Press Release

American Woodmark Corporation Announces Fourth Quarter Results

Company Release - 5/29/2018 6:30 AM ET

WINCHESTER, Va., May 29, 2018 /PRNewswire/ -- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its fourth fiscal quarter ended April 30, 2018.

Fiscal Fourth Quarter 2018

Net sales for the fourth fiscal quarter increased 57% to $405.9 million compared with the same quarter of the prior fiscal year.  The current fourth fiscal quarter results include three months 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, net sales for the fourth fiscal quarter increased 3% to $266.7 million compared with the same quarter of the prior fiscal year.  Excluding the impact of the RSI acquisition, the Company experienced growth in both the new construction and dealer channels during the fourth quarter of fiscal year 2018.

Net income was $19.1 million ($1.08 per diluted share) for the fourth quarter of the current fiscal year compared with $17.3 million ($1.06 per diluted share) in the same quarter of the prior fiscal year.  Net income was positively impacted by additional sales volumes and lower incentive costs which were partially offset by acquisition related costs of $2.7 million, intangible amortization of $12.3 million and gross margin declines in the core business mainly due to raw material inflation.  Adjusted EPS per diluted share was $1.64 for the fourth quarter of the current fiscal year compared with $1.13 in the same quarter of the prior fiscal year.  Beginning with this earnings release, the Company has revised its definition of Adjusted EPS per diluted share to exclude intangibles amortization charges.  Further details are contained below.

Adjusted EBITDA was $65.3 million or 16.1% of net sales compared to $34.5 million or 13.3% of net sales for the same quarter of the prior fiscal year.  The increase is primarily due to sales growth in the quarter and the inclusion of three months of results for RSI.

"With an Adjusted EBITDA margin of 16.1%, we were very pleased with our performance over the past quarter," said Cary Dunston, Chairman and CEO.  "We had solid growth in our dealer and new construction channels while home center channel sales continued to be challenging.  Our integration work is proceeding on plan as we remain focused on strategically leveraging our combined businesses to gain share in the market."

Fiscal Year 2018

Net sales for the 2018 fiscal year increased 21% to $1,250.3 million from the prior fiscal year.  Excluding the impact of the RSI acquisition, net sales for the 2018 fiscal year increased 4% to $1,072.6 million from the prior fiscal year.  Excluding the impact of the RSI acquisition, the Company experienced growth in both the new construction and dealer channels during the entire fiscal year.

Net income for the 2018 fiscal year was $63.1 million ($3.77 per diluted share) compared with $71.2 million ($4.34 per diluted share) for the prior fiscal year.  Adjusted EPS per diluted share was $5.24 for the 2018 fiscal year compared with $4.45 for the prior fiscal year.

Adjusted EBITDA was $175.8 million or 14.1% of net sales compared to $133.7 million or 13.0% of net sales for the prior fiscal year.  The year over year increase is primarily due to additional sales growth and the inclusion of four months of results for RSI.

Cash provided by operating activities for the 2018 fiscal year was $86.8 million.  Free cash flow totaled $36.9 million for the entire fiscal year.  Additionally, the Company paid down $40.0 million of its term loan facility during the fourth fiscal quarter.

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 distributors and through a network of independent dealers.  At April 30, 2018, the Company operated eighteen manufacturing facilities in the United States and Mexico and seven primary service centers located throughout the United States.

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.

USE OF NON-GAAP FINANCIAL MEASURES

This press release refers to the following non-GAAP financial measures:

  • Beginning with this earnings release, the Company has revised its definition of Adjusted EPS per diluted share to exclude intangibles amortization charges. Further details are contained below. Adjusted EPS per diluted share, which excludes expenses related to the RSI acquisition, the inventory step-up amortization related to the RSI acquisition, the amortization of intangibles and the related tax benefits of these items.
  • Adjusted EBITDA, which consists of EBITDA (net income adjusted to exclude interest income and adding back interest expense, income tax provision and depreciation and amortization) adjusted to exclude expenses related to the RSI acquisition, the inventory step-up amortization related to the RSI acquisition, stock compensation expense, and gain/loss of asset disposal.
  • Adjusted EBITDA margin, which is Adjusted EBITDA divided by net sales.
  • Free cash flow, which is cash flow from continuing operating activities less capital expenditures consisting of cash payments for property, plant and equipment and cash payments for investments in displays.
  • Net sales excluding RSI sales, which is net sales minus sales from RSI.

Refer to the "Non-GAAP Financial Measures" section below for a discussion of these non-GAAP measures and their reconciliation to the most directly comparable GAAP measure.

 

AMERICAN WOODMARK CORPORATION











Unaudited Financial Highlights











(in thousands, except share data)











Operating Results














Three Months Ended


Twelve Months Ended




April 30


April 30




2018


2017


2018


2017











Net sales


$

405,887



$

258,737



$

1,250,274



$

1,030,248


Cost of sales & distribution


316,692



201,166



994,871



805,612



Gross profit


89,195



57,571



255,403



224,636


Sales & marketing expense


22,446



18,851



77,843



70,979


General & administrative expense


28,413



12,336



69,855



45,419



Operating income


38,336



26,384



107,705



108,238


Interest expense & other income


10,175



(378)



12,945



(687)


Income tax expense


9,052



9,414



31,619



37,726



Net income


$

19,109



$

17,348



$

63,141



$

71,199












Earnings Per Share:









Weighted average shares outstanding - diluted


17,618,977



16,389,578



16,744,705



16,398,240












Net income per diluted share


$

1.08



$

1.06



$

3.77



$

4.34


 

 

Condensed Consolidated Balance Sheet

(Unaudited)




April 30


 April 30




2018


2017







Cash & cash equivalents


$

78,410



$

176,978


Investments - certificates of deposit


8,000



51,750


Customer receivables


136,355



63,115


Inventories


104,801



42,859


Income taxes receivable


25,996



301


Other current assets


10,805



4,225



Total current assets


364,367



339,228


Property, plant & equipment, net


218,102



107,933


Investments - certificates of deposit


1,500



20,500


Trademarks, net


8,889




Customer relationship intangibles, net


258,778




Goodwill


767,451




Other assets


26,258



33,612



Total assets


$

1,645,345



$

501,273








Current portion - long-term debt


$

4,143



$

1,598


Accounts payable & accrued expenses


166,312



99,899



Total current liabilities


170,455



101,497


Long-term debt


809,897



15,279


Deferred income taxes


71,563




Other liabilities


11,765



32,048



Total liabilities


1,063,680



148,824


Stockholders' equity


581,665



352,449



Total liabilities & stockholders' equity


$

1,645,345



$

501,273


 

Condensed Consolidated Statements of Cash Flows

(Unaudited)




Twelve Months Ended




April 30




2018


2017







Net cash provided by operating activities


$

86,775



$

77,080


Net cash used by investing activities


(44,316)



(53,744)


Net cash used by financing activities


(141,027)



(20,821)


Net (decrease) increase in cash and cash equivalents


(98,568)



2,515


Cash and cash equivalents, beginning of period


176,978



174,463








Cash and cash equivalents, end of period


$

78,410



$

176,978


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.

A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below.

These non-GAAP financial measures should be viewed in addition to, and not as a substitute for, our reported results prepared in accordance with GAAP, and such non-GAAP financial measures should not be construed as being more important than the comparable GAAP measures.

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, (2) inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI acquisition (that was fully expensed in the quarter ended January 31, 2018), (3) the amortization of intangible assets, and (4) the tax benefit of RSI acquisition expenses and the inventory step-up and intangible amortization.  The amortization of intangible assets is driven by the RSI acquisition and will recur in future periods.  We began excluding amortization of intangible assets from our definition of Adjusted EPS per diluted share beginning with this earnings release as management determined that such an exclusion would better help it evaluate the performance of our business and profitability and we also received 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 (income) expense, net, (3) depreciation and amortization expense, (4) amortization of customer lists and trademarks, (5) expenses related to the RSI acquisition, (6) inventory step-up amortization, (7) stock-based compensation expense, and (8) gain/loss on asset disposal.  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 sales excluding RSI sales

To better understand and compare the performance of our core American Woodmark business by our management and our investors, we believe it is helpful to subtract the amount of sales from our recently acquired and now wholly-owned subsidiary, RSI Home Products, Inc., from our net sales and report this amount with our quarterly earnings announcements.  We may discontinue using this non-GAAP financial measure at a later juncture once RSI has become fully integrated into our Company and the quarter to quarter comparisons of our core business are no longer as helpful to compare performance.

Summary

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.

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 Net Sales and Percentage of Net Sales Excluding RSI



Three Months Ended


Twelve Months Ended



April 30,


April 30,

(in thousands)


2018


2017


Percent Change


2018


2017


Percent Change














Net sales excluding RSI


$

266,734



$

258,737



3

%


$

1,072,550



$

1,030,248



4

%

RSI sales


139,153







177,724






Net Sales


$

405,887



$

258,737



57

%


1,250,274



1,030,248



21

%

 

 

Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents










(in thousands)












Three Months Ended


Twelve Months Ended



April 30,


April 30,



2018


2017


2018


2017










Net income (GAAP)


$

19,109



$

17,348



$

63,141



$

71,199


Add back:









      Income tax expense


9,052



9,414



31,619



37,726


      Interest (income) expense, net


10,167



(294)



13,054



(521)


      Depreciation and amortization expense


11,092



4,963



28,671



18,682


      Amortization of customer lists and trademarks


12,250





16,333




EBITDA (Non-GAAP)


$

61,670



$

31,431



$

152,818



$

127,086


Add back:









      Acquisition related expenses


2,739



1,958



12,902



2,686


      Inventory step-up amortization (1)






6,334




      Stock compensation expense


591



992



3,097



3,469


      Loss on asset disposal


335



158



615



444


Adjusted EBITDA (Non-GAAP)


$

65,335



$

34,539



$

175,766



$

133,685











Net Sales


$

405,887



$

258,737



$

1,250,274



$

1,030,248


Adjusted EBITDA margin (Non-GAAP)


16.1

%


13.3

%


14.1

%


13.0

%

 

 


Reconciliation of Net Income to Adjusted Net Income










(in thousands, except share data)












Three Months Ended


Twelve Months Ended



April 30,


April 30,



2018


2017


2018


2017










Net income (GAAP)


$

19,109



$

17,348



$

63,141



$

71,199


Add back:









      Acquisition related expenses


2,739



1,958



12,902



2,686


      Amortization of intangibles


12,250





16,333




      Inventory step-up amortization (1)






6,334




      Tax benefit of add backs


(5,134)



(708)



(10,970)



(969)


Adjusted net income (Non-GAAP)


$

28,964



$

18,598



$

87,740



$

72,916











Weighted average diluted shares


17,618,977



16,389,578



16,744,705



16,398,240


Adjusted EPS per diluted share (Non-GAAP)


$

1.64



$

1.13



$

5.24



$

4.45




(1)

The inventory step-amortization is the increase in the fair value of inventory acquired through the RSI acquisition that was fully expensed in the quarter ended January 31, 2018.

 

 

Revised Reconciliation of Net Income to Adjusted Net Income for Q3 FY2018










(in thousands, except share data)












Three Months Ended


Nine Months Ended



January 31,


January 31,



2018


2017


2018


2017










Net income (GAAP)


$

1,996



$

14,553



$

44,032



$

53,851


Add back:









      Acquisition related expenses


10,163



728



10,163



728


      Amortization of intangibles


4,083





4,083




      Inventory step-up amortization (1)


6,334





6,334




      Tax benefit of add backs


(5,836)



(261)



(5,836)



(261)


Adjusted net income (Non-GAAP)


$

16,740



$

15,020



$

58,776



$

54,318











Weighted average diluted shares


16,690,760



16,381,223



16,461,509



16,400,842


Adjusted EPS per diluted share (Non-GAAP) (2)


$

1.00



$

0.92



$

3.57



$

3.31




(2)

Beginning with this earnings release, the Company has excluded the impact of intangible asset amortization (and the related tax benefit) from the calculation of Adjusted EPS per diluted share. The following table presents a reconciliation of Adjusted EPS per diluted share as reported to the prior method for the periods presented:

 

 



Three Months Ended


Nine Months Ended



January 31,


January 31,



2018


2017


2018


2017










As reported


$

0.84



$

0.92



$

3.41



$

3.31


Intangible asset amortization (net of tax)


0.16





0.16




Prior method


$

1.00



$

0.92



$

3.57



$

3.31


 

 

Free Cash Flow










Twelve Months Ended




April 30,




2018


2017







Cash provided by operating activities



$

86,775



$

77,080


Less: Capital expenditures (3)



49,893



25,531


Free cash flow



$

36,882



$

51,549




(3)

Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.  During fiscal 2018 and 2017, approximately $21.1 million and $3.0 million, respectively, in costs were incurred related to the new company headquarters.

 

 

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SOURCE American Woodmark Corporation