American Woodmark Corporation Announces First Quarter Results

Rhea-AI Summary

American Woodmark Corporation (NASDAQ: AMWD) reported a strong first quarter for fiscal 2023, ending July 31, 2022, with net sales rising 22.7% to $542.9 million, driven by growth across all sales channels. Net income surged to $20.1 million ($1.21 per diluted share), a significant increase from $3.0 million ($0.18 per diluted share) year-over-year. Adjusted EBITDA also grew 76.0% to $56.5 million, representing 10.4% of net sales. Despite challenges from rising material and logistics costs, the company generated $32.7 million in free cash flow and successfully reduced debt by $20.6 million during the quarter.

Positive

• Net sales increased 22.7% to $542.9 million.
• Net income rose to $20.1 million ($1.21 per diluted share) compared to $3.0 million ($0.18 per diluted share) in the prior year.
• Adjusted EBITDA increased 76.0% to $56.5 million, or 10.4% of net sales.
• Generated $32.7 million in free cash flow.
• Reduced debt by $20.6 million during the quarter.

Negative

• Higher material and logistics costs partially offset gains.

WINCHESTER, Va.--(BUSINESS WIRE)-- 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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Kevin Dunnigan

Treasurer

540-665-9100

Source: American Woodmark Corporation

FAQ

What were American Woodmark's first quarter earnings for fiscal 2023?

American Woodmark reported a net income of $20.1 million, or $1.21 per diluted share, for the first quarter of fiscal 2023.

How much did net sales increase for American Woodmark in the first quarter of fiscal 2023?

Net sales increased by 22.7%, reaching $542.9 million in the first quarter of fiscal 2023.

What is the adjusted EBITDA for American Woodmark in the first quarter of fiscal 2023?

The adjusted EBITDA for the first quarter of fiscal 2023 was $56.5 million, representing a 76.0% increase.

Did American Woodmark generate free cash flow in the first quarter of fiscal 2023?

Yes, American Woodmark generated $32.7 million in free cash flow during the first quarter of fiscal 2023.

What challenges did American Woodmark face in the first quarter of fiscal 2023?

The company faced challenges from higher material and logistics costs, which partially offset its gains.