American Woodmark Corporation Announces Second Quarter Results

American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its second fiscal quarter ended October 31, 2020.

Net sales for the second fiscal quarter increased 4.8% to $448.6 million compared with the same quarter of the prior fiscal year. The Company experienced double digit growth in the repair and remodel sales channel during the second quarter of fiscal 2021 as the market demand recovered with consumer confidence increasing. Net sales for the first six months of the current fiscal year decreased 2.0% to $838.7 million from the comparable period of the prior fiscal year.

Net income was $22.3 million ($1.31 per diluted share) for the second quarter of fiscal 2021 compared with $22.2 million ($1.31 per diluted share) in the same quarter of the prior fiscal year. Net income for the second quarter of fiscal 2021 was negatively impacted by higher material and logistics costs, in addition to our investments made in the Company regarding labor and product launch costs. Net income for the first six months of the current fiscal year was $38.7 million ($2.27 per diluted share) compared with $49.0 million ($2.90 per diluted share) for the same period of the prior fiscal year. The Company incurred pre-tax restructuring costs totaling $2.8 million during the second quarter of fiscal 2021 and $6.3 million during the first half of 2021 related to the permanent layoffs due to COVID-19 announced in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 and the closure of its Humboldt, Tennessee manufacturing plant announced in June 2020. Adjusted EPS per diluted share was $1.97 for the second quarter of fiscal 2021 compared with $1.84 in the same quarter of the prior fiscal year and $3.62 for the first six months of the current fiscal year compared with $3.97 for the same period of the prior fiscal year.

Adjusted EBITDA for the second fiscal quarter was $65.0 million, or 14.5% of net sales, compared to $62.9 million, or 14.7% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the first six months of the fiscal year was $121.9 million, or 14.5% of net sales, compared to $132.5 million, or 15.5% of net sales, for the same period of the prior fiscal year.

“Our teams continued to perform well and drove solid performance for the quarter. Our home center and independent dealer and distribution businesses delivered positive growth, we achieved adjusted EBITDA margins of 14.5% and we paid down $40.0 million of our term loan facility," said Scott Culbreth, President and CEO. "I continue to be impressed by our team's ability to execute during these challenging times while maintaining a safe work environment."

Cash provided by operating activities for the first six months of the current fiscal year was $76.6 million and free cash flow totaled $57.4 million. As of October 31, 2020, the Company had $112.6 million of cash on hand with no term loan debt maturities until December 2022 plus access to $93.0 million of additional availability under its revolving credit facility. The Company paid down $40.0 million of its term loan facility during the first six months of the current fiscal year.

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 October 31, 2020, the Company operated seventeen 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

 

Six Months Ended

 

 

October 31

 

October 31

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net sales

 

$

448,583

 

 

$

428,016

 

 

$

838,670

 

 

$

855,381

 

Cost of sales & distribution

 

359,072

 

 

340,966

 

 

$

669,021

 

 

$

673,812

 

Gross profit

 

89,511

 

 

87,050

 

 

$

169,649

 

 

$

181,569

 

Sales & marketing expense

 

21,608

 

 

20,451

 

 

$

41,506

 

 

$

41,138

 

General & administrative expense

 

30,229

 

 

29,900

 

 

$

60,212

 

 

$

59,332

 

Restructuring charges

 

2,791

 

 

(188)

 

 

$

6,251

 

 

$

(207)

 

Operating income

 

34,883

 

 

36,887

 

 

$

61,680

 

 

$

81,306

 

Interest expense, net

 

5,981

 

 

7,436

 

 

$

12,011

 

 

$

15,524

 

Other income, net

 

(981)

 

 

(527)

 

 

$

(2,669)

 

 

$

(534)

 

Income tax expense

 

7,627

 

 

7,815

 

 

$

13,597

 

 

$

17,272

 

Net income

 

$

22,256

 

 

$

22,163

 

 

$

38,741

 

 

$

49,044

 

 

 

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

17,047,296

 

 

16,955,835

 

 

17,036,652

 

 

16,932,236

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.31

 

 

$

1.31

 

 

$

2.27

 

 

$

2.90

 

 

Condensed Consolidated Balance Sheet

(Unaudited)

 

 

October 31

 

April 30

 

 

2020

 

2020

 

 

 

 

 

Cash & cash equivalents

 

$

112,560

 

 

$

97,059

 

Customer receivables

 

149,165

 

 

106,344

 

Inventories

 

127,715

 

 

111,836

 

Other current assets

 

14,913

 

 

9,933

 

Total current assets

 

404,353

 

 

325,172

 

Property, plant & equipment, net

 

198,895

 

 

203,824

 

Operating lease assets, net

 

128,125

 

 

127,668

 

Trademarks, net

 

556

 

 

2,222

 

Customer relationship intangibles, net

 

144,611

 

 

167,444

 

Goodwill

 

767,612

 

 

767,612

 

Other assets

 

28,726

 

 

28,864

 

Total assets

 

$

1,672,878

 

 

$

1,622,806

 

 

 

 

 

 

Current portion - long-term debt

 

$

2,096

 

 

$

2,216

 

Short-term operating lease liabilities

 

19,519

 

 

18,896

 

Accounts payable & accrued expenses

 

173,533

 

 

134,494

 

Total current liabilities

 

195,148

 

 

155,606

 

Long-term debt

 

555,911

 

 

594,921

 

Deferred income taxes

 

47,701

 

 

52,935

 

Long-term operating lease liabilities

 

113,511

 

 

112,454

 

Other liabilities

 

15,413

 

 

6,352

 

Total liabilities

 

927,684

 

 

922,268

 

Stockholders' equity

 

745,194

 

 

700,538

 

Total liabilities & stockholders' equity

 

$

1,672,878

 

 

$

1,622,806

 

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Six Months Ended

 

 

October 31

 

 

2020

 

2019

 

 

 

 

 

Net cash provided by operating activities

 

$

76,568

 

 

$

86,232

 

Net cash used by investing activities

 

(18,930)

 

 

(18,288)

 

Net cash used by financing activities

 

(42,137)

 

 

(74,165)

 

Net increase (decrease) in cash and cash equivalents

 

15,501

 

 

(6,221)

 

Cash and cash equivalents, beginning of period

 

97,059

 

 

57,656

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

112,560

 

 

$

51,435

 

 

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") and 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.

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

 

Six Months Ended

 

 

October 31

 

October 31

(in thousands)

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

22,256

 

 

$

22,163

 

 

$

38,741

 

 

$

49,044

 

Add back:

 

 

 

 

 

 

 

 

Income tax expense

 

7,627

 

 

7,815

 

 

13,597

 

 

17,272

 

Interest expense, net

 

5,981

 

 

7,436

 

 

12,011

 

 

15,524

 

Depreciation and amortization expense

 

13,019

 

 

12,164

 

 

25,978

 

 

24,027

 

Amortization of customer relationship intangibles and trademarks

 

12,250

 

 

12,250

 

 

24,500

 

 

24,500

 

EBITDA (Non-GAAP)

 

$

61,133

 

 

$

61,828

 

 

$

114,827

 

 

$

130,367

 

Add back:

 

 

 

 

 

 

 

 

Acquisition and restructuring related expenses (1)

 

61

 

 

(130)

 

 

121

 

 

(89)

 

Non-recurring restructuring charges (2)

 

2,791

 

 

 

 

6,251

 

 

 

Change in fair value of foreign exchange forward contracts (3)

 

(566)

 

 

(152)

 

 

(1,821)

 

 

(96)

 

Stock-based compensation expense

 

1,266

 

 

1,178

 

 

2,227

 

 

2,075

 

Loss on asset disposal

 

286

 

 

151

 

 

332

 

 

217

 

Adjusted EBITDA (Non-GAAP)

 

$

64,971

 

 

$

62,875

 

 

$

121,937

 

 

$

132,474

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

448,583

 

 

$

428,016

 

 

$

838,670

 

 

$

855,381

 

Adjusted EBITDA margin (Non-GAAP)

 

14.5

%

 

14.7

%

 

14.5

%

 

15.5

%

 

(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) Nonrecurring 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 and six months ended October 31, 2020, includes accelerated depreciation expense of $0.2 million and $1.3 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 in the operating results.

 

Reconciliation of Net Income to Adjusted Net Income

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31

 

October 31

(in thousands, except share data)

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

22,256

 

 

$

22,163

 

 

$

38,741

 

 

$

49,044

 

Add back:

 

 

 

 

 

 

 

 

Acquisition and restructuring related expenses

 

61

 

 

(130)

 

 

121

 

 

(89)

 

Non-recurring restructuring charges

 

2,791

 

 

 

 

6,251

 

 

 

Amortization of customer relationship intangibles and trademarks

 

12,250

 

 

12,250

 

 

24,500

 

 

24,500

 

Tax benefit of add backs

 

(3,850)

 

 

(3,103)

 

 

(7,903)

 

 

(6,200)

 

Adjusted net income (Non-GAAP)

 

$

33,508

 

 

$

31,180

 

 

$

61,710

 

 

$

67,255

 

 

 

 

 

 

 

 

 

 

Weighted average diluted shares

 

17,047,296

 

 

16,955,835

 

 

17,036,652

 

 

16,932,236

 

Adjusted EPS per diluted share (Non-GAAP)

 

$

1.97

 

 

$

1.84

 

 

$

3.62

 

 

$

3.97

 

 

Free Cash Flow

 

 

 

 

 

Six Months Ended

 

 

October

 

 

2020

 

2019

 

 

 

 

 

Cash provided by operating activities

 

$

76,568

 

 

$

86,232

 

Less: Capital expenditures (1)

 

19,124

 

 

20,101

 

Free cash flow

 

$

57,444

 

 

$

66,131

 

 

(1) Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.

 

Net Leverage

 

 

 

 

 

Twelve Months
Ended

 

 

October 31

(in thousands)

 

2020

 

 

 

Net income (GAAP)

 

$

64,559

 

Add back:

 

 

Income tax expense

 

22,012

 

Interest expense, net

 

25,513

 

Depreciation and amortization expense

 

51,464

 

Amortization of customer relationship intangibles and trademarks

 

49,000

 

EBITDA (Non-GAAP)

 

212,548

 

Add back:

 

 

Acquisition and restructuring related expenses (1)

 

242

 

Non-recurring restructuring charges (2)

 

6,440

 

Change in fair value of foreign exchange forward contracts (3)

 

(623)

 

Stock-based compensation expense

 

4,140

 

Loss on asset disposal

 

2,745

 

Adjusted EBITDA (Non-GAAP)

 

$

225,492

 

 

 

 

 

 

As of

 

 

October 31

 

 

2020

Current maturities of long-term debt

 

$

2,096

 

Long-term debt, less current maturities

 

555,911

 

Total debt

 

558,007

 

Less: cash and cash equivalents

 

(112,560)

 

Net debt

 

$

445,447

 

 

 

 

Net leverage (4)

 

1.98

 

(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) Nonrecurring 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 in the operating results.
(4) Net debt divided by Adjusted EBITDA for the twelve months ended October 31, 2020.