American Woodmark Corporation (NASDAQ: AMWD) (the "Company")
today announced results for its second fiscal quarter ended October
31, 2020.
Net sales for the second fiscal quarter increased 4.8% to $448.6
million compared with the same quarter of the prior fiscal year.
The Company experienced double digit growth in the repair and
remodel sales channel during the second quarter of fiscal 2021 as
the market demand recovered with consumer confidence increasing.
Net sales for the first six months of the current fiscal year
decreased 2.0% to $838.7 million from the comparable period of the
prior fiscal year.
Net income was $22.3 million ($1.31 per diluted share) for the
second quarter of fiscal 2021 compared with $22.2 million ($1.31
per diluted share) in the same quarter of the prior fiscal year.
Net income for the second quarter of fiscal 2021 was negatively
impacted by higher material and logistics costs, in addition to our
investments made in the Company regarding labor and product launch
costs. Net income for the first six months of the current fiscal
year was $38.7 million ($2.27 per diluted share) compared with
$49.0 million ($2.90 per diluted share) for the same period of the
prior fiscal year. The Company incurred pre-tax restructuring costs
totaling $2.8 million during the second quarter of fiscal 2021 and
$6.3 million during the first half of 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 $1.97 for the second quarter of
fiscal 2021 compared with $1.84 in the same quarter of the prior
fiscal year and $3.62 for the first six months of the current
fiscal year compared with $3.97 for the same period of the prior
fiscal year.
Adjusted EBITDA for the second fiscal quarter was $65.0 million,
or 14.5% of net sales, compared to $62.9 million, or 14.7% of net
sales, for the same quarter of the prior fiscal year. Adjusted
EBITDA for the first six months of the fiscal year was $121.9
million, or 14.5% of net sales, compared to $132.5 million, or
15.5% of net sales, for the same period of the prior fiscal
year.
“Our teams continued to perform well and drove solid performance
for the quarter. Our home center and independent dealer and
distribution businesses delivered positive growth, we achieved
adjusted EBITDA margins of 14.5% and we paid down $40.0 million of
our term loan facility," said Scott Culbreth, President and CEO. "I
continue to be impressed by our team's ability to execute during
these challenging times while maintaining a safe work
environment."
Cash provided by operating activities for the first six months
of the current fiscal year was $76.6 million and free cash flow
totaled $57.4 million. As of October 31, 2020, the Company had
$112.6 million of cash on hand with no term loan debt maturities
until December 2022 plus access to $93.0 million of additional
availability under its revolving credit facility. The Company paid
down $40.0 million of its term loan facility during the first six
months of the current fiscal year.
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 October 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
Six Months Ended
October 31
October 31
2020
2019
2020
2019
Net sales
$
448,583
$
428,016
$
838,670
$
855,381
Cost of sales & distribution
359,072
340,966
$
669,021
$
673,812
Gross profit
89,511
87,050
$
169,649
$
181,569
Sales & marketing expense
21,608
20,451
$
41,506
$
41,138
General & administrative expense
30,229
29,900
$
60,212
$
59,332
Restructuring charges
2,791
(188)
$
6,251
$
(207)
Operating income
34,883
36,887
$
61,680
$
81,306
Interest expense, net
5,981
7,436
$
12,011
$
15,524
Other income, net
(981)
(527)
$
(2,669)
$
(534)
Income tax expense
7,627
7,815
$
13,597
$
17,272
Net income
$
22,256
$
22,163
$
38,741
$
49,044
Earnings Per Share:
Weighted average shares outstanding -
diluted
17,047,296
16,955,835
17,036,652
16,932,236
Net income per diluted share
$
1.31
$
1.31
$
2.27
$
2.90
Condensed Consolidated Balance
Sheet
(Unaudited)
October 31
April 30
2020
2020
Cash & cash equivalents
$
112,560
$
97,059
Customer receivables
149,165
106,344
Inventories
127,715
111,836
Other current assets
14,913
9,933
Total current assets
404,353
325,172
Property, plant & equipment, net
198,895
203,824
Operating lease assets, net
128,125
127,668
Trademarks, net
556
2,222
Customer relationship intangibles, net
144,611
167,444
Goodwill
767,612
767,612
Other assets
28,726
28,864
Total assets
$
1,672,878
$
1,622,806
Current portion - long-term debt
$
2,096
$
2,216
Short-term operating lease liabilities
19,519
18,896
Accounts payable & accrued
expenses
173,533
134,494
Total current liabilities
195,148
155,606
Long-term debt
555,911
594,921
Deferred income taxes
47,701
52,935
Long-term operating lease liabilities
113,511
112,454
Other liabilities
15,413
6,352
Total liabilities
927,684
922,268
Stockholders' equity
745,194
700,538
Total liabilities & stockholders'
equity
$
1,672,878
$
1,622,806
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Six Months Ended
October 31
2020
2019
Net cash provided by operating
activities
$
76,568
$
86,232
Net cash used by investing activities
(18,930)
(18,288)
Net cash used by financing activities
(42,137)
(74,165)
Net increase (decrease) in cash and cash
equivalents
15,501
(6,221)
Cash and cash equivalents, beginning of
period
97,059
57,656
Cash and cash equivalents, end of
period
$
112,560
$
51,435
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
Six Months Ended
October 31
October 31
(in thousands)
2020
2019
2020
2019
Net income (GAAP)
$
22,256
$
22,163
$
38,741
$
49,044
Add back:
Income tax expense
7,627
7,815
13,597
17,272
Interest expense, net
5,981
7,436
12,011
15,524
Depreciation and amortization expense
13,019
12,164
25,978
24,027
Amortization of customer relationship
intangibles and trademarks
12,250
12,250
24,500
24,500
EBITDA (Non-GAAP)
$
61,133
$
61,828
$
114,827
$
130,367
Add back:
Acquisition and restructuring related
expenses (1)
61
(130)
121
(89)
Non-recurring restructuring charges
(2)
2,791
—
6,251
—
Change in fair value of foreign exchange
forward contracts (3)
(566)
(152)
(1,821)
(96)
Stock-based compensation expense
1,266
1,178
2,227
2,075
Loss on asset disposal
286
151
332
217
Adjusted EBITDA (Non-GAAP)
$
64,971
$
62,875
$
121,937
$
132,474
Net Sales
$
448,583
$
428,016
$
838,670
$
855,381
Adjusted EBITDA margin (Non-GAAP)
14.5
%
14.7
%
14.5
%
15.5
%
(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 and six months ended October 31,
2020, includes accelerated depreciation expense of $0.2 million and
$1.3 million, respectively, 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
Six Months Ended
October 31
October 31
(in thousands, except share data)
2020
2019
2020
2019
Net income (GAAP)
$
22,256
$
22,163
$
38,741
$
49,044
Add back:
Acquisition and restructuring related
expenses
61
(130)
121
(89)
Non-recurring restructuring charges
2,791
—
6,251
—
Amortization of customer relationship
intangibles and trademarks
12,250
12,250
24,500
24,500
Tax benefit of add backs
(3,850)
(3,103)
(7,903)
(6,200)
Adjusted net income (Non-GAAP)
$
33,508
$
31,180
$
61,710
$
67,255
Weighted average diluted shares
17,047,296
16,955,835
17,036,652
16,932,236
Adjusted EPS per diluted share
(Non-GAAP)
$
1.97
$
1.84
$
3.62
$
3.97
Free Cash Flow
Six Months Ended
October
2020
2019
Cash provided by operating activities
$
76,568
$
86,232
Less: Capital expenditures (1)
19,124
20,101
Free cash flow
$
57,444
$
66,131
(1) Capital expenditures consist of cash payments for property,
plant and equipment and cash payments for investments in
displays.
Net Leverage
Twelve Months Ended
October 31
(in thousands)
2020
Net income (GAAP)
$
64,559
Add back:
Income tax expense
22,012
Interest expense, net
25,513
Depreciation and amortization expense
51,464
Amortization of customer relationship
intangibles and trademarks
49,000
EBITDA (Non-GAAP)
212,548
Add back:
Acquisition and restructuring related
expenses (1)
242
Non-recurring restructuring charges
(2)
6,440
Change in fair value of foreign exchange
forward contracts (3)
(623)
Stock-based compensation expense
4,140
Loss on asset disposal
2,745
Adjusted EBITDA (Non-GAAP)
$
225,492
As of
October 31
2020
Current maturities of long-term debt
$
2,096
Long-term debt, less current
maturities
555,911
Total debt
558,007
Less: cash and cash equivalents
(112,560)
Net debt
$
445,447
Net leverage (4)
1.98
(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 October 31, 2020.
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Kevin Dunnigan Treasury Director 540-665-9100
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