Press release

American Woodmark Corporation announces fourth quarter results

May 28, 2019

WINCHESTER, Va., May 28, 2019 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its fourth fiscal quarter ended April 30, 2019.

Net sales for the fourth fiscal quarter increased 0.4% to $407 million compared with the same quarter of the prior fiscal year.  Net sales for the current fiscal year increased 32% to $1,645 million from the prior fiscal year.  The Company experienced growth in the builder channel and independent dealers and distributors channel during the fourth quarter of fiscal year 2019.  The current fiscal year results include eight incremental months (May through December) 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, the Company experienced growth in all channels during fiscal year 2019 versus the comparable prior year period.

Net income was $22.0 million ($1.30 per diluted share) for the fourth quarter of the current fiscal year compared with $19.1 million ($1.08 per diluted share) in the same quarter of the prior fiscal year.  Net income for the current quarter was positively impacted by lower interest expense and taxes.  Net income for the current fiscal year was $83.7 million ($4.83 per diluted share) compared with $63.1 million ($3.77 per diluted share) for the prior fiscal year.  Adjusted EPS per diluted share was $1.87 for the fourth quarter of the current fiscal year compared with $1.64 in the same quarter of the prior fiscal year and $6.91 for the current fiscal year compared with $5.24 for the prior fiscal year.

Adjusted EBITDA for the fourth fiscal quarter was $63.8 million, or 15.7% of net sales, compared to $65.3 million, or 16.1% of net sales, for the same quarter of the prior fiscal year.  Adjusted EBITDA for the current fiscal year was $244.9 million, or 14.9% of net sales, compared to $175.8 million, or 14.1% of net sales, for the prior fiscal year.  The increase in the current fiscal year is primarily due to the inclusion of eight incremental months of results for RSI.

"Volatility by channel continued into our fourth fiscal quarter," said Cary Dunston, Chairman and CEO.  "We experienced solid growth in the builder channel, and independent dealer and distributor channel, however the home center channel proved to be challenging.  Despite the lower growth and market cost headwinds, we continued to gain cost leverage through our integration work and are pleased with our adjusted EBITDA performance.  Despite the quarter-to-quarter uncertainty in the market, we remain very confident in the underlying industry fundamentals and our ability to grow in all channels."

Cash provided by operating activities for the current fiscal year was $190.8 million.  Free cash flow totaled $151.5 million for the current fiscal year. The Company paid down $120.0 million of its term loan facility during the current fiscal year and repurchased 745,232 shares of common stock at a cost of $50.0 million.

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 April 30, 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 and Quarterly Reports on Form 10-Q.  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

 

Twelve Months Ended

     

April 30

 

April 30

     

2019

 

2018

 

2019

 

2018

                   

Net sales

 

$

407,399

 

$

405,887

 

$

1,645,319

 

$

1,250,274

Cost of sales & distribution

 

320,277

 

316,692

 

1,298,846

 

994,871

Gross profit

 

87,122

 

89,195

 

346,473

 

255,403

Sales & marketing expense

 

21,736

 

22,446

 

89,875

 

77,843

General & administrative expense

 

26,907

 

28,413

 

112,917

 

69,855

Restructuring charges

 

(74)

 

 

1,987

 

Operating income

 

38,553

 

38,336

 

141,694

 

107,705

Interest expense, net

 

8,448

 

10,167

 

35,652

 

13,054

Other (income) expense, net

 

1,291

 

8

 

(4,846)

 

(109)

Income tax expense

 

6,790

 

9,052

 

27,200

 

31,619

Net income

 

$

22,024

 

$

19,109

 

$

83,688

 

$

63,141

 

Earnings Per Share:

               

Weighted average shares outstanding - diluted

 

16,906,081

 

17,618,977

 

17,330,419

 

16,744,705

                   

Net income per diluted share

 

$

1.30

 

$

1.08

 

$

4.83

 

$

3.77

 

Condensed Consolidated Balance Sheet

(Unaudited)

     

 April 30

 

 April 30

     

2019

 

2018

           

Cash & cash equivalents

 

$

57,656

 

$

78,410

Investments - certificates of deposit

 

1,500

 

8,000

Customer receivables

 

125,901

 

136,355

Inventories

 

108,528

 

104,801

Income taxes receivable

 

1,009

 

25,996

Other current assets

 

11,441

 

10,805

 

Total current assets

 

306,035

 

364,367

Property, plant & equipment, net

 

208,263

 

218,102

Investments - certificates of deposit

 

 

1,500

Trademarks, net

 

5,555

 

8,889

Customer relationship intangibles, net

 

213,111

 

258,778

Goodwill

 

767,612

 

767,451

Other assets

 

29,355

 

26,258

 

Total assets

 

$

1,529,931

 

$

1,645,345

           

Current portion - long-term debt

 

$

2,286

 

$

4,143

Accounts payable & accrued expenses

 

147,304

 

166,312

 

Total current liabilities

 

149,590

 

170,455

Long-term debt

 

689,205

 

809,897

Deferred income taxes

 

64,749

 

71,563

Other liabilities

 

6,034

 

11,765

 

Total liabilities

 

909,578

 

1,063,680

Stockholders' equity

 

620,353

 

581,665

 

Total liabilities & stockholders' equity

 

$

1,529,931

 

$

1,645,345

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

     

Twelve Months Ended

     

April 30

     

2019

 

2018

           

Net cash provided by operating activities

 

$

190,845

 

$

86,775

Net cash used by investing activities

 

(37,923)

 

(44,316)

Net cash used by financing activities

 

(173,676)

 

(141,027)

Net decrease in cash and cash equivalents

 

(20,754)

 

(98,568)

Cash and cash equivalents, beginning of period

 

78,410

 

176,978

           

Cash and cash equivalents, end of period

 

$

57,656

 

$

78,410

 

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) inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI acquisition, (3) the amortization of customer relationship intangibles and trademarks, (4) net gain on debt forgiveness and modification and (5) the tax benefit of RSI acquisition expenses and subsequent restructuring charges, the inventory step-up amortization, 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) inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI acquisition, (7) stock-based compensation expense, (8) gain/loss on asset disposals, (9) change in fair value of foreign exchange forward contracts and (10) 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.

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

 

Twelve Months Ended

   

April 30

 

April 30

(in thousands)

 

2019

 

2018

 

2019

 

2018

                 

Net income (GAAP)

 

$

22,024

   

$

19,109

   

$

83,688

   

$

63,141

 

Add back:

               

      Income tax expense

 

6,790

   

9,052

   

27,200

   

31,619

 

      Interest expense, net

 

8,448

   

10,167

   

35,652

   

13,054

 

      Depreciation and amortization expense

 

11,912

   

11,092

   

45,446

   

28,671

 

      Amortization of customer relationship intangibles

               

         and trademarks

 

12,250

   

12,250

   

49,000

   

16,333

 

EBITDA (Non-GAAP)

 

$

61,424

   

$

61,670

   

$

240,986

   

$

152,818

 

Add back:

               

      Acquisition related expenses (1)

 

116

   

2,739

   

4,118

   

12,902

 

      Inventory step-up amortization

 

   

   

   

6,334

 

      Change in fair value of foreign exchange forward

               

         contracts (2)

 

291

   

   

   

 

      Net gain on debt forgiveness and modification (3)

 

(95)

   

   

(5,266)

   

 

      Stock-based compensation expense

 

750

   

591

   

3,040

   

3,097

 

      Loss on asset disposal

 

1,312

   

335

   

1,973

   

615

 

Adjusted EBITDA (Non-GAAP)

 

$

63,798

   

$

65,335

   

$

244,851

   

$

175,766

 
                 

Net Sales

 

$

407,399

   

$

405,887

   

$

1,645,319

   

$

1,250,274

 

Adjusted EBITDA margin (Non-GAAP)

 

15.7

%

 

16.1

%

 

14.9

%

 

14.1

%

 

(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 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 and $5.5 million, for the fourth quarter and fiscal year 2019, respectively, and the Company incurred $0.3 million in loan modification expense in connection with an amendment to the credit agreement during fiscal year 2019.

 

Reconciliation of Net Income to Adjusted Net Income

         
   

Three Months Ended

 

Twelve Months Ended

   

April 30

 

April 30

(in thousands, except share data)

 

2019

 

2018

 

2019

 

2018

                 

Net income (GAAP)

 

$

22,024

 

$

19,109

 

$

83,688

 

$

63,141

Add back:

               

      Acquisition related expenses

 

116

 

2,739

 

4,118

 

12,902

      Inventory step-up amortization

 

 

 

 

6,334

      Amortization of customer relationship intangibles

               

         and trademarks

 

12,250

 

12,250

 

49,000

 

16,333

      Net gain on debt forgiveness and modification

 

(95)

 

 

(5,266)

 

      Tax benefit of add backs

 

(2,763)

 

(5,134)

 

(11,824)

 

(10,970)

Adjusted net income (Non-GAAP)

 

$

31,532

 

$

28,964

 

$

119,716

 

$

87,740

                 

Weighted average diluted shares

 

16,906,081

 

17,618,977

 

17,330,419

 

16,744,705

Adjusted EPS per diluted share (Non-GAAP)

 

$

1.87

 

$

1.64

 

$

6.91

 

$

5.24

 

Free Cash Flow

     
   

Twelve Months Ended

   

April 30

   

2019

 

2018

         

Cash provided by operating activities

 

$

190,845

 

$

86,775

Less: Capital expenditures (1)

 

39,385

 

49,893

Free cash flow

 

$

151,460

 

$

36,882

 

(1) Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During fiscal 2019 and 2018, approximately $6.7 million and $21.1 million, respectively, in cash outflows were incurred related to the new company headquarters.

View original content: http://www.prnewswire.com/news-releases/american-woodmark-corporation-announces-fourth-quarter-results-300856738.html

SOURCE American Woodmark Corporation

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