Press release

American Woodmark Corporation announces fourth quarter results

May 26, 2020

WINCHESTER, Va., May 26, 2020 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its fourth fiscal quarter ended April 30, 2020.

Net sales for the fourth fiscal quarter decreased 2.0% to $399.2 million compared with the same quarter of the prior fiscal year.  Net sales for fiscal 2020 increased 0.3% to $1,650.3 million from the prior fiscal year.  The Company experienced growth in the builder channel during the fourth quarter and fiscal 2020, which was more than offset by declines in the home center and independent dealers and distributors channels during the fourth fiscal quarter and only partially offset during fiscal 2020.

Net income was $13.0 million ($0.77 per diluted share) for the fourth quarter of fiscal 2020 compared with $22.0 million ($1.30 per diluted share) in the same quarter of the prior fiscal year.  Net income for the fourth quarter of fiscal 2020 was negatively impacted by lower sales, tariffs, particleboard supply disruption costs and expenses related to the temporary suspension of operations in our component plants in Mexico.  All of the Company's manufacturing facilities and service centers, including the component plants in Mexico, are currently open and operating.  Net income for fiscal 2020 was $74.9 million ($4.42 per diluted share) compared with $83.7 million ($4.83 per diluted share) for the same period of the prior fiscal year.  Adjusted EPS per diluted share was $1.33 for the fourth quarter of fiscal 2020 compared with $1.87 in the same quarter of the prior fiscal year and $6.59 for fiscal 2020 compared with $6.91 for the prior fiscal year.

Adjusted EBITDA for the fourth fiscal quarter was $53.4 million, or 13.4% of net sales, compared to $63.8 million, or 15.7% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the current fiscal year was $236.0 million, or 14.3% of net sales, compared to $244.9 million, or 14.9% of net sales, for the prior fiscal year.

"We are very pleased with our overall performance, despite the challenges presented related to COVID-19," said Cary Dunston, Chairman and CEO. "Although we did experience limited disruption in our operations that impacted our ability to ship stock product, our teams have done an amazing job of creating safe working environments to allow us to continue to operate throughout the pandemic.  While net revenue was down slightly for the quarter, we had nice growth in our builder business.  In addition, demand on our stock business remains strong with our plants now fully operational."

Cash provided by operating activities for fiscal 2020 was $177.5 million and free cash flow totaled $136.8 million.  The Company paid down $96.0 million of its term loan facility during fiscal 2020.  As of April 30, 2020, the Company had $97.1 million of cash on hand with no term loan debt maturities until December 2022 plus access to $94.3 million of additional availability under our revolver.

Due to the ongoing market conditions related to COVID-19, the Company has taken steps during the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 to reduce our expenses through a combination of permanent and temporary layoffs.  These actions are expected to reduce overhead expenses by approximately $8 million on an annualized basis.  The Company recognized a charge of $0.2 million during the fourth quarter of fiscal 2020 and anticipates taking an additional charge of approximately $1.4 million for severance and related expenses during the first quarter of fiscal 2021.

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, 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.

(AMWD – ER)

 

AMERICAN WOODMARK CORPORATION

                   

Unaudited Financial Highlights

                   

(in thousands, except share data)

                   

Operating Results

                   
     

Three Months Ended

 

Twelve Months Ended

     

April 30

 

April 30

     

2020

 

2019

 

2020

 

2019

                   

Net sales

 

$

399,197

   

$

407,399

   

$

1,650,333

   

$

1,645,319

 

Cost of sales & distribution

 

323,928

   

320,277

   

1,321,147

   

1,298,846

 
 

Gross profit

 

75,269

   

87,122

   

329,186

   

346,473

 

Sales & marketing expense

 

21,069

   

21,736

   

83,608

   

89,875

 

General & administrative expense

 

27,088

   

26,907

   

113,334

   

112,917

 

Restructuring charges

 

189

   

(74)

   

(18)

   

1,987

 
 

Operating income

 

26,923

   

38,553

   

132,262

   

141,694

 

Interest expense, net

 

6,579

   

8,448

   

29,027

   

35,652

 

Other (income) expense, net

 

3,386

   

1,291

   

2,687

   

(4,846)

 

Income tax expense

 

3,945

   

6,790

   

25,687

   

27,200

 
 

Net income

 

$

13,013

   

$

22,024

   

$

74,861

   

$

83,688

 
                   

Earnings Per Share:

               

Weighted average shares outstanding - diluted

 

16,965,119

   

16,906,081

   

16,952,480

   

17,330,419

 
                   

Net income per diluted share

 

$

0.77

   

$

1.30

   

$

4.42

   

$

4.83

 

Condensed Consolidated Balance Sheet

(Unaudited)

     

April 30

 

 April 30

     

2020

 

2019

           

Cash & cash equivalents

 

$

97,059

   

$

57,656

 

Investments - certificates of deposit

 

   

1,500

 

Customer receivables

 

106,344

   

125,901

 

Inventories

 

111,836

   

108,528

 

Income taxes receivable

 

   

1,009

 

Other current assets

 

9,933

   

11,441

 
 

Total current assets

 

325,172

   

306,035

 

Property, plant & equipment, net

 

203,824

   

208,263

 

Operating lease assets, net

 

127,668

   

 

Trademarks, net

 

2,222

   

5,555

 

Customer relationship intangibles, net

 

167,444

   

213,111

 

Goodwill

 

767,612

   

767,612

 

Other assets

 

28,864

   

29,355

 
 

Total assets

 

$

1,622,806

   

$

1,529,931

 
           

Current portion - long-term debt

 

$

2,216

   

$

2,286

 

Short-term operating lease liabilities

 

18,896

   

 

Accounts payable & accrued expenses

 

134,494

   

147,304

 
 

Total current liabilities

 

155,606

   

149,590

 

Long-term debt

 

594,921

   

689,205

 

Deferred income taxes

 

52,935

   

64,749

 

Long-term operating lease liabilities

 

112,454

   

 

Other liabilities

 

6,352

   

6,034

 
 

Total liabilities

 

922,268

   

909,578

 

Stockholders' equity

 

700,538

   

620,353

 
 

Total liabilities & stockholders' equity

 

$

1,622,806

   

$

1,529,931

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

     

Twelve Months Ended

     

April 30

     

2020

 

2019

           

Net cash provided by operating activities

 

$

177,542

   

$

190,845

 

Net cash used by investing activities

 

(38,916)

   

(37,923)

 

Net cash used by financing activities

 

(99,223)

   

(173,676)

 

Net increase (decrease) in cash and cash equivalents

 

39,403

   

(20,754)

 

Cash and cash equivalents, beginning of period

 

57,656

   

78,410

 
           

Cash and cash equivalents, end of period

 

$

97,059

   

$

57,656

 

 

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 to, 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"), the subsequent restructuring charges that the Company incurred related to the acquisition, (2) non-recurring restructuring charges, (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 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.  During the fourth quarter of fiscal 2020, management determined that adding non-recurring restructuring charges was an appropriate adjustment due to their non-recurring nature.

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 the subsequent restructuring charges that the Company incurred related to the acquisition, (6) non-recurring restructuring charges, (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.

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

 

Twelve Months Ended

   

April 30

 

April 30

(in thousands)

 

2020

 

2019

 

2020

 

2019

                 

Net income (GAAP)

 

$

13,013

   

$

22,024

   

$

74,861

   

$

83,688

 

Add back:

               

      Income tax expense

 

3,945

   

6,790

   

25,687

   

27,200

 

      Interest expense, net

 

6,579

   

8,448

   

29,027

   

35,652

 

      Depreciation and amortization expense

 

12,901

   

11,912

   

49,513

   

45,446

 

      Amortization of customer relationship intangibles

and trademarks

 

 

 

12,250

   

12,250

   

49,000

   

49,000

 

EBITDA (Non-GAAP)

 

$

48,688

   

$

61,424

   

$

228,088

   

$

240,986

 

Add back:

               

      Acquisition and restructuring related expenses (1)

 

250

   

116

   

221

   

4,118

 

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

 

1,346

   

291

   

1,102

   

 

      Net gain on debt forgiveness and modification (3)

 

   

(95)

   

   

(5,266)

 

      Stock-based compensation expense

 

867

   

750

   

3,989

   

3,040

 

      Loss on asset disposal

 

2,279

   

1,312

   

2,629

   

1,973

 

Adjusted EBITDA (Non-GAAP)

 

$

53,430

   

$

63,798

   

$

236,029

   

$

244,851

 
                 

Net Sales

 

$

399,197

   

$

407,399

   

$

1,650,333

   

$

1,645,319

 

Adjusted EBITDA margin (Non-GAAP)

 

13.4

%

 

15.7

%

 

14.3

%

 

14.9

%

 

(1) Acquisition and restructuring related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc., the subsequent restructuring charges that the Company incurred related to the acquisition and restructuring charges incurred related to COVID-19.

(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)

 

2020

 

2019

 

2020

 

2019

                 

Net income (GAAP)

 

$

13,013

   

$

22,024

   

$

74,861

   

$

83,688

 

Add back:

               

      Acquisition and restructuring related expenses

 

250

   

116

   

221

   

4,118

 

      Amortization of customer relationship intangibles and trademarks

 

12,250

   

12,250

   

49,000

   

49,000

 

      Net gain on debt forgiveness and modification

 

   

(95)

   

   

(5,266)

 

      Tax benefit of add backs

 

(2,978)

   

(2,763)

   

(12,305)

   

(11,824)

 

Adjusted net income (Non-GAAP)

 

$

22,535

   

$

31,532

   

$

111,777

   

$

119,716

 
                 

Weighted average diluted shares

 

16,965,119

   

16,906,081

   

16,952,480

   

17,330,419

 

Adjusted EPS per diluted share (Non-GAAP)

 

$

1.33

   

$

1.87

   

$

6.59

   

$

6.91

 

 

Free Cash Flow

     
   

Twelve Months Ended

   

April 30

   

2020

 

2019

         

Cash provided by operating activities

 

$

177,542

   

$

190,845

 

Less: Capital expenditures (1)

 

40,739

   

39,385

 

Free cash flow

 

$

136,803

   

$

151,460

 

 

(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 $0.6 million and $6.7 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

Net Leverage

     
   

Twelve Months
Ended

   

April 30

(in thousands)

 

2020

     

Net income (GAAP)

 

$

74,861

 

Add back:

   

      Income tax expense

 

25,687

 

      Interest expense, net

 

29,027

 

      Depreciation and amortization expense

 

49,513

 

      Amortization of customer relationship intangibles and trademarks

 

49,000

 

EBITDA (Non-GAAP)

 

$

228,088

 

Add back:

   

      Acquisition and restructuring related expenses (1)

 

221

 

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

 

1,102

 

      Stock-based compensation expense

 

3,989

 

      Loss on asset disposal

 

2,629

 

Adjusted EBITDA (Non-GAAP)

 

$

236,029

 
     
   

As of

   

April 30

   

2020

Current maturities of long-term debt

 

$

2,216

 

Long-term debt, less current maturities

 

594,921

 

Total debt

 

597,137

 

Less: cash and cash equivalents

 

(97,059)

 

Net debt

 

$

500,078

 
     

Net leverage (3)

 

2.12

 

 

(1) Acquisition and restructuring related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc., the subsequent restructuring charges that the Company incurred related to the acquisition and restructuring charges incurred related to COVID-19.

(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) Net debt divided by Adjusted EBITDA for the twelve months ended April 30, 2020.

 

View original content: http://www.prnewswire.com/news-releases/american-woodmark-corporation-announces-fourth-quarter-results-301064465.html

SOURCE American Woodmark Corporation

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