American Woodmark Corporation Announces Third Quarter Results

Rhea-AI Summary

American Woodmark Corporation (NASDAQ: AMWD) reported a net sales increase of $27.8 million (6.4%) to $459.7 million in Q3 FY2022. However, the company faced a net loss of $49.3 million ($2.97 per diluted share) mainly due to $69.5 million pension settlement charges. Adjusted EBITDA dropped 45.2% to $30.6 million, attributed to labor absenteeism and supply chain issues. Despite challenges, the company forecasts a $25 million increase in pricing actions for Q4 FY2022. As of January 31, 2022, AMWD had $0.9 million in cash and $227 million available under its revolving facility.

Positive

• Net sales increased by $27.8 million (6.4%) in Q3 FY2022.
• Sales growth was experienced across all channels.
• Anticipated additional pricing actions in Q4 FY2022 expected to increase by $25 million compared to Q3 FY2022.

Negative

• Net loss of $49.3 million in Q3 FY2022, compared to net income of $18.4 million last year.
• Adjusted EBITDA decreased by 45.2% to $30.6 million.
• Cash used in operations was $13.1 million; free cash flow totaled $(48.8) million.

WINCHESTER, Va.--(BUSINESS WIRE)-- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its third quarter of fiscal 2022 which ended January 31, 2022.

Net sales for the third quarter of fiscal 2022 increased $27.8 million, or 6.4%, to $459.7 million compared with the same quarter of the prior fiscal year. The Company experienced growth in all sales channels during the third quarter of fiscal 2022 versus the prior year period. Net sales for the first nine months of the current fiscal year increased 6.7% to $1,355.5 million from the comparable period of the prior fiscal year.

Net loss was $49.3 million ($2.97 per diluted share) for the third quarter of fiscal 2022 compared with net income of $18.4 million ($1.08 per diluted share) in the same quarter of the prior fiscal year. Net income for the third quarter of fiscal 2022 decreased $67.7 million primarily due to onetime pension settlement charges of $69.5 million related to the termination of the Company's pension plan, while the Company also experienced continued pressures in the supply chain and continued labor challenges. Net loss for the first nine months of the current fiscal year was $44.2 million ($2.67 per diluted share) compared with net income of $57.6 million ($3.38 per diluted share) for the same period of the prior fiscal year. Net income percentage was (10.7)% for the third quarter of fiscal 2022 compared to 4.3% for the same period in the prior fiscal year and (3.3)% for the first nine months of the current fiscal year compared with 4.5% for the same period of the prior fiscal year. Adjusted EPS per diluted share was $0.60 for the third quarter of fiscal 2022 compared with $1.57 in the same quarter of the prior fiscal year and $1.92 for the first nine months of the current fiscal year compared with $5.22 for the same period of the prior fiscal year.

Adjusted EBITDA for the third quarter of fiscal 2022 decreased $25.2 million, or 45.2%, to $30.6 million, or 6.6% of net sales, compared to $55.7 million, or 12.9% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the first nine months of fiscal 2022 decreased $84.8 million, or 47.6%, to $93.5 million, or 6.9% of net sales, compared to $178.3 million, or 14.0% of net sales, for the same period of the prior fiscal year.

As previously disclosed, during the third quarter of fiscal 2021, the Company filed an application with the IRS to terminate its pension plan. The plan was terminated in a standard termination and benefits were distributed in the third quarter of fiscal 2022 resulting in the one-time pension settlement charges disclosed above.

"Our teams delivered sales growth across all channels for the fiscal third quarter. Adjusted EBITDA margins of 6.6% for the fiscal third quarter were below expectations as sales were negatively impacted by labor absenteeism as COVID cases increased due to the Omicron variant along with supply chain shortages in the later part of December and early January. Our current quarter results include $30 million plus of pricing impacts that we realized in the third quarter of fiscal 2022. We are in process or have completed, depending upon the channel, an additional set of pricing actions that will further offset inflationary impacts beginning in April. Assuming our current sales level, we expect the impact of confirmed pricing actions to increase in the fourth fiscal quarter of 2022 by an additional $25 million versus the third quarter's realized pricing actions, to over approximately $55 million per quarter," said Scott Culbreth, President and CEO. "Staffing levels continue to improve and we have started a new made-to-order assembly line in our Gas City facility in February which will result in incremental production capacity to reduce our backlog. Despite all the challenges our team has faced, we remain excited about the long-term potential for the business and expect significant Adjusted EBITDA margin improvement versus current levels as price realization better matches inflationary impacts, we improve costs through productivity initiatives, and increase our production levels as staffing improves."

Cash used by operating activities for the first nine months of fiscal 2022 was $13.1 million and free cash flow totaled $(48.8) million. Cash flows were negatively impacted by the decrease in net income, higher inventory levels, and lower accounts payable and accrued compensation expenses. As of January 31, 2022, the Company had $0.9 million of cash on hand with no term loan debt maturities until July 2023 plus access to $227.0 million of additional availability under its revolving facility. The Company paid down a net of $15.3 million of its debt and repurchased shares valued at $25.0 million during the first nine 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.

AMERICAN WOODMARK CORPORATION
Unaudited Financial Highlights
(in thousands, except share data)
Operating Results
		Three Months Ended								Nine Months Ended
		January 31,								January 31,
		2022				2021				2022				2021
Net sales		$	459,736			$	431,954			$	1,355,480			$	1,270,624
Cost of sales & distribution			407,916				354,458				1,198,523				1,022,889
Gross profit			51,820				77,496				156,957				247,735
Sales & marketing expense			23,453				21,862				68,008				63,368
General & administrative expense			23,270				26,202				71,553				86,414
Restructuring charges, net			(127	)			(847	)			183				5,404
Operating income			5,224				30,279				17,213				92,549
Interest expense, net			2,668				5,746				7,201				17,757
Pension settlement			69,452				—				69,452				—
Other (income) expense, net			(329	)			(259	)			607				(2,928	)
Income tax expense (benefit)			(17,310	)			6,347				(15,801	)			20,094
Net income (loss)		$	(49,257	)		$	18,445			$	(44,246	)		$	57,626
Earnings Per Share:
Weighted average shares outstanding - diluted			16,569,881				17,047,211				16,599,369				17,036,586
Net income (loss) per diluted share		$	(2.97	)		$	1.08			$	(2.67	)		$	3.38

Condensed Consolidated Balance Sheet
(Unaudited)
		January 31,			April 30,
		2022			2021
Cash & cash equivalents		$	871		$	91,071
Customer receivables			151,121			146,866
Inventories			204,234			158,167
Income taxes receivable			8,349			—
Other current assets			19,388			13,861
Total current assets			383,963			409,965
Property, plant and equipment, net			208,728			204,002
Operating lease assets, net			112,874			123,118
Customer relationship intangibles, net			87,528			121,778
Goodwill			767,612			767,612
Other assets			30,980			27,924
Total assets		$	1,591,685		$	1,654,399
Current portion - long-term debt		$	2,250		$	8,322
Short-term operating lease liabilities			22,303			19,994
Accounts payable & accrued expenses			168,397			192,131
Total current liabilities			192,950			220,447
Long-term debt			506,490			513,450
Deferred income taxes			39,330			42,891
Long-term operating lease liabilities			99,553			109,628
Other liabilities			2,409			11,745
Total liabilities			840,732			898,161
Stockholders' equity			750,953			756,238
Total liabilities & stockholders' equity		$	1,591,685		$	1,654,399

Condensed Consolidated Statements of Cash Flows
(Unaudited)
		Nine Months Ended
		January 31,
		2022				2021
Net cash (used) provided by operating activities		$	(13,051	)		$	107,509
Net cash used by investing activities			(35,766	)			(29,364	)
Net cash used by financing activities			(41,383	)			(83,412	)
Net decrease in cash and cash equivalents			(90,200	)			(5,267	)
Cash and cash equivalents, beginning of period			91,071				97,059
Cash and cash equivalents, end of period		$	871			$	91,792

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 and trademarks, (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, (10) net gain/loss on debt forgiveness and modification, and (11) 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 and trademarks, (4) net loss on debt forgiveness and modification, (5) pension settlement charges, and (6) 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								Nine Months Ended
		January 31,								January 31,
(in thousands)		2022				2021				2022				2021
Net income (loss) (GAAP)		$	(49,257	)		$	18,445			$	(44,246	)		$	57,626
Add back:
Income tax expense (benefit)			(17,310	)			6,347				(15,801	)			20,094
Interest expense, net			2,668				5,746				7,201				17,757
Depreciation and amortization expense			12,507				12,732				38,453				38,710
Amortization of customer relationship intangibles and trademarks			11,416				11,972				34,250				36,472
EBITDA (Non-GAAP)		$	(39,976	)		$	55,242			$	19,857			$	170,659
Add back:
Acquisition and restructuring related expenses (1)			20				33				60				154
Non-recurring restructuring charges, net (2)			(127	)			(847	)			183				5,404
Pension settlement			69,452				—				69,452				—
Change in fair value of foreign exchange forward contracts (3)			(177	)			101				(7	)			(1,720	)
Stock-based compensation expense			1,006				1,316				3,399				3,543
(Gain) loss on asset disposal			365				(97	)			516				235
Adjusted EBITDA (Non-GAAP)		$	30,563			$	55,748			$	93,460			$	178,275
Net Sales		$	459,736			$	431,954			$	1,355,480			$	1,270,624
Net income margin (GAAP)			(10.7	)%			4.3	%			(3.3	)%			4.5	%
Adjusted EBITDA margin (Non-GAAP)			6.6	%			12.9	%			6.9	%			14.0	%

(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. The nine months ended January 31, 2021 includes accelerated depreciation expense of $1.3 million related to Humboldt. The three- and nine-months ended January 31, 2021 includes gain on assets disposal of $2.5 million and $2.2 million, respectively, 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) expense, net in the operating results.

Reconciliation of Net Income to Adjusted Net Income
		Three Months Ended								Nine Months Ended
		January 31,								January 31,
(in thousands, except share data)		2022				2021				2022				2021
Net income (loss) (GAAP)		$	(49,257	)		$	18,445			$	(44,246	)		$	57,626
Add back:
Acquisition and restructuring related expenses			20				33				60				154
Non-recurring restructuring charges, net			(127	)			(847	)			183				5,404
Pension settlement			69,452				—				69,452				—
Amortization of customer relationship intangibles and trademarks			11,416				11,972				34,250				36,472
Tax benefit of add backs			(21,586	)			(2,815	)			(27,753	)			(10,718	)
Adjusted net income (Non-GAAP)		$	9,918			$	26,788			$	31,946			$	88,938
Weighted average diluted shares (GAAP)			16,569,881				17,047,211				16,599,369				17,036,586
Add back: potentially anti-dilutive shares (1)			40,973				—				47,878				—
Weighted average diluted shares (Non-GAAP)			16,610,854				17,047,211				16,647,247				17,036,586
EPS per diluted share (GAAP)		$	(2.97	)		$	1.08			$	(2.67	)		$	3.38
Adjusted EPS per diluted share (Non-GAAP)		$	0.60			$	1.57			$	1.92			$	5.22
(1) Potentially dilutive securities for the three- and nine-month periods ended January 31, 2022, respectively, have not been considered in the GAAP calculation of net loss per share as the effect would be anti-dilutive.

Free Cash Flow
		Nine Months Ended
		January 31,
		2022				2021
Cash (used) provided by operating activities		$	(13,051	)		$	107,509
Less: Capital expenditures (1)			35,771				33,236
Free cash flow		$	(48,822	)		$	74,273
(1) Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.

Net Leverage
		Twelve Months Ended
		January 31,
(in thousands)		2022
Net loss (GAAP)		$	(41,420	)
Add back:
Income tax expense			(16,647	)
Interest expense, net			12,571
Depreciation and amortization expense			50,842
Amortization of customer relationship intangibles and trademarks			45,668
EBITDA (Non-GAAP)		$	51,014
Add back:
Acquisition and restructuring related expenses (1)			627
Non-recurring restructuring charges, net (2)			80
Pension settlement			69,452
Change in fair value of foreign exchange forward contracts (3)			611
Stock-based compensation expense			4,454
Loss on asset disposal			664
Net loss on debt forgiveness and modification			13,792
Adjusted EBITDA (Non-GAAP)		$	140,694
		As of
		January 31,
		2022
Current maturities of long-term debt		$	2,250
Long-term debt, less current maturities			506,490
Total debt			508,740
Less: cash and cash equivalents			(871	)
Net debt		$	507,869
Net leverage (4)			3.61

(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 January 31, 2022.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220224005298/en/

Kevin Dunnigan

Treasury Director

540-665-9100

Source: American Woodmark Corporation

FAQ

What were the net sales for American Woodmark in Q3 FY2022?

Net sales for Q3 FY2022 were $459.7 million, an increase of $27.8 million (6.4%) compared to the same quarter last year.

What caused the net loss for American Woodmark in Q3 FY2022?

The net loss of $49.3 million was primarily due to one-time pension settlement charges of $69.5 million.

How did the adjusted EBITDA change in Q3 FY2022 for AMWD?

Adjusted EBITDA decreased by 45.2% to $30.6 million in Q3 FY2022.

What does American Woodmark expect for pricing actions in Q4 FY2022?

AMWD anticipates pricing actions to increase by $25 million in Q4 FY2022 compared to Q3 FY2022.

How much cash did American Woodmark have as of January 31, 2022?

As of January 31, 2022, AMWD had $0.9 million in cash.