American Woodmark Corporation Announces First Quarter Results

American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its first quarter of fiscal 2022 which ended July 31, 2021.

Net sales for the first quarter of fiscal 2022 increased $52.5 million, or 13.5%, to $442.6 million compared with the same quarter of the prior fiscal year. The Company experienced growth across all channels, with high-teens growth in our repair and remodel sales channel and upper single digit growth in our new construction sales channel during the first quarter of fiscal 2022 versus the prior year period as market demand continued at a strong pace.

Net income was $3.0 million ($0.18 per diluted share) for the first quarter of fiscal 2022 compared with $16.1 million ($0.94 per diluted share) in the same quarter of the prior fiscal year. Net income for the first quarter of fiscal 2022 decreased $13.1 million due to the rapidly evolving inflationary pressures outpacing our pricing actions taken across all our channels. This was approximately 220 basis points of sequential pressure from the Company's fourth quarter of fiscal 2021 to the first quarter of fiscal 2022, related primarily to materials and logistics costs. Given the increased backlog of our products there is an inherent lag in the realization of our pricing actions. Net income margin was 0.7% for the first quarter of fiscal 2022 compared to 4.1% for the same period in the prior fiscal year. Adjusted EPS per diluted share was $0.70 for the first quarter of fiscal 2022 compared with $1.63 in the same quarter of the prior fiscal year.

Adjusted EBITDA for the first quarter of fiscal 2022 decreased $24.3 million, or 43.1%, to $32.1 million, or 7.3% of net sales, compared to $56.4 million, or 14.5% of net sales, for the same quarter of the prior fiscal year.

"While delivering sales growth across all channels our adjusted EBITDA margins of 7.3% were below expectations. Although we have and are also in the process of implementing significant pricing actions due to the increasing inflationary pressures we are facing, we only realized approximately $3 million of impact in the first quarter of fiscal 2022. Assuming our current sales level, we expect the impact of confirmed pricing actions to increase in the second half of fiscal 2022 to over $25 million per quarter," said Scott Culbreth, President and CEO. "Looking forward our focus remains on increasing production to match a strong demand environment and reducing backlog and realizing additional pricing actions to mitigate inflationary pressures in materials, logistics, and labor."

Cash provided by operating activities for the first fiscal quarter was $6.6 million and free cash flow totaled $(8.1) million. Cash flows were negatively impacted due to the higher inventory levels, timing of accounts payable, and lower accrued compensation expenses. As of July 31, 2021, the Company had $27.8 million of cash on hand with no term loan debt maturities until July 2023 plus access to $243.0 million of additional availability under its revolving facility. The Company paid down $29.1 million of its debt and repurchased shares valued at $25 million during the first three 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.
(AMWD-ER)

 

AMERICAN WOODMARK CORPORATION

 

 

 

 

Unaudited Financial Highlights

 

 

 

 

(in thousands, except share data)

 

 

 

 

Operating Results

 

 

 

 

 

Three Months Ended

 

July 31

 

2021

 

2020
As Adjusted

 

 

 

 

Net sales

$

442,581

 

$

390,087

 

Cost of sales & distribution

389,138

 

310,520

 

Gross profit

53,443

 

79,567

 

Sales & marketing expense

22,987

 

19,898

 

General & administrative expense

23,687

 

29,983

 

Restructuring charges, net

313

 

3,460

 

Operating income

6,456

 

26,226

 

Interest expense, net

2,173

 

6,030

 

Other (income) expense, net

73

 

(1,688

)

Income tax expense

1,229

 

5,825

 

Net income

$

2,981

 

$

16,059

 

 

 

 

 

Earnings Per Share:

 

 

 

Weighted average shares outstanding - diluted

16,716,167

 

17,013,444

 

 

 

 

 

Net income per diluted share

$

0.18

 

$

0.94

 

Condensed Consolidated Balance Sheet

(Unaudited)

 

July 31

 

April 30

 

2021

 

2021
As Adjusted

 

 

 

 

Cash & cash equivalents

$

27,818

 

$

91,071

Customer receivables

130,736

 

146,866

Inventories

181,794

 

158,167

Other current assets

15,072

 

13,861

Total current assets

355,420

 

409,965

Property, plant and equipment, net

206,932

 

204,002

Operating lease assets, net

120,703

 

123,118

Customer relationship intangibles, net

110,361

 

121,778

Goodwill

767,612

 

767,612

Other assets

28,557

 

27,924

Total assets

$

1,589,585

 

$

1,654,399

 

 

 

 

Current portion - long-term debt

$

2,131

 

$

8,322

Short-term operating lease liabilities

20,635

 

19,994

Accounts payable & accrued expenses

176,051

 

192,131

Total current liabilities

198,817

 

220,447

Long-term debt

491,412

 

513,450

Deferred income taxes

43,448

 

42,891

Long-term operating lease liabilities

106,917

 

109,628

Other liabilities

11,890

 

11,745

Total liabilities

852,484

 

898,161

Stockholders' equity

737,101

 

756,238

Total liabilities & stockholders' equity

$

1,589,585

 

$

1,654,399

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

Three Months Ended

 

July 31

 

2021

 

2020

 

 

 

 

Net cash provided by operating activities

$

6,588

 

 

$

40,000

 

Net cash used by investing activities

(14,706

)

 

(7,836

)

Net cash used by financing activities

(55,135

)

 

(1,168

)

Net increase (decrease) in cash and cash equivalents

(63,253

)

 

30,996

 

Cash and cash equivalents, beginning of period

91,071

 

 

97,059

 

 

 

 

 

Cash and cash equivalents, end of period

$

27,818

 

 

$

128,055

 

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.

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 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/loss 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.

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 RSI acquisition, (2) non-recurring restructuring charges, (3) the amortization of customer relationship intangibles and trademarks, (4) net loss 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.

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

 

July 31

(in thousands)

2021

 

2020
As Adjusted

 

 

 

Net income (GAAP)

$

2,981

 

 

$

16,059

 

 

Add back:

 

 

Income tax expense

1,229

 

 

5,825

 

 

Interest expense, net

2,173

 

 

6,030

 

 

Depreciation and amortization expense

13,025

 

 

12,959

 

 

Amortization of customer relationship intangibles and trademarks

11,417

 

 

12,250

 

 

EBITDA (Non-GAAP)

$

30,825

 

 

$

53,123

 

 

Add back:

 

 

Acquisition and restructuring related expenses (1)

20

 

 

60

 

 

Non-recurring restructuring charges, net (2)

313

 

 

3,460

 

 

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

(350

)

 

(1,255

)

 

Stock-based compensation expense

1,177

 

 

961

 

 

Loss on asset disposal

115

 

 

46

 

 

Adjusted EBITDA (Non-GAAP)

$

32,100

 

 

$

56,395

 

 

 

 

 

Net Sales

$

442,581

 

 

$

390,087

 

 

Net income margin (GAAP)

0.7

 

%

4.1

 

%

Adjusted EBITDA margin (Non-GAAP)

7.3

 

%

14.5

 

%

(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)  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 three months ended July 31, 2020 includes accelerated depreciation expense of $1.1 million 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

 

July 31

(in thousands, except share data)

2021

 

 

2020
As Adjusted

 

 

 

 

Net income (GAAP)

$

2,981

 

 

$

16,059

 

Add back:

 

 

 

Acquisition and restructuring related expenses

20

 

 

60

 

Non-recurring restructuring charges, net

313

 

 

3,460

 

Amortization of customer relationship intangibles and trademarks

11,417

 

 

12,250

 

Tax benefit of add backs

(3,067

)

 

(4,053

)

Adjusted net income (Non-GAAP)

$

11,664

 

 

$

27,776

 

 

 

 

 

Weighted average diluted shares

16,716,167

 

 

17,013,444

 

EPS per diluted share (GAAP)

$

0.18

 

 

$

0.94

 

Adjusted EPS per diluted share (Non-GAAP)

$

0.70

 

 

$

1.63

 

Free Cash Flow

 

 

 

Three Months Ended

 

July 31

 

2021

 

2020

 

 

 

Cash provided by operating activities

$

6,588

 

$

40,000

Less: Capital expenditures (1)

14,711

 

7,842

Free cash flow

$

(8,123

)

$

32,158

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

 

Net Leverage

 

 

 

 

 

Twelve Months
Ended

 

 

July 31

(in thousands)

 

2021

 

 

 

Net income (GAAP)

 

$

45,259

 

 

Add back:

 

 

Income tax expense

 

13,931

 

 

Interest expense, net

 

19,271

 

 

Depreciation and amortization expense

 

51,165

 

 

Amortization of customer relationship intangibles and trademarks

 

47,056

 

 

EBITDA (Non-GAAP)

 

$

176,682

 

 

Add back:

 

 

Acquisition and restructuring related expenses (1)

 

134

 

 

Non-recurring restructuring charges, net (2)

 

2,701

 

 

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

 

(197

)

 

Stock-based compensation expense

 

4,814

 

 

Loss on asset disposal

 

454

 

 

Net loss on debt forgiveness and modification

 

13,792

 

 

Adjusted EBITDA (Non-GAAP)

 

$

198,380

 

 

 

 

 

 

 

As of

 

 

July 31

 

 

2021

Current maturities of long-term debt

 

$

2,131

 

 

Long-term debt, less current maturities

 

491,412

 

 

Total debt

 

493,543

 

 

Less: cash and cash equivalents

 

(27,818

)

 

Net debt

 

$

465,725

 

 

 

 

 

Net leverage (4)

 

2.35

 

 

(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)  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 July 31, 2021.