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American Woodmark Corporation Announces Third Quarter Results

WINCHESTER, Va., Feb. 26, 2019 /PRNewswire/ -- American Woodmark Corporation (AMWD) (the "Company") today announced results for its third fiscal quarter ended January 31, 2019.

Net sales for the third fiscal quarter increased 31% to $384 million compared with the same quarter of the prior fiscal year.  Net sales for the first nine months of the current fiscal year increased 47% to $1,238 million from the comparable period of the prior fiscal year.  The current third fiscal quarter and first nine months results include two incremental months (November and December) and eight incremental months (May through December), respectively, 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, net sales for the third fiscal quarter increased 1% to $257 million compared with the same quarter of the prior fiscal year and net sales for the first nine months of the current fiscal year increased 6% to $854 million compared to the first nine months of the prior fiscal year.  Excluding the impact of the RSI acquisition, the Company experienced growth in the builder channel and independent dealers and distributors channel during the third quarter of fiscal year 2019.  Excluding the impact of the RSI acquisition, the Company experienced growth in all channels during the first nine months of fiscal year 2019 versus the comparable prior year period.

Net income was $18.4 million ($1.07 per diluted share) for the third quarter of the current fiscal year compared with $2.0 million ($0.12 per diluted share) in the same quarter of the prior fiscal year.  Net income for the current quarter was positively impacted by the RSI acquisition, lower acquisition related expenses of $15.9 million, an unrealized gain on foreign exchange contracts of $0.5 million and a net gain on debt forgiveness and modification of $5.2 million which were all partially offset by additional intangible asset amortization of $8.2 million.  Net income for the first nine months of the current fiscal year was $61.7 million ($3.53 per diluted share) compared with $44.0 million ($2.67 per diluted share) for the same period of the prior fiscal year.  Adjusted EPS per diluted share was $1.40 for the third quarter of the current fiscal year compared with $1.00 in the same quarter of the prior fiscal year and $5.05 for the first nine months of the current fiscal year compared with $3.57 for the same period of the prior fiscal year.

Adjusted EBITDA for the third fiscal quarter was $52.2 million, or 13.6% of net sales, compared to $36.0 million, or 12.3% of net sales, for the same quarter of the prior fiscal year.  Adjusted EBITDA for the first nine months of the fiscal year was $181.1 million, or 14.6% of net sales, compared to $110.4 million, or 13.1% of net sales, for the same period of the prior fiscal year.  The increase is primarily due to the inclusion of two incremental months during the current fiscal third quarter and eight incremental months during the current fiscal year, respectively, of results for RSI.

"Despite the volatility within our industry, we are pleased with the overall performance of our third fiscal quarter," said Cary Dunston, Chairman and CEO.  "We saw solid growth in our new construction and dealer/distributor businesses while continuing to drive leverage through our low cost supply chain.  Although market uncertainty continues, we remain very focused on our strategic positioning and continuing to strengthen our competitive advantage in the market."

Cash provided by operating activities for the first nine months of the current fiscal year was $138.0 million.  Free cash flow totaled $106.2 million for the first nine months of the current fiscal year.  The Company paid down $99.0 million of its term loan facility during the first nine months of the current fiscal year and repurchased 628,714 shares of common stock at a cost of $41.0 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 January 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


Nine Months Ended




January 31


January 31




2019


2018


2019


2018











Net sales


$

384,080



$

292,791



$

1,237,920



$

844,387


Cost of sales & distribution


307,227



242,412



978,569



678,179



Gross profit


76,853



50,379



259,351



166,208


Sales & marketing expense


22,215



19,167



68,139



55,397


General & administrative expense


27,462



23,492



86,010



41,442


Restructuring charges


26





2,061





Operating income


27,150



7,720



103,141



69,369


Interest expense, net


8,836



4,035



27,204



2,887


Other income, net


(5,812)



(79)



(6,137)



(117)


Income tax expense


5,717



1,768



20,410



22,567



Net income


$

18,409



$

1,996



$

61,664



$

44,032












Earnings Per Share:









Weighted average shares outstanding - diluted


17,216,327



16,690,760



17,466,936



16,461,509












Net income per diluted share


$

1.07



$

0.12



$

3.53



$

2.67


 

Condensed Consolidated Balance Sheet

(Unaudited)




January 31


 April 30




2019


2018







Cash & cash equivalents


$

42,009



$

78,410


Investments - certificates of deposit


2,500



8,000


Customer receivables


117,198



136,355


Inventories


116,116



104,801


Income taxes receivable


791



25,996


Other current assets


13,884



10,805



Total current assets


292,498



364,367


Property, plant & equipment, net


211,977



218,102


Investments - certificates of deposit




1,500


Trademarks, net


6,389



8,889


Customer relationship intangibles, net


224,528



258,778


Goodwill


767,612



767,451


Other assets


29,832



26,258



Total assets


$

1,532,836



$

1,645,345








Current portion - long-term debt


$

2,300



$

4,143


Accounts payable & accrued expenses


140,212



166,312



Total current liabilities


142,512



170,455


Long-term debt


709,818



809,897


Deferred income taxes


66,284



71,563


Other liabilities


6,250



11,765



Total liabilities


924,864



1,063,680


Stockholders' equity


607,972



581,665



Total liabilities & stockholders' equity


$

1,532,836



$

1,645,345


  

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Nine Months Ended




January 31




2019


2018







Net cash provided by operating activities


$

137,950



$

48,881


Net cash used by investing activities


(31,299)



(28,355)


Net cash used by financing activities


(143,052)



(57,880)


Net decrease in cash and cash equivalents


(36,401)



(37,354)


Cash and cash equivalents, beginning of period


78,410



176,978








Cash and cash equivalents, end of period


$

42,009



$

139,624


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 (income) 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) unrealized gain/loss on 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 sales excluding RSI sales

To better understand and compare the performance of our core American Woodmark business by our management and our investors, we believe it is helpful to subtract the amount of sales from our recently acquired and now wholly-owned subsidiary, RSI, from our net sales and report this amount with our quarterly earnings announcements.  We may discontinue using this non-GAAP financial measure at a later juncture once RSI has become fully integrated into our Company and the quarter to quarter comparisons of our core business are no longer as helpful to compare performance.

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 Net Sales and Percentage of Net Sales Excluding RSI








Three Months Ended


Nine Months Ended



January 31


January 31

(in thousands)


2019


2018


Percent Change


2019


2018


Percent Change














Net sales excluding RSI


$

256,940



$

254,220



1

%


$

853,652



$

805,816



6

%

RSI sales (1)


127,140



38,571



230

%


384,268



38,571



896

%

Net Sales


$

384,080



$

292,791



31

%


$

1,237,920



$

844,387



47

%


(1) 

The current third fiscal quarter and first nine months results include two incremental months (November and December) and eight incremental months (May through December), respectively, of results from the Company's acquisition of RSI Home Products, Inc. ("RSI"), which closed December 29, 2017.

 

Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents








Three Months Ended


Nine Months Ended



January 31


January 31

(in thousands)


2019


2018


2019


2018










Net income (GAAP)


$

18,409



$

1,996



$

61,664



$

44,032


Add back:









      Income tax expense


5,717



1,768



20,410



22,567


      Interest (income) expense, net


8,836



4,035



27,204



2,887


      Depreciation and amortization expense


11,308



6,602



33,534



17,579


      Amortization of customer relationship intangibles









         and trademarks


12,250



4,083



36,750



4,083


EBITDA (Non-GAAP)


$

56,520



$

18,484



$

179,562



$

91,148


Add back:









      Acquisition related expenses (1)


593



10,163



4,002



10,163


      Inventory step-up amortization




6,334





6,334


      Unrealized gain on foreign exchange forward









         contracts (2)


(490)





(291)




      Net gain on debt forgiveness and modification (3)


(5,171)





(5,171)




      Stock-based compensation expense


668



897



2,290



2,506


      Loss on asset disposal


76



147



661



280


Adjusted EBITDA (Non-GAAP)


$

52,196



$

36,025



$

181,053



$

110,431











Net Sales


$

384,080



$

292,791



$

1,237,920



$

844,387


Adjusted EBITDA margin (Non-GAAP)


13.6

%


12.3

%


14.6

%


13.1

%


(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 $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)


2019


2018


2019


2018










Net income (GAAP)


$

18,409



$

1,996



$

61,664



$

44,032


Add back:









      Acquisition related expenses


593



10,163



4,002



10,163


      Inventory step-up amortization




6,334





6,334


      Amortization of customer relationship intangibles









         and trademarks


12,250



4,083



36,750



4,083


      Net gain on debt forgiveness and modification


(5,171)





(5,171)




      Tax benefit of add backs


(1,972)



(5,836)



(9,061)



(5,836)


Adjusted net income (Non-GAAP)


$

24,109



$

16,740



$

88,184



$

58,776











Weighted average diluted shares


17,216,327



16,690,760



17,466,936



16,451,509


Adjusted EPS per diluted share (Non-GAAP)


$

1.40



$

1.00



$

5.05



$

3.57



Free Cash Flow






Nine Months Ended



January 31,



2019


2018






Cash provided by operating activities


$

137,950



$

48,881


Less: Capital expenditures (1)


31,756



32,919


Free cash flow


$

106,194



$

15,962



(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 2019 and 2018, approximately $6.6 million and $12.4 million, respectively, in cash outflows were incurred related to the new company headquarters.

 

 

Cision

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