American Woodmark Corporation Announces Second Quarter Results

WINCHESTER, Va., Nov. 26, 2019 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: 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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