American Woodmark Corporation Announces Third Quarter Results

Rhea-AI Summary

American Woodmark Corporation (NASDAQ: AMWD) reported a 4.6% increase in net sales for Q3 fiscal 2023, reaching $480.7 million, driven by growth in builder and distributor channels. Year-to-date net sales surged 16.9% to $1,585.1 million. The company turned a net income of $14.7 million ($0.88 per diluted share) compared to a net loss of $49.3 million in the same quarter last year, aided by the absence of prior pension settlement charges. Adjusted EBITDA rose to $51.0 million, a significant 66.8% increase. Cash flows improved, with $110.8 million generated from operations and a free cash flow of $91.5 million. The company anticipates low double-digit net sales growth and adjusted EBITDA margins for the full fiscal year.

Positive

• Q3 net sales increased by 4.6% to $480.7 million.
• Year-to-date net sales rose by 16.9% to $1,585.1 million.
• Net income for Q3 was $14.7 million, improving from a net loss of $49.3 million in the prior year.
• Adjusted EBITDA increased by 66.8% to $51.0 million.
• Free cash flow totaled $91.5 million, up significantly from last year.

Negative

• Demand trends slowed during the third fiscal quarter.

WINCHESTER, Va.--(BUSINESS WIRE)-- American Woodmark Corporation (NASDAQ: AMWD) (the "Company") today announced results for its third quarter of fiscal 2023 which ended January 31, 2023.

Net sales for the third quarter of fiscal 2023 increased $21.0 million, or 4.6%, to $480.7 million compared with the same quarter of the prior fiscal year. Net sales for the first nine months of the current fiscal year increased 16.9% to $1,585.1 million from the comparable period of the prior fiscal year. The Company experienced growth in the builder and independent dealers and distributors sales channels during the third quarter and growth in all sales channels during the first nine months of fiscal 2023 versus the comparable prior year periods.

Net income was $14.7 million ($0.88 per diluted share) for the third quarter of fiscal 2023 compared with a net loss of $49.3 million ($2.97 per diluted share) in the same quarter of the prior fiscal year. Net income for the third quarter of fiscal 2023 increased due to the absence of onetime pension settlement charges of $69.5 million related to the termination of the Company's pension plan in the prior year third quarter and an increase in net sales largely as a result of price increases and increased efficiencies. Net income for the first nine months of the current fiscal year was $63.6 million ($3.82 per diluted share) compared with a net loss of $44.2 million ($2.67 per diluted share) for the same period of the prior fiscal year. Net income margin was 3.1% for the third quarter of fiscal 2023 compared to (10.7)% for the same period in the prior fiscal year and 4.0% for the first nine months of the current fiscal year compared with (3.3)% for the same period of the prior fiscal year. Adjusted EPS per diluted share was $1.46 for the third quarter of fiscal 2023 compared with $0.60 in the same quarter of the prior fiscal year and $5.40 for the first nine months of the current fiscal year compared with $1.92 for the same period of the prior fiscal year.

Adjusted EBITDA for the third quarter of fiscal 2023 increased $20.4 million, or 66.8%, to $51.0 million, or 10.6% of net sales, compared to $30.6 million, or 6.6% of net sales, for the same quarter of the prior fiscal year. Adjusted EBITDA for the first nine months of fiscal 2023 increased $81.6 million, or 87.4%, to $175.1 million, or 11.0% of net sales, compared to $93.5 million, or 6.9% of net sales, for the same period of the prior fiscal year.

Cash provided by operating activities for the first nine months of fiscal 2023 was $110.8 million and free cash flow totaled $91.5 million. The $140.3 million increase in free cash flows versus the first nine months of fiscal 2022 was primarily due to changes in our operating cash flows, specifically, higher net income, and lower customer receivables and, lower capital spending. As of January 31, 2023, the Company had $45.8 million of cash and cash equivalents on hand with no term loan debt maturities until July 2024 plus access to $277.6 million of additional availability under its revolving facility. The Company paid down $67.3 million of its debt during the first nine months of the current fiscal year.

"During the third quarter of fiscal 2023, our teams delivered sales growth of 4.6% and improved Adjusted EBITDA by 66.8% to $51.0 million," said Scott Culbreth, President and CEO. "As stated in previous quarters, we committed to improving our results as price realization better matched inflationary impacts and we improved our costs through operating efficiency initiatives. Our team has delivered on this commitment during the first nine months of the fiscal year and I thank each of them for their efforts. Demand trends did slow during the third fiscal quarter, but we are maintaining our full year outlook for net sales growth of low double digits along with Adjusted EBITDA margins of low double digits."

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,
		2023				2022				2023				2022
Net sales		$	480,713			$	459,736			$	1,585,105			$	1,355,480
Cost of sales & distribution			405,373				407,981				1,324,284				1,198,765
Gross profit			75,340				51,755				260,821				156,715
Sales & marketing expense			21,364				23,383				71,781				67,755
General & administrative expense			28,848				23,281				91,129				71,638
Restructuring charges, net			1,310				(127	)			1,310				183
Operating income			23,818				5,218				96,601				17,139
Interest expense, net			4,303				2,668				12,778				7,201
Pension settlement, net			293				69,452				48				69,452
Other (income) expense, net			(411	)			(335	)			(1,082	)			533
Income tax expense (benefit)			4,905				(17,310	)			21,275				(15,801	)
Net income (loss)		$	14,728			$	(49,257	)		$	63,582			$	(44,246	)
Earnings Per Share:
Weighted average shares outstanding - diluted			16,695,714				16,569,881				16,661,234				16,599,369
Net income (loss) per diluted share		$	0.88			$	(2.97	)		$	3.82			$	(2.67	)

Condensed Consolidated Balance Sheet
(Unaudited)
		January 31,			April 30,
		2023			2022
Cash & cash equivalents		$	45,817		$	22,325
Customer receivables			117,742			156,961
Inventories			224,763			228,259
Other current assets			23,136			21,112
Total current assets			411,458			428,657
Property, plant and equipment, net			203,509			213,808
Operating lease assets, net			98,766			108,055
Customer relationship intangibles, net			41,861			76,111
Goodwill			767,612			767,612
Other assets			41,167			38,253
Total assets		$	1,564,373		$	1,632,496
Current portion - long-term debt		$	2,546		$	2,264
Short-term operating lease liabilities			22,515			21,985
Accounts payable & accrued expenses			143,059			191,979
Total current liabilities			168,120			216,228
Long-term debt			440,684			506,732
Deferred income taxes			26,901			38,340
Long-term operating lease liabilities			83,052			95,084
Other liabilities			2,476			3,229
Total liabilities			721,233			859,613
Stockholders' equity			843,140			772,883
Total liabilities & stockholders' equity		$	1,564,373		$	1,632,496

Condensed Consolidated Statements of Cash Flows
(Unaudited)
		Nine Months Ended
		January 31,
		2023				2022
Net cash provided (used) by operating activities		$	110,803			$	(13,051	)
Net cash used by investing activities			(19,260	)			(35,766	)
Net cash used by financing activities			(68,051	)			(41,383	)
Net increase (decrease) in cash and cash equivalents			23,492				(90,200	)
Cash and cash equivalents, beginning of period			22,325				91,071
Cash and cash equivalents, end of period		$	45,817			$	871

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								Nine Months Ended
		January 31,								January 31,
(in thousands)		2023				2022				2023				2022
Net income (loss) (GAAP)		$	14,728			$	(49,257	)		$	63,582			$	(44,246	)
Add back:
Income tax expense (benefit)			4,905				(17,310	)			21,275				(15,801	)
Interest expense, net			4,303				2,668				12,778				7,201
Depreciation and amortization expense			11,814				12,507				36,578				38,453
Amortization of customer relationship intangibles			11,416				11,416				34,250				34,250
EBITDA (Non-GAAP)		$	47,166			$	(39,976	)		$	168,463			$	19,857
Add back:
Acquisition and restructuring related expenses (1)			20				20				60				60
Non-recurring restructuring charges, net (2)			1,310				(127	)			1,310				183
Pension settlement, net			293				69,452				48				69,452
Change in fair value of foreign exchange forward contracts (3)			(324	)			(177	)			(904	)			(7	)
Stock-based compensation expense			1,859				1,006				5,249				3,399
Loss on asset disposal			666				365				879				516
Adjusted EBITDA (Non-GAAP)		$	50,990			$	30,563			$	175,105			$	93,460
Net Sales		$	480,713			$	459,736			$	1,585,105			$	1,355,480
Net income margin (GAAP)			3.1	%			(10.7	)%			4.0	%			(3.3	)%
Adjusted EBITDA margin (Non-GAAP)			10.6	%			6.6	%			11.0	%			6.9	%

(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 that occurred during January 2023 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								Nine Months Ended
		January 31,								January 31,
(in thousands, except share data)		2023				2022				2023				2022
Net income (loss) (GAAP)		$	14,728			$	(49,257	)		$	63,582			$	(44,246	)
Add back:
Acquisition and restructuring related expenses			20				20				60				60
Non-recurring restructuring charges, net			1,310				(127	)			1,310				183
Pension settlement, net			293				69,452				48				69,452
Amortization of customer relationship intangibles and trademarks			11,416				11,416				34,250				34,250
Tax benefit of add backs			(3,341	)			(21,586	)			(9,202	)			(27,753	)
Adjusted net income (Non-GAAP)		$	24,426			$	9,918			$	90,048			$	31,946
Weighted average diluted shares (GAAP)			16,695,714				16,569,881				16,661,234				16,599,369
Add back: potentially anti-dilutive shares (1)			—				40,973				—				47,878
Weighted average diluted shares (Non-GAAP)			16,695,714				16,610,854				16,661,234				16,647,247
EPS per diluted share (GAAP)		$	0.88			$	(2.97	)		$	3.82			$	(2.67	)
Adjusted EPS per diluted share (Non-GAAP)		$	1.46			$	0.60			$	5.40			$	1.92

(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,
		2023			2022
Net cash provided (used) by operating activities		$	110,803		$	(13,051	)
Less: Capital expenditures (1)			19,283			35,771
Free cash flow		$	91,520		$	(48,822	)

(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)		2023
Net income (GAAP)		$	78,106
Add back:
Income tax expense			23,820
Interest expense, net			15,768
Depreciation and amortization expense			49,064
Amortization of customer relationship intangibles			45,666
EBITDA (Non-GAAP)		$	212,424
Add back:
Acquisition and restructuring related expenses (1)			80
Non-recurring restructuring charges, net (2)			1,310
Pension settlement			(931	)
Change in fair value of foreign exchange forward contracts (3)			(897	)
Stock-based compensation expense			6,559
Loss on asset disposal			1,060
Adjusted EBITDA (Non-GAAP)		$	219,605
		As of
		January 31,
		2023
Current maturities of long-term debt		$	2,546
Long-term debt, less current maturities			440,684
Total debt			443,230
Less: cash and cash equivalents			(45,817	)
Net debt		$	397,413
Net leverage (4)			1.81

(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 that occurred during January 2023.

(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, 2023.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230228005337/en/

Kevin Dunnigan

VP & Treasurer

540-665-9100

Source: American Woodmark Corporation

FAQ

What were American Woodmark's Q3 fiscal 2023 net sales results?

American Woodmark reported Q3 fiscal 2023 net sales of $480.7 million, a 4.6% increase from the previous year.

How did American Woodmark's net income change in Q3 fiscal 2023?

The company achieved a net income of $14.7 million in Q3 fiscal 2023, a significant recovery from a net loss of $49.3 million in the prior year's quarter.

What is the adjusted EBITDA for American Woodmark in Q3 fiscal 2023?

Adjusted EBITDA for Q3 fiscal 2023 was $51.0 million, marking a 66.8% increase compared to the same quarter last year.

What is American Woodmark's outlook for the fiscal year?

American Woodmark maintains a full-year outlook for low double-digit net sales growth and adjusted EBITDA margins.

How much free cash flow did American Woodmark generate in the first nine months of fiscal 2023?

In the first nine months of fiscal 2023, American Woodmark generated $91.5 million in free cash flow.