American Woodmark Corporation (NASDAQ: AMWD) (the "Company")
today announced results for its first quarter of fiscal 2022 which
ended July 31, 2021.
Net sales for the first quarter of fiscal 2022 increased $52.5
million, or 13.5%, to $442.6 million compared with the same quarter
of the prior fiscal year. The Company experienced growth across all
channels, with high-teens growth in our repair and remodel sales
channel and upper single digit growth in our new construction sales
channel during the first quarter of fiscal 2022 versus the prior
year period as market demand continued at a strong pace.
Net income was $3.0 million ($0.18 per diluted share) for the
first quarter of fiscal 2022 compared with $16.1 million ($0.94 per
diluted share) in the same quarter of the prior fiscal year. Net
income for the first quarter of fiscal 2022 decreased $13.1 million
due to the rapidly evolving inflationary pressures outpacing our
pricing actions taken across all our channels. This was
approximately 220 basis points of sequential pressure from the
Company's fourth quarter of fiscal 2021 to the first quarter of
fiscal 2022, related primarily to materials and logistics costs.
Given the increased backlog of our products there is an inherent
lag in the realization of our pricing actions. Net income margin
was 0.7% for the first quarter of fiscal 2022 compared to 4.1% for
the same period in the prior fiscal year. Adjusted EPS per diluted
share was $0.70 for the first quarter of fiscal 2022 compared with
$1.63 in the same quarter of the prior fiscal year.
Adjusted EBITDA for the first quarter of fiscal 2022 decreased
$24.3 million, or 43.1%, to $32.1 million, or 7.3% of net sales,
compared to $56.4 million, or 14.5% of net sales, for the same
quarter of the prior fiscal year.
"While delivering sales growth across all channels our adjusted
EBITDA margins of 7.3% were below expectations. Although we have
and are also in the process of implementing significant pricing
actions due to the increasing inflationary pressures we are facing,
we only realized approximately $3 million of impact in the first
quarter of fiscal 2022. Assuming our current sales level, we expect
the impact of confirmed pricing actions to increase in the second
half of fiscal 2022 to over $25 million per quarter," said Scott
Culbreth, President and CEO. "Looking forward our focus remains on
increasing production to match a strong demand environment and
reducing backlog and realizing additional pricing actions to
mitigate inflationary pressures in materials, logistics, and
labor."
Cash provided by operating activities for the first fiscal
quarter was $6.6 million and free cash flow totaled $(8.1) million.
Cash flows were negatively impacted due to the higher inventory
levels, timing of accounts payable, and lower accrued compensation
expenses. As of July 31, 2021, the Company had $27.8 million of
cash on hand with no term loan debt maturities until July 2023 plus
access to $243.0 million of additional availability under its
revolving facility. The Company paid down $29.1 million of its debt
and repurchased shares valued at $25 million during the first three
months of the current fiscal year.
Effective May 1, 2021, the Company changed its accounting method
for inventory costing for inventories which previously utilized a
last-in, first-out ("LIFO") basis to a first-in, first-out ("FIFO")
basis. All prior periods presented have been retrospectively
adjusted to apply the effects of the change.
About Us
American Woodmark celebrates the creativity in all of us. With
over 10,000 employees and more than a dozen brands, we’re one of
the nation’s largest cabinet manufacturers. From inspiration to
installation, we help people find their unique style and turn their
home into a space for self-expression. By partnering with major
home centers, builders, and independent dealers and distributors,
we spark the imagination of homeowners and designers and bring
their vision to life. Across our service and distribution centers,
our corporate office, and manufacturing facilities, you’ll always
find the same commitment to customer satisfaction, integrity,
teamwork, and excellence. Visit americanwoodmark.com to learn more
and start building something distinctly your own.
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
2021
2020 As
Adjusted
Net sales
$
442,581
$
390,087
Cost of sales & distribution
389,138
310,520
Gross profit
53,443
79,567
Sales & marketing expense
22,987
19,898
General & administrative expense
23,687
29,983
Restructuring charges, net
313
3,460
Operating income
6,456
26,226
Interest expense, net
2,173
6,030
Other (income) expense, net
73
(1,688
)
Income tax expense
1,229
5,825
Net income
$
2,981
$
16,059
Earnings Per Share:
Weighted average shares outstanding -
diluted
16,716,167
17,013,444
Net income per diluted share
$
0.18
$
0.94
Condensed Consolidated Balance
Sheet
(Unaudited)
July 31
April 30
2021
2021 As
Adjusted
Cash & cash equivalents
$
27,818
$
91,071
Customer receivables
130,736
146,866
Inventories
181,794
158,167
Other current assets
15,072
13,861
Total current assets
355,420
409,965
Property, plant and equipment, net
206,932
204,002
Operating lease assets, net
120,703
123,118
Customer relationship intangibles, net
110,361
121,778
Goodwill
767,612
767,612
Other assets
28,557
27,924
Total assets
$
1,589,585
$
1,654,399
Current portion - long-term debt
$
2,131
$
8,322
Short-term operating lease liabilities
20,635
19,994
Accounts payable & accrued
expenses
176,051
192,131
Total current liabilities
198,817
220,447
Long-term debt
491,412
513,450
Deferred income taxes
43,448
42,891
Long-term operating lease liabilities
106,917
109,628
Other liabilities
11,890
11,745
Total liabilities
852,484
898,161
Stockholders' equity
737,101
756,238
Total liabilities & stockholders'
equity
$
1,589,585
$
1,654,399
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Three Months Ended
July 31
2021
2020
Net cash provided by operating
activities
$
6,588
$
40,000
Net cash used by investing activities
(14,706
)
(7,836
)
Net cash used by financing activities
(55,135
)
(1,168
)
Net increase (decrease) in cash and cash
equivalents
(63,253
)
30,996
Cash and cash equivalents, beginning of
period
91,071
97,059
Cash and cash equivalents, end of
period
$
27,818
$
128,055
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.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
We use EBITDA, 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 EBITDA, 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/loss 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.
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 RSI acquisition,
(2) non-recurring restructuring charges, (3) the amortization of
customer relationship intangibles and trademarks, (4) net loss 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.
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 EBITDA,
Adjusted EBITDA and Adjusted EBITDA margin
Three Months Ended
July 31
(in thousands)
2021
2020 As
Adjusted
Net income (GAAP)
$
2,981
$
16,059
Add back:
Income tax expense
1,229
5,825
Interest expense, net
2,173
6,030
Depreciation and amortization expense
13,025
12,959
Amortization of customer relationship
intangibles and trademarks
11,417
12,250
EBITDA (Non-GAAP)
$
30,825
$
53,123
Add back:
Acquisition and restructuring related
expenses (1)
20
60
Non-recurring restructuring charges, net
(2)
313
3,460
Change in fair value of foreign exchange
forward contracts (3)
(350
)
(1,255
)
Stock-based compensation expense
1,177
961
Loss on asset disposal
115
46
Adjusted EBITDA (Non-GAAP)
$
32,100
$
56,395
Net Sales
$
442,581
$
390,087
Net income margin (GAAP)
0.7
%
4.1
%
Adjusted EBITDA margin (Non-GAAP)
7.3
%
14.5
%
(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) Non-recurring 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)
2021
2020 As
Adjusted
Net income (GAAP)
$
2,981
$
16,059
Add back:
Acquisition and restructuring related
expenses
20
60
Non-recurring restructuring charges,
net
313
3,460
Amortization of customer relationship
intangibles and trademarks
11,417
12,250
Tax benefit of add backs
(3,067
)
(4,053
)
Adjusted net income (Non-GAAP)
$
11,664
$
27,776
Weighted average diluted shares
16,716,167
17,013,444
EPS per diluted share (GAAP)
$
0.18
$
0.94
Adjusted EPS per diluted share
(Non-GAAP)
$
0.70
$
1.63
Free Cash Flow
Three Months Ended
July 31
2021
2020
Cash provided by operating activities
$
6,588
$
40,000
Less: Capital expenditures (1)
14,711
7,842
Free cash flow
$
(8,123
)
$
32,158
(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)
2021
Net income (GAAP)
$
45,259
Add back:
Income tax expense
13,931
Interest expense, net
19,271
Depreciation and amortization expense
51,165
Amortization of customer relationship
intangibles and trademarks
47,056
EBITDA (Non-GAAP)
$
176,682
Add back:
Acquisition and restructuring related
expenses (1)
134
Non-recurring restructuring charges, net
(2)
2,701
Change in fair value of foreign exchange
forward contracts (3)
(197
)
Stock-based compensation expense
4,814
Loss on asset disposal
454
Net loss on debt forgiveness and
modification
13,792
Adjusted EBITDA (Non-GAAP)
$
198,380
As of
July 31
2021
Current maturities of long-term debt
$
2,131
Long-term debt, less current
maturities
491,412
Total debt
493,543
Less: cash and cash equivalents
(27,818
)
Net debt
$
465,725
Net leverage (4)
2.35
(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) Non-recurring 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)
expense, net in the operating results.
(4) Net debt divided by Adjusted
EBITDA for the twelve months ended July 31, 2021.
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Kevin Dunnigan Treasury Director 540-665-9100
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