American Woodmark Corporation Announces Fourth Quarter Results
WINCHESTER, Va., May 28, 2019 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its fourth fiscal quarter ended April 30, 2019.
Net sales for the fourth fiscal quarter increased 0.4% to $407 million compared with the same quarter of the prior fiscal year. Net sales for the current fiscal year increased 32% to $1,645 million from the prior fiscal year. The Company experienced growth in the builder channel and independent dealers and distributors channel during the fourth quarter of fiscal year 2019. The current fiscal year results include eight incremental months (May through December) 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, the Company experienced growth in all channels during fiscal year 2019 versus the comparable prior year period.
Net income was $22.0 million ($1.30 per diluted share) for the fourth quarter of the current fiscal year compared with $19.1 million ($1.08 per diluted share) in the same quarter of the prior fiscal year. Net income for the current quarter was positively impacted by lower interest expense and taxes. Net income for the current fiscal year was $83.7 million ($4.83 per diluted share) compared with $63.1 million ($3.77 per diluted share) for the prior fiscal year. Adjusted EPS per diluted share was $1.87 for the fourth quarter of the current fiscal year compared with $1.64 in the same quarter of the prior fiscal year and $6.91 for the current fiscal year compared with $5.24 for the prior fiscal year.
Adjusted EBITDA for the fourth fiscal quarter was $63.8 million, or 15.7% of net sales, compared to $65.3 million, or 16.1% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the current fiscal year was $244.9 million, or 14.9% of net sales, compared to $175.8 million, or 14.1% of net sales, for the prior fiscal year. The increase in the current fiscal year is primarily due to the inclusion of eight incremental months of results for RSI.
"Volatility by channel continued into our fourth fiscal quarter," said Cary Dunston, Chairman and CEO. "We experienced solid growth in the builder channel, and independent dealer and distributor channel, however the home center channel proved to be challenging. Despite the lower growth and market cost headwinds, we continued to gain cost leverage through our integration work and are pleased with our adjusted EBITDA performance. Despite the quarter-to-quarter uncertainty in the market, we remain very confident in the underlying industry fundamentals and our ability to grow in all channels."
Cash provided by operating activities for the current fiscal year was $190.8 million. Free cash flow totaled $151.5 million for the current fiscal year. The Company paid down $120.0 million of its term loan facility during the current fiscal year and repurchased 745,232 shares of common stock at a cost of $50.0 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 April 30, 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 and Quarterly Reports on Form 10-Q. 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 Twelve Months Ended
April 30
April 30
2019 2018 2019 2018
Net sales $
407,399 $
405,887 $
1,645,319 $
1,250,274
Cost of sales & distribution 320,277 316,692 1,298,846 994,871
87,122 89,195 346,473 255,403
Gross profit
Sales & marketing expense 21,736 22,446 89,875 77,843
General & administrative expense 26,907 28,413 112,917 69,855
Restructuring charges (74) 1,987
38,553 38,336 141,694 107,705
Operating income
Interest expense, net 8,448 10,167 35,652 13,054
Other (income) expense, net 1,291 8 (4,846) (109)
Income tax expense 6,790 9,052 27,200 31,619
$
22,024 $
19,109 $
83,688 $
63,141
Net income
Earnings Per Share:
Weighted average shares outstanding - diluted 16,906,081 17,618,977 17,330,419 16,744,705
Net income per diluted share $
1.30 $
1.08 $
4.83 $
3.77
Condensed Consolidated Balance Sheet
(Unaudited)
April 30 April 30
2019 2018
Cash & cash equivalents $
57,656 $
78,410
Investments - certificates of deposit 1,500 8,000
Customer receivables 125,901 136,355
Inventories 108,528 104,801
Income taxes receivable 1,009 25,996
Other current assets 11,441 10,805
Total current assets 306,035 364,367
Property, plant & equipment, net 208,263 218,102
Investments - certificates of deposit 1,500
Trademarks, net 5,555 8,889
Customer relationship intangibles, net 213,111 258,778
Goodwill 767,612 767,451
Other assets 29,355 26,258
Total assets $
1,529,931 $
1,645,345
Current portion - long-term debt $
2,286 $
4,143
Accounts payable & accrued expenses 147,304 166,312
Total current liabilities 149,590 170,455
Long-term debt 689,205 809,897
Deferred income taxes 64,749 71,563
Other liabilities 6,034 11,765
Total liabilities 909,578 1,063,680
Stockholders' equity 620,353 581,665
Total liabilities & stockholders' equity $
1,529,931 $
1,645,345
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Twelve Months Ended
April 30
2019 2018
Net cash provided by operating activities $
190,845 $
86,775
Net cash used by investing activities (37,923) (44,316)
Net cash used by financing activities (173,676) (141,027)
Net decrease in cash and cash equivalents (20,754) (98,568)
Cash and cash equivalents, beginning of period 78,410 176,978
Cash and cash equivalents, end of period $
57,656 $
78,410
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 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) 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.
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 Twelve Months Ended
April 30
April 30
(in thousands) 2019 2018 2019 2018
---
Net income (GAAP) $
22,024 $
19,109 $
83,688 $
63,141
Add back:
Income tax expense 6,790 9,052 27,200 31,619
Interest expense, net 8,448 10,167 35,652 13,054
Depreciation and amortization expense 11,912 11,092 45,446 28,671
Amortization of customer relationship intangibles
and trademarks 12,250 12,250 49,000 16,333
EBITDA (Non-GAAP) $
61,424 $
61,670 $
240,986 $
152,818
Add back:
Acquisition related expenses (1) 116 2,739 4,118 12,902
Inventory step-up amortization 6,334
Change in fair value of foreign exchange forward
contracts (2) 291
Net gain on debt forgiveness and modification (3) (95) (5,266)
Stock-based compensation expense 750 591 3,040 3,097
Loss on asset disposal 1,312 335 1,973 615
Adjusted EBITDA (Non-GAAP) $
63,798 $
65,335 $
244,851 $
175,766
Net Sales $
407,399 $
405,887 $
1,645,319 $
1,250,274
Adjusted EBITDA margin (Non-GAAP) 15.7
% 16.1
% 14.9
% 14.1
%
(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 $0.1 million and $5.5 million, for the fourth quarter and fiscal year 2019, respectively, and the Company incurred $0.3 million in loan modification expense in connection with an amendment to the credit agreement during fiscal year 2019.
Reconciliation of Net Income to Adjusted Net Income
Three Months Ended Twelve Months Ended
April 30 April 30
(in thousands, except share data) 2019 2018 2019 2018
---
Net income (GAAP) $
22,024 $
19,109 $
83,688 $
63,141
Add back:
Acquisition related expenses 116 2,739 4,118 12,902
Inventory step-up amortization 6,334
Amortization of customer relationship intangibles
and trademarks 12,250 12,250 49,000 16,333
Net gain on debt forgiveness and modification (95) (5,266)
Tax benefit of add backs (2,763) (5,134) (11,824) (10,970)
Adjusted net income (Non-GAAP) $
31,532 $
28,964 $
119,716 $
87,740
Weighted average diluted shares 16,906,081 17,618,977 17,330,419 16,744,705
Adjusted EPS per diluted share (Non-GAAP) $
1.87 $
1.64 $
6.91 $
5.24
Free Cash Flow
Twelve Months Ended
April 30
2019 2018
Cash provided by operating activities $
190,845 $
86,775
Less: Capital expenditures (1) 39,385 49,893
Free cash flow $
151,460 $
36,882
(1) Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays. During fiscal 2019 and 2018, approximately $6.7 million and $21.1 million, respectively, in cash outflows were incurred related to the new company headquarters.
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SOURCE American Woodmark Corporation
