American Woodmark Corporation Announces First Quarter Results
WINCHESTER, Va., Aug. 27, 2018 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its first fiscal quarter ended July 31, 2018.
Fiscal First Quarter 2019
Net sales for the first fiscal quarter increased 55% to $429.0 million compared with the same quarter of the prior fiscal year. The current first fiscal quarter results include three months 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 first fiscal quarter increased 8% to $299.0 million compared with the same quarter of the prior fiscal year. Excluding the impact of the RSI acquisition, the Company experienced growth in all channels during the first quarter of fiscal year 2019.
Net income was $24.8 million ($1.41 per diluted share) for the first quarter of the current fiscal year compared with $22.3 million ($1.36 per diluted share) in the same quarter of the prior fiscal year. Net income was positively impacted by the RSI acquisition and additional sales volumes which were partially offset by restructuring charges of $2.4 million, intangible amortization of $12.3 million and raw material inflation. Adjusted EPS per diluted share was $2.04 for the first quarter of the current fiscal year compared with $1.36 in the same quarter of the prior fiscal year.
Adjusted EBITDA was $68.1 million, or 15.9% of net sales compared to $37.4 million, or 13.5% of net sales for the same quarter of the prior fiscal year. The increase is primarily due to sales growth in the quarter and the inclusion of three months of results for RSI.
"We are very pleased with our solid performance for the first quarter of our new fiscal year", said Cary Dunston, Chairman and CEO. "We experienced growth in all channels, over-indexing the market as a whole. Our integration work remains on plan as we have come together as one team with a clear vision for success."
Cash provided by operating activities for the first fiscal quarter was $52.9 million. Free cash flow totaled $41.4 million for the first fiscal quarter. Additionally, the Company paid down $63.0 million of its term loan facility during the first fiscal quarter.
On August 23, 2018, the Company's Board of Directors reinstated the Company's previously suspended stock repurchase program, subject to the approval of certain changes to the Company's existing credit facility currently being negotiated with lenders. The Company previously announced the suspension of its stock repurchase program in December 2017 in connection with its then-proposed acquisition of RSI. Approximately $36 million remains available under the program for repurchases.
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, 2018, the Company operated eighteen manufacturing facilities in the United States and Mexico and seven 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
July 31
2018 2017
---- ----
Net sales $428,962 $276,827
Cost of sales & distribution 333,226 218,469
------- -------
Gross profit 95,736 58,358
Sales & marketing expense 22,938 18,198
General & administrative
expense 29,830 9,527
Restructuring charges 2,441 -
----- ---
Operating income 40,527 30,633
Interest expense & other
income 7,988 (739)
Income tax expense 7,772 9,091
----- -----
Net income $24,767 $22,281
Earnings Per Share:
Weighted average shares
outstanding -diluted 17,618,943 16,355,045
Net income per diluted share $1.41 $1.36
Condensed Consolidated Balance Sheet
(Unaudited)
July 31 April 30
2018 2018
---- ----
Cash & cash equivalents $50,186 $78,410
Investments -certificates
of deposit 7,250 8,000
Customer receivables 131,398 136,355
Inventories 113,547 104,801
Income taxes receivable 17,964 25,996
Other current assets 10,023 10,805
------ ------
Total current assets 330,368 364,367
Property, plant &
equipment, net 216,300 218,102
Investments -certificates
of deposit 500 1,500
Trademarks, net 8,056 8,889
Customer relationship
intangibles, net 247,361 258,778
Goodwill 767,914 767,451
Other assets 26,514 26,258
------
Total assets $1,597,013 $1,645,345
Current portion - long-
term debt $4,264 $4,143
Accounts payable & accrued
expenses 156,199 166,312
------- -------
Total current liabilities 160,463 170,455
Long-term debt 747,381 809,897
Deferred income taxes 69,924 71,563
Other liabilities 9,338 11,765
----- ------
Total liabilities 987,106 1,063,680
Stockholders' equity 609,907 581,665
------- -------
Total liabilities & stockholders'
equity $1,597,013 $1,645,345
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
July 31
2018 2017
---- ----
Net
cash
provided
by
operating
activities $52,937 $26,570
Net
cash
used
by
investing
activities (16,406) (21,178)
Net
cash
used
by
financing
activities (64,755) (6,773)
------- ------
Net
decrease
in
cash
and
cash
equivalents (28,224) (1,381)
Cash
and
cash
equivalents,
beginning
of
period 78,410 176,978
------ -------
Cash
and
cash
equivalents,
end
of
period $50,186 $175,597
======= ========
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, (2) inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI acquisition, (3) the amortization of intangible assets, and (4) the tax benefit of RSI acquisition expenses and the inventory step-up and intangible amortization. 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, (7) stock-based compensation expense, (8) gain/loss on asset disposal and (9) unrealized gain/loss on foreign exchange forward contracts. 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
July 31
(in thousands) 2018 2017 Percent
Change
-------------- ---- ---- --------
Net sales
excluding RSI $299,036 $276,827 8%
RSI sales 129,926 - -
------- ---
Net Sales $428,962 $276,827 55%
Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents
Three Months Ended
July 31
(in thousands) 2018 2017
------------- ---- ----
Net income (GAAP) $24,767 $22,281
Add back:
Income tax expense 7,772 9,091
Interest (income)
expense, net 9,425 (517)
Depreciation and
amortization
expense 10,768 5,536
Amortization of
customer
relationship
intangibles and
trademarks 12,250 -
------ ---
EBITDA (Non-GAAP) $64,982 $36,391
Add back:
Acquisition related
expenses (1) 2,761 -
Unrealized gain on
foreign exchange
forward contracts
(2) (794) -
Stock compensation
expense 786 945
Loss on asset
disposal 354 32
Adjusted EBITDA
(Non-GAAP) $68,089 $37,368
Net Sales $428,962 $276,827
Adjusted EBITDA
margin (Non-GAAP) 15.9% 13.5%
(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 income in the
operating results.
Reconciliation of Net Income to Adjusted Net Income
Three Months Ended
July 31
(in
thousands,
except
share
data) 2018 2017
----------- ---- ----
Net income
(GAAP) $24,767 $22,281
Add back:
Acquisition
related
expenses 2,761 -
Amortization
of
customer
relationship
intangibles
and
trademarks 12,250 -
Tax benefit
of add
backs (3,798) -
------ ---
Adjusted
net income
(Non-
GAAP) $35,980 $22,281
Weighted
average
diluted
shares 17,618,943 16,355,045
Adjusted
EPS per
diluted
share
(Non-
GAAP) $2.04 $1.36
Free Cash Flow
Three Months Ended
July 31
2018 2017
---- ----
Cash
provided
by
operating
activities $52,937 $26,570
Less:
Capital
expenditures
(1) 11,563 11,680
------ ------
Free cash
flow $41,374 $14,890
(1) Capital expenditures consist of
cash payments for property, plant
and equipment and cash payments
for investments in displays.
During the first quarter of fiscal
2019 and 2018, approximately $4.5
million and $3.6 million,
respectively, in cash outflows
were incurred related to the new
company headquarters.
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SOURCE American Woodmark Corporation
