American Woodmark Corporation Announces Third Quarter Results
February 25, 2021 at 06:30 AM EST
American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its third fiscal quarter ended January 31, 2021.
Net sales for the third fiscal quarter increased $36.2 million, or 9.1%, to $432.0 million, compared with the same quarter of the prior fiscal year. The Company experienced growth across all channels, with low double-digit growth in the repair and remodel sales channel and mid-single digit growth in our new construction sales channel during the third quarter of fiscal 2021 as market demand recovered with consumer confidence remaining strong. Net sales for the first nine months of the current fiscal year increased $19.5 million, or 1.6%, to $1,270.6 million from the comparable period of the prior fiscal year.
Net income was $17.2 million ($1.01 per diluted share) for the third quarter of fiscal 2021 compared with $12.8 million ($0.75 per diluted share) in the same quarter of the prior fiscal year. Net income for the third quarter of fiscal 2021 increased $4.4 million due to an increase in net sales, offset by higher material and logistics costs. In addition, the Company made an investment to establish a distribution center and continued to enhance our labor benefits for our hourly workforce. Net income for the first nine months of the current fiscal year was $55.9 million ($3.28 per diluted share) compared with $61.8 million ($3.65 per diluted share) for the same period of the prior fiscal year. The Company had a pre-tax $0.8 million restructuring related gain during the third quarter of fiscal 2021, which was driven by a gain of $2.3 million from its sale of its Humboldt, Tennessee manufacturing facility. The Company incurred net pre-tax restructuring costs of $5.4 million during the first nine months 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 $1.50 for the third quarter of fiscal 2021 compared with $1.30 in the same quarter of the prior fiscal year and $5.12 for the first nine months of the current fiscal year compared with $5.27 for the same period of the prior fiscal year.
Adjusted EBITDA for the third fiscal quarter increased $4.0 million, or 7.9%, to $54.1 million, or 12.5% of net sales, compared to $50.1 million, or 12.7% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the first nine months of the fiscal year was $176.0 million, or 13.9% of net sales, compared to $182.6 million, or 14.6% of net sales, for the same period of the prior fiscal year.
“Our teams delivered positive sales growth across all channels, achieved adjusted EBITDA margins of 12.5% and we paid down an additional $40.0 million of our term loan facility during the third fiscal quarter," said Scott Culbreth, President and CEO. "Looking forward our focus will be on continuing to increase production to match a strong demand environment and mitigate inflationary pressures in material, logistics and labor."
Cash provided by operating activities for the first nine months of the current fiscal year was $107.5 million and free cash flow totaled $74.3 million. As of January 31, 2021, the Company had $91.8 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 $80.0 million of its term loan facility during the first nine 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 January 31, 2021, the Company operated seventeen manufacturing facilities in the United States and Mexico and eight primary service centers and one distribution center 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.
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 RSI 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 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: