Press release

American Woodmark Corporation announces first quarter results

August 27, 2019

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.

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

SOURCE American Woodmark Corporation

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