American Woodmark Corporation Announces Third Quarter Results

WINCHESTER, Va., Feb. 25, 2020 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its third fiscal quarter ended January 31, 2020.

Net sales for the third fiscal quarter increased 3.0% to $395.8 million compared with the same quarter of the prior fiscal year.  The Company experienced growth in the builder and home center channels during the third quarter of fiscal year 2020.  Net sales for the first nine months of the current fiscal year increased 1.1% to $1,251.1 million from the comparable period of the prior fiscal year.  The Company experienced growth in the builder channel during the first nine months of fiscal year 2020, which was partially offset by declines in the home center and independent dealers and distributors channels.

Net income was $12.8 million ($0.75 per diluted share) for the third quarter of the current fiscal year compared with $18.4 million ($1.07 per diluted share) in the same quarter of the prior fiscal year.  Net income for the current quarter was negatively impacted by tariffs, particleboard supply disruption costs and expenses related to the completion of our facility move in California.  Net income for the first nine months of the current fiscal year was $61.8 million ($3.65 per diluted share) compared with $61.7 million ($3.53 per diluted share) for the same period of the prior fiscal year.  Adjusted EPS per diluted share was $1.30 for the third quarter of the current fiscal year compared with $1.40 in the same quarter of the prior fiscal year and $5.27 for the first nine months of the current fiscal year compared with $5.05 for the same period of the prior fiscal year.

Adjusted EBITDA for the third fiscal quarter was $50.1 million, or 12.7% of net sales, compared to $52.2 million, or 13.6% of net sales, for the same quarter of the prior fiscal year.  Adjusted EBITDA for the first nine months of the fiscal year was $182.6 million, or 14.6% of net sales, compared to $181.1 million, or 14.6% of net sales, for the same period of the prior fiscal year.

"Although we believe we experienced good growth relative to the market, our third fiscal quarter financials proved to be challenging due to ongoing volatility in the market and a more prominent impact from cost headwinds," said Cary Dunston, Chairman and CEO.  "We had solid growth within our builder, dealer and stock home center businesses, which was partially offset by a decline in our made-to-order home center business.  Margins were challenged due to the completion of our facility move in California and the continued cost associated with tariffs and particle board disruption."

Cash provided by operating activities for the first nine months of the current fiscal year was $112.2 million and free cash flow totaled $80.2 million.  The Company paid down $90.0 million of its term loan facility during the first nine 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 January 31, 2020, 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


Nine Months Ended




January 31


January 31




2020


2019


2020


2019











Net sales


$

395,755



$

384,080



$

1,251,136



$

1,237,920


Cost of sales & distribution


323,407



307,227



997,219



978,569



Gross profit


72,348



76,853



253,917



259,351


Sales & marketing expense


21,401



22,215



62,539



68,139


General & administrative expense


26,914



27,462



86,246



86,010


Restructuring charges




26



(207)



2,061



Operating income


24,033



27,150



105,339



103,141


Interest expense, net


6,924



8,836



22,448



27,204


Other (income) expense, net


(165)



(5,812)



(699)



(6,137)


Income tax expense


4,470



5,717



21,742



20,410



Net income


$

12,804



$

18,409



$

61,848



$

61,664












Earnings Per Share:









Weighted average shares outstanding - diluted


16,974,956



17,216,327



16,947,449



17,466,936












Net income per diluted share


$

0.75



$

1.07



$

3.65



$

3.53


 

 

Condensed Consolidated Balance Sheet

(Unaudited)




January 31


 April 30




2020


2019







Cash & cash equivalents


$

47,063



$

57,656


Investments - certificates of deposit




1,500


Customer receivables


122,353



125,901


Inventories


121,930



108,528


Income taxes receivable


6,238



1,009


Other current assets


14,627



11,441



Total current assets


312,211



306,035


Property, plant & equipment, net


208,780



208,263


Operating lease assets, net


90,530




Trademarks, net


3,056



5,555


Customer relationship intangibles, net


178,861



213,111


Goodwill


767,612



767,612


Other assets


32,784



29,355



Total assets


$

1,593,834



$

1,529,931








Current portion - long-term debt


$

2,309



$

2,286


Short-term operating lease liabilities


20,837




Accounts payable & accrued expenses


146,056



147,304



Total current liabilities


169,202



149,590


Long-term debt


600,573



689,205


Deferred income taxes


56,634



64,749


Long-term operating lease liabilities


73,297




Other liabilities


4,843



6,034



Total liabilities


904,549



909,578


Stockholders' equity


689,285



620,353



Total liabilities & stockholders' equity


$

1,593,834



$

1,529,931


 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Nine Months Ended




January 31




2020


2019







Net cash provided by operating activities


$

112,208



$

137,950


Net cash used by investing activities


(30,213)



(31,299)


Net cash used by financing activities


(92,588)



(143,052)


Net decrease in cash and cash equivalents


(10,593)



(36,401)


Cash and cash equivalents, beginning of period


57,656



78,410








Cash and cash equivalents, end of period


$

47,063



$

42,009


 

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 acquisition of RSI Home Products, Inc. ("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


Nine Months Ended



January 31


January 31

(in thousands)


2020


2019


2020


2019










Net income (GAAP)


$

12,804



$

18,409



$

61,848



$

61,664


Add back:









      Income tax expense


4,470



5,717



21,742



20,410


      Interest expense, net


6,924



8,836



22,448



27,204


      Depreciation and amortization expense


12,585



11,308



36,612



33,534


      Amortization of customer relationship intangibles









         and trademarks


12,250



12,250



36,750



36,750


EBITDA (Non-GAAP)


$

49,033



$

56,520



$

179,400



$

179,562


Add back:









      Acquisition related expenses (1)


60



593



(29)



4,002


      Change in fair value of foreign exchange forward









         contracts (2)


(148)



(490)



(244)



(291)


      Net gain on debt forgiveness and modification (3)




(5,171)





(5,171)


      Stock-based compensation expense


1,047



668



3,122



2,290


      Loss on asset disposal


133



76



350



661


Adjusted EBITDA (Non-GAAP)


$

50,125



$

52,196



$

182,599



$

181,053











Net Sales


$

395,755



$

384,080



$

1,251,136



$

1,237,920


Adjusted EBITDA margin (Non-GAAP)


12.7

%


13.6

%


14.6

%


14.6

%


(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 and the Company incurred $0.3 million in loan modification expense with amendment to the credit agreement during the third quarter of fiscal 2019.

 

 


Reconciliation of Net Income to Adjusted Net Income








Three Months Ended


Nine Months Ended



January 31


January 31

(in thousands, except share data)


2020


2019


2020


2019










Net income (GAAP)


$

12,804



$

18,409



$

61,848



$

61,664


Add back:









      Acquisition related expenses


60



593



(29)



4,002


      Amortization of customer relationship intangibles









         and trademarks


12,250



12,250



36,750



36,750


      Net gain on debt forgiveness and modification




(5,171)





(5,171)


      Tax benefit of add backs


(3,127)



(1,972)



(9,327)



(9,061)


Adjusted net income (Non-GAAP)


$

21,987



$

24,109



$

89,242



$

88,184











Weighted average diluted shares


16,974,956



17,216,327



16,947,449



17,466,936


Adjusted EPS per diluted share (Non-GAAP)


$

1.30



$

1.40



$

5.27



$

5.05




Free Cash Flow






















Nine Months Ended











January 31











2020


2019














Cash provided by operating activities










$

112,208



$

137,950


Less: Capital expenditures (1)










32,034



31,756


Free cash flow










$

80,174



$

106,194



(1)  Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During the first nine months of fiscal 2020 and 2019, approximately $0.6 million and $6.6 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

 

Net Leverage






Twelve Months Ended



January 31

(in thousands)


2020




Net income (GAAP)


$

83,872


Add back:



      Income tax expense


28,532


      Interest expense, net


30,896


      Depreciation and amortization expense


48,524


      Amortization of customer relationship intangibles



         and trademarks


49,000


EBITDA (Non-GAAP)


$

240,824


Add back:



      Acquisition related expenses (1)


85


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


47


      Net gain on debt forgiveness and modification (3)


(95)


      Stock-based compensation expense


3,873


      Loss on asset disposal


1,662


Adjusted EBITDA (Non-GAAP)


$

246,396







As of



January 31



2020

Current maturities of long-term debt


$

2,309


Long-term debt, less current maturities


600,573


Total debt


602,882


Less: cash and cash equivalents


(47,063)


Net debt


$

555,819





Net leverage (4)


2.26



(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 $0.1 million during the fourth quarter of fiscal year 2019.

(4)  Net debt divided by Adjusted EBITDA for the twelve months ended January 31, 2020.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/american-woodmark-corporation-announces-third-quarter-results-301010142.html

SOURCE American Woodmark Corporation

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