American Woodmark Corporation Announces First Quarter Results

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

Net sales for the first fiscal quarter decreased 8.7% to $390.1 million compared with the same quarter of the prior fiscal year.  The Company experienced declines in all sales channels during the first quarter of fiscal 2021 as both the remodel and new construction markets were negatively impacted by the COVID-19 pandemic.

Net income was $16.5 million ($0.97 per diluted share) for the first quarter of fiscal 2021 compared with $26.9 million ($1.59 per diluted share) in the same quarter of the prior fiscal year.  Net income for the first quarter of fiscal 2021 was negatively impacted by lower sales due to COVID-19, deleveraging of fixed costs across the Company and a decline in efficiency.  The Company incurred pre-tax restructuring costs totaling $3.5 million during the first quarter of fiscal 2021 related to the permanent layoffs due to COVID-19 announced in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 and the closure of its Humboldt, Tennessee manufacturing plant announced in June 2020.  Adjusted EPS per diluted share was $1.66 for the first quarter of fiscal 2021 compared with $2.13 in the same quarter of the prior fiscal year.

Adjusted EBITDA for the first fiscal quarter was $57.0 million, or 14.6% of net sales, compared to $69.6 million, or 16.3% of net sales, for the same quarter of the prior fiscal year.

"Our sales and net income were negatively impacted by COVID-19 during our first fiscal quarter, but our teams performed well and drove results that exceeded our initial expectations," said Scott Culbreth, President and CEO.  "I want to personally thank all of our employees and suppliers for helping the Company navigate this difficult situation."

Cash provided by operating activities for the first fiscal quarter was $40.0 million and free cash flow totaled $32.2 million.  As of July 31, 2020, the Company had $128.1 million of cash on hand with no term loan debt maturities until December 2022 plus access to $93.6 million of additional availability under its revolving credit facility.

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, 2020, the Company operated seventeen 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




July 31




2020


2019







Net sales


$

390,087



$

427,365


Cost of sales & distribution


309,949



332,846



Gross profit


80,138



94,519


Sales & marketing expense


19,898



20,687


General & administrative expense


29,983



29,432


Restructuring charges


3,460



(19)



Operating income


26,797



44,419


Interest expense, net


6,030



8,088


Other income, net


(1,688)



(7)


Income tax expense


5,970



9,457



Net income


$

16,485



$

26,881








Earnings Per Share:





Weighted average shares outstanding - diluted


17,013,444



16,907,463








Net income per diluted share


$

0.97



$

1.59




Condensed Consolidated Balance Sheet

(Unaudited)




July 31


 April 30




2020


2020







Cash & cash equivalents


$

128,055



$

97,059


Customer receivables


123,301



106,344


Inventories


126,700



111,836


Other current assets


9,913



9,933



Total current assets


387,969



325,172


Property, plant & equipment, net


199,088



203,824


Operating lease assets, net


126,409



127,668


Trademarks, net


1,389



2,222


Customer relationship intangibles, net


156,028



167,444


Goodwill


767,612



767,612


Other assets


28,942



28,864



Total assets


$

1,667,437



$

1,622,806








Current portion - long-term debt


$

2,087



$

2,216


Short-term operating lease liabilities


19,566



18,896


Accounts payable & accrued expenses


156,412



134,494



Total current liabilities


178,065



155,606


Long-term debt


595,248



594,921


Deferred income taxes


50,151



52,935


Long-term operating lease liabilities


111,090



112,454


Other liabilities


11,363



6,352



Total liabilities


945,917



922,268


Stockholders' equity


721,520



700,538



Total liabilities & stockholders' equity


$

1,667,437



$

1,622,806














 

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Three Months Ended




July 31




2020


2019







Net cash provided by operating activities


$

40,000



$

62,612


Net cash used by investing activities


(7,836)



(5,580)


Net cash used by financing activities


(1,168)



(43,639)


Net increase in cash and cash equivalents


30,996



13,393


Cash and cash equivalents, beginning of period


97,059



57,656








Cash and cash equivalents, end of period


$

128,055



$

71,049


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") and 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. 

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



July 31

(in thousands)


2020


2019






Net income (GAAP)


$

16,485



$

26,881


Add back:





Income tax expense


5,970



9,457


Interest expense, net


6,030



8,088


Depreciation and amortization expense


12,959



11,863


Amortization of customer relationship intangibles and trademarks


12,250



12,250


EBITDA (Non-GAAP)


$

53,694



$

68,539


Add back:





Acquisition and restructuring related expenses (1)


60



41


Non-recurring restructuring charges (2)


3,460




Change in fair value of foreign exchange forward contracts (3)


(1,255)



56


Stock-based compensation expense


961



897


Loss on asset disposal


46



66


Adjusted EBITDA (Non-GAAP)


$

56,966



$

69,599







Net Sales


$

390,087



$

427,365


Adjusted EBITDA margin (Non-GAAP)


14.6

%


16.3

%


(1)

Acquisition and restructuring related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc. and the subsequent restructuring charges that the Company incurred related to the acquisition.

(2)

Nonrecurring restructuring charges are comprised of expenses incurred related to the permanent layoffs due to COVID-19 and the closure of the manufacturing plant in Humboldt, Tennessee.  The three months ended July 31, 2020, includes accelerated depreciation expense of $1.1 million related to Humboldt.

(3)

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 income in the operating results.

 

Reconciliation of Net Income to Adjusted Net Income






Three Months Ended



July 31

(in thousands, except share data)


2020


2019






Net income (GAAP)


$

16,485



$

26,881


Add back:





Acquisition and restructuring related expenses


60



41


Non-recurring restructuring charges


3,460




Amortization of customer relationship intangibles and trademarks


12,250



12,250


Tax benefit of add backs


(4,053)



(3,097)


Adjusted net income (Non-GAAP)


$

28,202



$

36,075







Weighted average diluted shares


17,013,444



16,907,463


Adjusted EPS per diluted share (Non-GAAP)


$

1.66



$

2.13


Free Cash Flow






Three Months Ended



July 31



2020


2019






Cash provided by operating activities


$

40,000



$

62,612


Less: Capital expenditures (1)


7,842



6,593


Free cash flow


$

32,158



$

56,019




(1)

Capital expenditures consist of cash payments for property, plant and equipment and
cash payments for investments in displays. 

 

Net Leverage






Twelve Months
Ended



July 31

(in thousands)


2020




Net income (GAAP)


$

64,465


Add back:



Income tax expense


22,200


Interest expense, net


26,968


Depreciation and amortization expense


50,610


Amortization of customer relationship intangibles and trademarks


49,000


EBITDA (Non-GAAP)


213,243


Add back:



Acquisition and restructuring related expenses (1)


52


Non-recurring restructuring charges (2)


3,649


Change in fair value of foreign exchange forward contracts (3)


(209)


Stock-based compensation expense


4,053


Loss on asset disposal


2,609


Adjusted EBITDA (Non-GAAP)


$

223,397







As of



July 31



2020

Current maturities of long-term debt


$

2,087


Long-term debt, less current maturities


595,248


Total debt


597,335


Less: cash and cash equivalents


(128,055)


Net debt


$

469,280





Net leverage (4)


2.10



(1)

Acquisition and restructuring related expenses are comprised of expenses related to the acquisition of RSI Home Products, Inc. and the subsequent restructuring charges that the Company incurred related to the acquisition.

(2)

Nonrecurring restructuring charges are comprised of expenses incurred related to the permanent layoffs due to COVID-19 and the closure of the manufacturing plant in Humboldt, Tennessee. 

(3)

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 income in the operating results.

(4)

Net debt divided by Adjusted EBITDA for the twelve months ended July 31, 2020.

 

 

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SOURCE American Woodmark Corporation

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