American Woodmark Corporation (NASDAQ: AMWD) (the "Company")
today announced results for its third quarter of fiscal 2022 which
ended January 31, 2022.
Net sales for the third quarter of fiscal 2022 increased $27.8
million, or 6.4%, to $459.7 million compared with the same quarter
of the prior fiscal year. The Company experienced growth in all
sales channels during the third quarter of fiscal 2022 versus the
prior year period. Net sales for the first nine months of the
current fiscal year increased 6.7% to $1,355.5 million from the
comparable period of the prior fiscal year.
Net loss was $49.3 million ($2.97 per diluted share) for the
third quarter of fiscal 2022 compared with net income of $18.4
million ($1.08 per diluted share) in the same quarter of the prior
fiscal year. Net income for the third quarter of fiscal 2022
decreased $67.7 million primarily due to onetime pension settlement
charges of $69.5 million related to the termination of the
Company's pension plan, while the Company also experienced
continued pressures in the supply chain and continued labor
challenges. Net loss for the first nine months of the current
fiscal year was $44.2 million ($2.67 per diluted share) compared
with net income of $57.6 million ($3.38 per diluted share) for the
same period of the prior fiscal year. Net income percentage was
(10.7)% for the third quarter of fiscal 2022 compared to 4.3% for
the same period in the prior fiscal year and (3.3)% for the first
nine months of the current fiscal year compared with 4.5% for the
same period of the prior fiscal year. Adjusted EPS per diluted
share was $0.60 for the third quarter of fiscal 2022 compared with
$1.57 in the same quarter of the prior fiscal year and $1.92 for
the first nine months of the current fiscal year compared with
$5.22 for the same period of the prior fiscal year.
Adjusted EBITDA for the third quarter of fiscal 2022 decreased
$25.2 million, or 45.2%, to $30.6 million, or 6.6% of net sales,
compared to $55.7 million, or 12.9% of net sales, for the same
quarter of the prior fiscal year. Adjusted EBITDA for the first
nine months of fiscal 2022 decreased $84.8 million, or 47.6%, to
$93.5 million, or 6.9% of net sales, compared to $178.3 million, or
14.0% of net sales, for the same period of the prior fiscal
year.
As previously disclosed, during the third quarter of fiscal
2021, the Company filed an application with the IRS to terminate
its pension plan. The plan was terminated in a standard termination
and benefits were distributed in the third quarter of fiscal 2022
resulting in the one-time pension settlement charges disclosed
above.
"Our teams delivered sales growth across all channels for the
fiscal third quarter. Adjusted EBITDA margins of 6.6% for the
fiscal third quarter were below expectations as sales were
negatively impacted by labor absenteeism as COVID cases increased
due to the Omicron variant along with supply chain shortages in the
later part of December and early January. Our current quarter
results include $30 million plus of pricing impacts that we
realized in the third quarter of fiscal 2022. We are in process or
have completed, depending upon the channel, an additional set of
pricing actions that will further offset inflationary impacts
beginning in April. Assuming our current sales level, we expect the
impact of confirmed pricing actions to increase in the fourth
fiscal quarter of 2022 by an additional $25 million versus the
third quarter's realized pricing actions, to over approximately $55
million per quarter," said Scott Culbreth, President and CEO.
"Staffing levels continue to improve and we have started a new
made-to-order assembly line in our Gas City facility in February
which will result in incremental production capacity to reduce our
backlog. Despite all the challenges our team has faced, we remain
excited about the long-term potential for the business and expect
significant Adjusted EBITDA margin improvement versus current
levels as price realization better matches inflationary impacts, we
improve costs through productivity initiatives, and increase our
production levels as staffing improves."
Cash used by operating activities for the first nine months of
fiscal 2022 was $13.1 million and free cash flow totaled $(48.8)
million. Cash flows were negatively impacted by the decrease in net
income, higher inventory levels, and lower accounts payable and
accrued compensation expenses. As of January 31, 2022, the Company
had $0.9 million of cash on hand with no term loan debt maturities
until July 2023 plus access to $227.0 million of additional
availability under its revolving facility. The Company paid down a
net of $15.3 million of its debt and repurchased shares valued at
$25.0 million during the first nine 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.
AMERICAN WOODMARK
CORPORATION
Unaudited Financial
Highlights
(in thousands, except share
data)
Operating Results
Three Months Ended
Nine Months Ended
January 31,
January 31,
2022
2021
2022
2021
Net sales
$
459,736
$
431,954
$
1,355,480
$
1,270,624
Cost of sales & distribution
407,916
354,458
1,198,523
1,022,889
Gross profit
51,820
77,496
156,957
247,735
Sales & marketing expense
23,453
21,862
68,008
63,368
General & administrative expense
23,270
26,202
71,553
86,414
Restructuring charges, net
(127
)
(847
)
183
5,404
Operating income
5,224
30,279
17,213
92,549
Interest expense, net
2,668
5,746
7,201
17,757
Pension settlement
69,452
—
69,452
—
Other (income) expense, net
(329
)
(259
)
607
(2,928
)
Income tax expense (benefit)
(17,310
)
6,347
(15,801
)
20,094
Net income (loss)
$
(49,257
)
$
18,445
$
(44,246
)
$
57,626
Earnings Per Share:
Weighted average shares outstanding -
diluted
16,569,881
17,047,211
16,599,369
17,036,586
Net income (loss) per diluted share
$
(2.97
)
$
1.08
$
(2.67
)
$
3.38
Condensed Consolidated Balance
Sheet
(Unaudited)
January 31,
April 30,
2022
2021
Cash & cash equivalents
$
871
$
91,071
Customer receivables
151,121
146,866
Inventories
204,234
158,167
Income taxes receivable
8,349
—
Other current assets
19,388
13,861
Total current assets
383,963
409,965
Property, plant and equipment, net
208,728
204,002
Operating lease assets, net
112,874
123,118
Customer relationship intangibles, net
87,528
121,778
Goodwill
767,612
767,612
Other assets
30,980
27,924
Total assets
$
1,591,685
$
1,654,399
Current portion - long-term debt
$
2,250
$
8,322
Short-term operating lease liabilities
22,303
19,994
Accounts payable & accrued
expenses
168,397
192,131
Total current liabilities
192,950
220,447
Long-term debt
506,490
513,450
Deferred income taxes
39,330
42,891
Long-term operating lease liabilities
99,553
109,628
Other liabilities
2,409
11,745
Total liabilities
840,732
898,161
Stockholders' equity
750,953
756,238
Total liabilities & stockholders'
equity
$
1,591,685
$
1,654,399
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Nine Months Ended
January 31,
2022
2021
Net cash (used) provided by operating
activities
$
(13,051
)
$
107,509
Net cash used by investing activities
(35,766
)
(29,364
)
Net cash used by financing activities
(41,383
)
(83,412
)
Net decrease in cash and cash
equivalents
(90,200
)
(5,267
)
Cash and cash equivalents, beginning of
period
91,071
97,059
Cash and cash equivalents, end of
period
$
871
$
91,792
Non-GAAP Financial Measures
We have reported our financial results in accordance with U.S.
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 acquisition
of RSI Home Products, Inc. ("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,
(10) net gain/loss on debt forgiveness and modification, and (11)
pension settlement charges. 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 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, (5)
pension settlement charges, and (6) 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
Nine Months Ended
January 31,
January 31,
(in thousands)
2022
2021
2022
2021
Net income (loss) (GAAP)
$
(49,257
)
$
18,445
$
(44,246
)
$
57,626
Add back:
Income tax expense (benefit)
(17,310
)
6,347
(15,801
)
20,094
Interest expense, net
2,668
5,746
7,201
17,757
Depreciation and amortization expense
12,507
12,732
38,453
38,710
Amortization of customer relationship
intangibles and trademarks
11,416
11,972
34,250
36,472
EBITDA (Non-GAAP)
$
(39,976
)
$
55,242
$
19,857
$
170,659
Add back:
Acquisition and restructuring related
expenses (1)
20
33
60
154
Non-recurring restructuring charges, net
(2)
(127
)
(847
)
183
5,404
Pension settlement
69,452
—
69,452
—
Change in fair value of foreign exchange
forward contracts (3)
(177
)
101
(7
)
(1,720
)
Stock-based compensation expense
1,006
1,316
3,399
3,543
(Gain) loss on asset disposal
365
(97
)
516
235
Adjusted EBITDA (Non-GAAP)
$
30,563
$
55,748
$
93,460
$
178,275
Net Sales
$
459,736
$
431,954
$
1,355,480
$
1,270,624
Net income margin (GAAP)
(10.7
)%
4.3
%
(3.3
)%
4.5
%
Adjusted EBITDA margin (Non-GAAP)
6.6
%
12.9
%
6.9
%
14.0
%
(1) Acquisition and restructuring related
expenses are comprised of expenses related to the RSI acquisition
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 nine months ended January 31, 2021
includes accelerated depreciation expense of $1.3 million related
to Humboldt. The three- and nine-months ended January 31, 2021
includes gain on assets disposal of $2.5 million and $2.2 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) expense,
net in the operating results.
Reconciliation of Net Income
to Adjusted Net Income
Three Months Ended
Nine Months Ended
January 31,
January 31,
(in thousands, except share data)
2022
2021
2022
2021
Net income (loss) (GAAP)
$
(49,257
)
$
18,445
$
(44,246
)
$
57,626
Add back:
Acquisition and restructuring related
expenses
20
33
60
154
Non-recurring restructuring charges,
net
(127
)
(847
)
183
5,404
Pension settlement
69,452
—
69,452
—
Amortization of customer relationship
intangibles and trademarks
11,416
11,972
34,250
36,472
Tax benefit of add backs
(21,586
)
(2,815
)
(27,753
)
(10,718
)
Adjusted net income (Non-GAAP)
$
9,918
$
26,788
$
31,946
$
88,938
Weighted average diluted shares (GAAP)
16,569,881
17,047,211
16,599,369
17,036,586
Add back: potentially anti-dilutive shares
(1)
40,973
—
47,878
—
Weighted average diluted shares
(Non-GAAP)
16,610,854
17,047,211
16,647,247
17,036,586
EPS per diluted share (GAAP)
$
(2.97
)
$
1.08
$
(2.67
)
$
3.38
Adjusted EPS per diluted share
(Non-GAAP)
$
0.60
$
1.57
$
1.92
$
5.22
(1) Potentially dilutive securities for the three- and
nine-month periods ended January 31, 2022, respectively, have not
been considered in the GAAP calculation of net loss per share as
the effect would be anti-dilutive.
Free Cash Flow
Nine Months Ended
January 31,
2022
2021
Cash (used) provided by operating
activities
$
(13,051
)
$
107,509
Less: Capital expenditures (1)
35,771
33,236
Free cash flow
$
(48,822
)
$
74,273
(1) Capital expenditures consist of cash
payments for property, plant and equipment and cash payments for
investments in displays.
Net Leverage
Twelve Months Ended
January 31,
(in thousands)
2022
Net loss (GAAP)
$
(41,420
)
Add back:
Income tax expense
(16,647
)
Interest expense, net
12,571
Depreciation and amortization expense
50,842
Amortization of customer relationship
intangibles and trademarks
45,668
EBITDA (Non-GAAP)
$
51,014
Add back:
Acquisition and restructuring related
expenses (1)
627
Non-recurring restructuring charges, net
(2)
80
Pension settlement
69,452
Change in fair value of foreign exchange
forward contracts (3)
611
Stock-based compensation expense
4,454
Loss on asset disposal
664
Net loss on debt forgiveness and
modification
13,792
Adjusted EBITDA (Non-GAAP)
$
140,694
As of
January 31,
2022
Current maturities of long-term debt
$
2,250
Long-term debt, less current
maturities
506,490
Total debt
508,740
Less: cash and cash equivalents
(871
)
Net debt
$
507,869
Net leverage (4)
3.61
(1) Acquisition and restructuring related
expenses are comprised of expenses related to the RSI acquisition
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 January 31, 2022.
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Kevin Dunnigan Treasury Director 540-665-9100
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