt


$

2,352



$

2,286


Accounts payable & accrued expenses


178,075



147,304



Total current liabilities


180,427



149,590


Long-term debt


647,697



689,205


Deferred income taxes


63,202



64,749


Long-term operating lease liabilities


76,271




Other liabilities


4,651



6,034



Total liabilities


972,248



909,578


Stockholders' equity


651,168



620,353



Total liabilities & stockholders' equity


$

1,623,416



$

1,529,931


 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Three Months Ended




July 31




2019


2018







Net cash provided by operating activities


$

62,612



$

52,937


Net cash used by investing activities


(5,580)



(16,406)


Net cash used by financing activities


(43,639)



(64,755)


Net increase (decrease) in cash and cash equivalents


13,393



(28,224)


Cash and cash equivalents, beginning of period


57,656



78,410








Cash and cash equivalents, end of period


$

71,049



$

50,186


 

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



July 31

(in thousands)


2019


2018






Net income (GAAP)


$

26,881



$

24,767


Add back:





      Income tax expense


9,457



7,772


      Interest expense, net


8,088



9,425


      Depreciation and amortization expense


11,863



10,768


      Amortization of customer relationship intangibles





         and trademarks


12,250



12,250


EBITDA (Non-GAAP)


$

68,539



$

64,982


Add back:





      Acquisition related expenses (1)


41



2,761


      Change in fair value of foreign exchange forward





         contracts (2)


56



(794)


      Stock-based compensation expense


897



786


      Loss on asset disposal


66



354


Adjusted EBITDA (Non-GAAP)


$

69,599



$

68,089







Net Sales


$

427,365



$

428,962


Adjusted EBITDA margin (Non-GAAP)


16.3

%


15.9

%








(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



July 31

(in thousands, except share data)


2019


2018






Net income (GAAP)


$

26,881



$

24,767


Add back:





      Acquisition related expenses


41



2,761


      Amortization of customer relationship intangibles





         and trademarks


12,250



12,250


      Tax benefit of add backs


(3,097)



(3,798)


Adjusted net income (Non-GAAP)


$

36,075



$

35,980







Weighted average diluted shares


16,907,463



17,618,943


Adjusted EPS per diluted share (Non-GAAP)


$

2.13



$

2.04


 

 

Free Cash Flow






Three Months Ended



July 31



2019


2018






Cash provided by operating activities


$

62,612



$

52,937


Less: Capital expenditures (1)


6,593



11,563


Free cash flow


$

56,019



$

41,374


(1)

Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During fiscal 2020 and 2019, approximately $0.5 million and $4.5 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

 

Net Leverage






Twelve Months Ended



July 31

(in thousands)


2019




Net income (GAAP)


$

85,802


Add back:



      Income tax expense


28,885


      Interest expense, net


34,315


      Depreciation and amortization expense


46,541


      Amortization of customer relationship intangibles



         and trademarks


49,000


EBITDA (Non-GAAP)


$

244,543


Add back:



      Acquisition related expenses (1)


1,398


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


850


      Net gain on debt forgiveness and modification (3)


(5,266)


      Stock-based compensation expense


3,151


      Loss on asset disposal


1,684


Adjusted EBITDA (Non-GAAP)


$

246,360







As of July 31



2019

Current maturities of long-term debt


$

2,352


Long-term debt, less current maturities


647,697


Total debt


650,049


Less: cash and cash equivalents


(71,049)


Net debt


$

579,000





Net leverage (4)


2.35






(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 July 31, 2019.

 

Cision View original content:http://www.prnewswire.com/news-releases/american-woodmark-corporation-announces-first-quarter-results-300907221.html

SOURCE American Woodmark Corporation

View Comments and Join the Discussion!