American Woodmark Corporation Announces Fourth Quarter Results

WINCHESTER, Va., May 26, 2020 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its fourth fiscal quarter ended April 30, 2020.

Net sales for the fourth fiscal quarter decreased 2.0% to $399.2 million compared with the same quarter of the prior fiscal year. Net sales for fiscal 2020 increased 0.3% to $1,650.3 million from the prior fiscal year. The Company experienced growth in the builder channel during the fourth quarter and fiscal 2020, which was more than offset by declines in the home center and independent dealers and distributors channels during the fourth fiscal quarter and only partially offset during fiscal 2020.

Net income was $13.0 million ($0.77 per diluted share) for the fourth quarter of fiscal 2020 compared with $22.0 million ($1.30 per diluted share) in the same quarter of the prior fiscal year. Net income for the fourth quarter of fiscal 2020 was negatively impacted by lower sales, tariffs, particleboard supply disruption costs and expenses related to the temporary suspension of operations in our component plants in Mexico. All of the Company's manufacturing facilities and service centers, including the component plants in Mexico, are currently open and operating. Net income for fiscal 2020 was $74.9 million ($4.42 per diluted share) compared with $83.7 million ($4.83 per diluted share) for the same period of the prior fiscal year. Adjusted EPS per diluted share was $1.33 for the fourth quarter of fiscal 2020 compared with $1.87 in the same quarter of the prior fiscal year and $6.59 for fiscal 2020 compared with $6.91 for the prior fiscal year.

Adjusted EBITDA for the fourth fiscal quarter was $53.4 million, or 13.4% of net sales, compared to $63.8 million, or 15.7% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the current fiscal year was $236.0 million, or 14.3% of net sales, compared to $244.9 million, or 14.9% of net sales, for the prior fiscal year.

"We are very pleased with our overall performance, despite the challenges presented related to COVID-19," said Cary Dunston, Chairman and CEO. "Although we did experience limited disruption in our operations that impacted our ability to ship stock product, our teams have done an amazing job of creating safe working environments to allow us to continue to operate throughout the pandemic. While net revenue was down slightly for the quarter, we had nice growth in our builder business. In addition, demand on our stock business remains strong with our plants now fully operational."

Cash provided by operating activities for fiscal 2020 was $177.5 million and free cash flow totaled $136.8 million. The Company paid down $96.0 million of its term loan facility during fiscal 2020. As of April 30, 2020, the Company had $97.1 million of cash on hand with no term loan debt maturities until December 2022 plus access to $94.3 million of additional availability under our revolver.

Due to the ongoing market conditions related to COVID-19, the Company has taken steps during the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 to reduce our expenses through a combination of permanent and temporary layoffs. These actions are expected to reduce overhead expenses by approximately $8 million on an annualized basis. The Company recognized a charge of $0.2 million during the fourth quarter of fiscal 2020 and anticipates taking an additional charge of approximately $1.4 million for severance and related expenses during the first quarter of fiscal 2021.

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, 2020, 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. 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                          
            
              Twelve Months Ended


                                                 
           
              April 30                                     
            
              April 30


                                            2020                            2019                       2020                                        2019






     Net sales                                   $
           399,197                                          $
            407,399                           $
         1,650,333     $
         1,645,319


      Cost of sales & distribution      323,928                                      320,277                                      1,321,147                     1,298,846



          
            Gross profit             75,269                                       87,122                                        329,186                       346,473


      Sales & marketing expense          21,069                                       21,736                                         83,608                        89,875


      General & administrative
       expense                           27,088                                       26,907                                        113,334                       112,917



     Restructuring charges                 189                                         (74)                                          (18)                        1,987



          
            Operating income         26,923                                       38,553                                        132,262                       141,694



     Interest expense, net               6,579                                        8,448                                         29,027                        35,652


      Other (income) expense, net         3,386                                        1,291                                          2,687                       (4,846)



     Income tax expense                  3,945                                        6,790                                         25,687                        27,200



          
            Net income                         $
           13,013                                           $
            22,024                            $
           74,861      $
           83,688





                 Earnings Per Share:


      Weighted average shares
       outstanding -diluted          16,965,119                                   16,906,081                                     16,952,480                    17,330,419




      Net income per diluted share                   $
           0.77                                             $
            1.30                              $
           4.42        $
           4.83

                                               
       
       Condensed Consolidated Balance Sheet


                                                     
           (Unaudited)


                                                                     April 30                                    April 30


                                                                         2020                           2019






     Cash & cash equivalents                                                     $
            97,059                        $
      57,656


      Investments -certificates of
       deposit                                                                                         1,500



     Customer receivables                                           106,344                          125,901



     Inventories                                                    111,836                          108,528



     Income taxes receivable                                                                          1,009



     Other current assets                                             9,933                           11,441



      
              Total current assets                                   325,172                          306,035


      Property, plant & equipment, net                               203,824                          208,263


      Operating lease assets, net                                    127,668



     Trademarks, net                                                  2,222                            5,555


      Customer relationship intangibles,
       net                                                           167,444                          213,111



     Goodwill                                                       767,612                          767,612



     Other assets                                                    28,864                           29,355



      
              Total assets                                                     $
            1,622,806                     $
      1,529,931





      Current portion - long-term debt                                             $
            2,216                         $
      2,286


      Short-term operating lease
       liabilities                                                    18,896


      Accounts payable & accrued
       expenses                                                      134,494                          147,304



                 Total current liabilities                              155,606                          149,590



     Long-term debt                                                 594,921                          689,205



     Deferred income taxes                                           52,935                           64,749


      Long-term operating lease
       liabilities                                                   112,454



     Other liabilities                                                6,352                            6,034



      
              Total liabilities                                      922,268                          909,578



     Stockholders' equity                                           700,538                          620,353



                 Total liabilities & stockholders'
                  equity                                                          $
            1,622,806                     $
      1,529,931


                    
            
         Condensed Consolidated Statements of Cash Flows


                                   
              (Unaudited)


                                                                      Twelve Months Ended


                                                    
              
                April 30


                                                         2020                     2019





     Net cash provided by
      operating activities                $
              177,542                             $
      190,845


     Net cash used by
      investing activities     (38,916)                                      (37,923)


     Net cash used by
      financing activities     (99,223)                                     (173,676)



     Net increase (decrease)
      in cash and cash
      equivalents                39,403                                       (20,754)


     Cash and cash
      equivalents, beginning
      of period                  57,656                                         78,410





     Cash and cash
      equivalents, end of
      period                               $
              97,059                              $
      57,656


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"), 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. During the fourth quarter of fiscal 2020, management determined that adding non-recurring restructuring charges was an appropriate adjustment due to their non-recurring nature.

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                              
              
                Twelve Months Ended


                                          
          
                April 30                                        
              
                April 30


        (in thousands)               2020                           2019                           2020                                    2019

    ---



        Net income (GAAP)                   $
          13,013                                                $
              22,024                            $
             74,861     $
        83,688



       Add back:


              Income tax expense    3,945                                           6,790                                               25,687                      27,200


              Interest expense,
               net                  6,579                                           8,448                                               29,027                      35,652


              Depreciation and
               amortization
               expense             12,901                                          11,912                                               49,513                      45,446


              Amortization of
               customer
               relationship
               intangibles         12,250                                          12,250                                               49,000                      49,000

        and trademarks



        EBITDA (Non-GAAP)                   $
          48,688                                                $
              61,424                           $
             228,088    $
        240,986



       Add back:


              Acquisition and
               restructuring
               related expenses
               (1)                   250                                             116                                                  221                       4,118


              Change in fair value
               of foreign exchange
               forward
               contracts (2)        1,346                                             291                                                1,102


              Net gain on debt
               forgiveness and
               modification (3)                                                     (95)                                                                        (5,266)


              Stock-based
               compensation
               expense                867                                             750                                                3,989                       3,040


              Loss on asset
               disposal             2,279                                           1,312                                                2,629                       1,973


        Adjusted EBITDA
         (Non-GAAP)                         $
          53,430                                                $
              63,798                           $
             236,029    $
        244,851





       Net Sales                          $
          399,197                                               $
              407,399                         $
             1,650,333  $
        1,645,319


        Adjusted EBITDA              13.4
         margin (Non-GAAP)              %                                 15.7
            %                                      14.3
            %              14.9
           %




              (1)              Acquisition and restructuring
                                  related expenses are comprised
                                  of expenses related to the
                                  acquisition of RSI Home
                                  Products, Inc., the subsequent
                                  restructuring charges that the
                                  Company incurred related to the
                                  acquisition and restructuring
                                  charges incurred related to
                                  COVID-19.



              (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)                          2020                       2019                     2020                               2019

    ---



        Net income (GAAP)                          $
         13,013                                        $
              22,024                 $
           74,861   $
        83,688



       Add back:


              Acquisition and
               restructuring related
               expenses                        250                                   116                                             221              4,118


              Amortization of customer
               relationship intangibles
               and trademarks               12,250                                12,250                                          49,000             49,000


              Net gain on debt
               forgiveness and
               modification                                                        (95)                                                          (5,266)


              Tax benefit of add backs     (2,978)                              (2,763)                                       (12,305)          (11,824)



        Adjusted net income (Non-
         GAAP)                                     $
         22,535                                        $
              31,532                $
           111,777  $
        119,716




        Weighted average diluted
         shares                         16,965,119                            16,906,081                                      16,952,480         17,330,419


        Adjusted EPS per diluted
         share (Non-GAAP)                            $
         1.33                                          $
              1.87                   $
           6.59     $
        6.91

                   
        
           Free Cash Flow




                                       Twelve Months Ended


                          
         
                April 30


                        2020                                2019





     Cash
      provided
      by
      operating
      activities             $
           177,542                     $
     190,845


     Less:
      Capital
      expenditures
      (1)            40,739                                39,385



     Free
      cash
      flow                   $
           136,803                     $
     151,460




              (1)              Capital expenditures consist of
                                  cash payments for property, plant
                                  and equipment and cash payments
                                  for investments in displays.
                                  During fiscal 2020 and 2019,
                                  approximately $0.6 million and
                                  $6.7 million, respectively, in
                                  cash outflows were incurred
                                  related to the new company
                                  headquarters.

                             
     
     Net Leverage




                                                    Twelve Months
                                              Ended


                                                       April 30


        (in
         thousands)                                          2020

    ---



        Net income
         (GAAP)                                                    $
       74,861


        Add back:


              Income tax
               expense                                     25,687


              Interest
               expense, net                                29,027


              Depreciation
               and
               amortization
               expense                                     49,513


              Amortization
               of customer
               relationship
               intangibles
               and
               trademarks                                  49,000



        EBITDA (Non-
         GAAP)                                                    $
       228,088


        Add back:


              Acquisition
               and
               restructuring
               related
               expenses (1)                                   221


              Change in
               fair value
               of foreign
               exchange
               forward
               contracts
               (2)                                         1,102


              Stock-based
               compensation
               expense                                      3,989


              Loss on asset
               disposal                                     2,629


        Adjusted
         EBITDA (Non-
         GAAP)                                                    $
       236,029




                                                        As of


                                                       April 30


                                                             2020



        Current
         maturities
         of long-
         term debt                                                  $
       2,216


        Long-term
         debt, less
         current
         maturities                                       594,921



        Total debt                                        597,137


        Less: cash
         and cash
         equivalents                                     (97,059)



        Net debt                                                  $
       500,078




        Net leverage
         (3)                                                2.12




              (1)              Acquisition and restructuring
                                  related expenses are comprised
                                  of expenses related to the
                                  acquisition of RSI Home
                                  Products, Inc., the subsequent
                                  restructuring charges that the
                                  Company incurred related to the
                                  acquisition and restructuring
                                  charges incurred related to
                                  COVID-19.



              (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)              Net debt divided by Adjusted
                                  EBITDA for the twelve months
                                  ended April 30, 2020.

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SOURCE American Woodmark Corporation