American Woodmark Corporation (NASDAQ: AMWD) (the "Company")
today announced results for its first quarter of fiscal 2023 which
ended July 31, 2022.
Net sales for the first quarter of fiscal 2023 increased $100.3
million, or 22.7%, to $542.9 million compared with the same quarter
of the prior fiscal year. The Company experienced growth in all
sales channels during the first quarter of fiscal 2023 versus the
prior year period.
Net income was $20.1 million ($1.21 per diluted share) for the
first quarter of fiscal 2023 compared with net income of $3.0
million ($0.18 per diluted share) in the same quarter of the prior
fiscal year. Net income for the first quarter of fiscal 2023
increased due to an increase in net sales largely as a result of
price increases and increased efficiencies, partially offset by
higher material and logistics costs.
Adjusted EBITDA for the first quarter of fiscal 2023 increased
$24.4 million, or 76.0%, to $56.5 million, or 10.4% of net sales,
compared to $32.1 million, or 7.3% of net sales, for the same
quarter of the prior fiscal year.
Cash provided by operating activities for the first three months
of fiscal 2023 was $37.3 million and free cash flow totaled $32.7
million. Cash flows were positively impacted by the increase in net
income and higher accrued expenses. As of July 31, 2022, the
Company had $33.7 million of cash on hand with no term loan debt
maturities until July 2023 plus access to $239.4 million of
additional availability under its revolving loan facility. The
Company paid down a net of $20.6 million of its debt during the
first three months of the current fiscal year.
"During the first quarter of fiscal 2023, our teams delivered
sales growth of 22.7%, improved adjusted EBITDA by 76.0% to $56.5
million, and generated free cash flow of over $32 million," said
Scott Culbreth, President and CEO. "We committed to improving our
results as price realization started to better match inflationary
impacts and we improved our costs through operating efficiency
initiatives. Our team has remained resilient and focused and I want
to thank them for their efforts in delivering these results."
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.
AMERICAN WOODMARK
CORPORATION
Unaudited Financial
Highlights
(in thousands, except share
data)
Operating Results
Three Months Ended
July 31,
2022
2021
Net sales
$
542,893
$
442,581
Cost of sales & distribution
456,146
389,235
Gross profit
86,747
53,346
Sales & marketing expense
25,766
22,888
General & administrative expense
30,180
23,734
Restructuring charges, net
—
313
Operating income
30,801
6,411
Interest expense, net
4,053
2,173
Pension settlement, net
(239
)
—
Other (income) expense, net
226
28
Income tax expense
6,691
1,229
Net income
$
20,070
$
2,981
Earnings Per Share:
Weighted average shares outstanding -
diluted
16,619,916
16,716,167
Net income per diluted share
$
1.21
$
0.18
Condensed Consolidated Balance
Sheet
(Unaudited)
July 31,
April 30,
2022
2022
Cash & cash equivalents
$
33,696
$
22,325
Customer receivables
162,447
156,961
Inventories
247,021
228,259
Other current assets
21,161
21,112
Total current assets
464,325
428,657
Property, plant and equipment, net
207,188
213,808
Operating lease assets, net
104,943
108,055
Customer relationship intangibles, net
64,694
76,111
Goodwill
767,612
767,612
Other assets
37,452
38,253
Total assets
$
1,646,214
$
1,632,496
Current portion - long-term debt
$
2,390
$
2,264
Short-term operating lease liabilities
22,058
21,985
Accounts payable & accrued
expenses
212,416
191,979
Total current liabilities
236,864
216,228
Long-term debt
486,436
506,732
Deferred income taxes
36,055
38,340
Long-term operating lease liabilities
91,863
95,084
Other liabilities
2,458
3,229
Total liabilities
853,676
859,613
Stockholders' equity
792,538
772,883
Total liabilities & stockholders'
equity
$
1,646,214
$
1,632,496
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Three Months Ended
July 31,
2022
2021
Net cash provided by operating
activities
$
37,295
$
6,588
Net cash used by investing activities
(4,560
)
(14,706
)
Net cash used by financing activities
(21,364
)
(55,135
)
Net increase (decrease) in cash and cash
equivalents
11,371
(63,253
)
Cash and cash equivalents, beginning of
period
22,325
91,071
Cash and cash equivalents, end of
period
$
33,696
$
27,818
Non-GAAP Financial Measures
We have reported our financial results in accordance with U.S.
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, (5) 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, (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) pension settlement
charges. 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 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, (4)
pension settlement charges, 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)
2022
2021
Net income (GAAP)
$
20,070
$
2,981
Add back:
Income tax expense
6,691
1,229
Interest expense, net
4,053
2,173
Depreciation and amortization expense
12,430
13,025
Amortization of customer relationship
intangibles
11,417
11,417
EBITDA (Non-GAAP)
$
54,661
$
30,825
Add back:
Acquisition and restructuring related
expenses (1)
20
20
Non-recurring restructuring charges, net
(2)
—
313
Pension settlement
(239
)
—
Change in fair value of foreign exchange
forward contracts (3)
238
(350
)
Stock-based compensation expense
1,635
1,177
Loss on asset disposal
177
115
Adjusted EBITDA (Non-GAAP)
$
56,492
$
32,100
Net Sales
$
542,893
$
442,581
Net income margin (GAAP)
3.7
%
0.7
%
Adjusted EBITDA margin (Non-GAAP)
10.4
%
7.3
%
(1) Acquisition and restructuring related
expenses are comprised of expenses related to the RSI acquisition
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.
Reconciliation of Net Income
to Adjusted Net Income
Three Months Ended
July 31,
(in thousands, except share data)
2022
2021
Net income (GAAP)
$
20,070
$
2,981
Add back:
Acquisition and restructuring related
expenses
20
20
Non-recurring restructuring charges,
net
—
313
Pension settlement
(239
)
—
Amortization of customer relationship
intangibles and trademarks
11,417
11,417
Tax benefit of add backs
(2,900
)
(3,067
)
Adjusted net income (Non-GAAP)
$
28,368
$
11,664
Weighted average diluted shares (GAAP)
16,619,916
16,716,167
EPS per diluted share (GAAP)
$
1.21
$
0.18
Adjusted EPS per diluted share
(Non-GAAP)
$
1.71
$
0.70
Free Cash Flow
Three Months Ended
July 31,
2022
2021
Cash provided by operating activities
$
37,295
$
6,588
Less: Capital expenditures (1)
4,575
14,711
Free cash flow
$
32,720
$
(8,123
)
(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)
2022
Net loss (GAAP)
$
(12,633
)
Add back:
Income tax expense
(7,795
)
Interest expense, net
12,070
Depreciation and amortization expense
50,343
Amortization of customer relationship
intangibles
45,667
EBITDA (Non-GAAP)
$
87,652
Add back:
Acquisition and restructuring related
expenses (1)
80
Non-recurring restructuring charges, net
(2)
(130
)
Pension settlement
68,234
Change in fair value of foreign exchange
forward contracts (3)
588
Stock-based compensation expense
5,166
Loss on asset disposal
759
Adjusted EBITDA (Non-GAAP)
$
162,349
As of
July 31,
2022
Current maturities of long-term debt
$
2,390
Long-term debt, less current
maturities
486,436
Total debt
488,826
Less: cash and cash equivalents
(33,696
)
Net debt
$
455,130
Net leverage (4)
2.80
(1) Acquisition and restructuring related
expenses are comprised of expenses related to the RSI acquisition
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, 2022.
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