FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended January 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For the Quarter Ended January 31, 1995 Commission file number
0-14798
American Woodmark Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1138147
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
3102 Shawnee Drive, Winchester, Virginia 22601
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(703) 665-9100
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Common Stock, No Par Value--7,549,836 shares as of March 13, 1995
<PAGE>
INDEX
AMERICAN WOODMARK CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet -- January 31, 1995 and April 30, 1994
Statement of Income -- Three months ended January 31,
1995 and January 31, 1994. Nine months ended January 31,
1995 and January 31, 1994.
Statement of Cash Flows -- Nine months ended January 31,
1995 and January 31, 1994.
Notes to Financial Statements -- January 31, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Exhibit (11) -- Statement re: Computation of Earnings
per Share
SIGNATURES
2<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
AMERICAN WOODMARK CORPORATION
BALANCE SHEET (UNAUDITED)
<CAPTION>
January 31 April 30
1995 1994
(*)
(000'S omitted)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 1,902 $ 460
Customer receivables (less allowances)--Note D 18,225 18,845
Inventories--Note E 11,387 11,715
Prepaid expenses 417 602
Deferred taxes 416 456
Other 861 361
TOTAL CURRENT ASSETS 33,208 32,439
PROPERTY, PLANT AND EQUIPMENT 34,089 35,872
OTHER ASSETS 3,760 3,252
INTANGIBLE PENSION ASSET 758 758
$71,815 $72,321
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable $ 0 $ 2,000
Accounts payable 7,221 8,776
Accrued compensation and related expenses 6,922 5,151
Current maturities of long-term debt 2,849 3,158
Other accrued expenses 3,094 3,622
TOTAL CURRENT LIABILITIES 20,086 22,707
LONG-TERM DEBT, less current maturities 16,066 18,334
DEFERRED INCOME TAXES 2,930 2,767
LONG-TERM PENSION LIABILITIES 2,137 2,137
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value;
2,000,000 shares authorized, none
issued
Common Stock, no par value; 20,000,000
shares authorized, issued and
outstanding January 31, 1995--
7,548,919; April 30, 1994--
7,531,225 17,475 17,410
Retained Earnings 13,121 8,966
30,596 26,376
Other Information - Note F
$71,815 $72,321
<FN>
See notes to financial statements.
*The Balance Sheet for April 30, 1994 has been derived from the
Audited Financial Statements as of April 30, 1994.
</TABLE>
3<PAGE>
<TABLE>
AMERICAN WOODMARK CORPORATION
STATEMENT OF INCOME (UNAUDITED)
<CAPTION>
(Third Quarter and Year-to-Date)
Three Months Ended Nine Months Ended
January 31 January 31
1995 1994 1995 1994
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Net sales $48,144 $41,843 $147,666 $126,020
Cost of sales & distribution 37,089 32,622 112,472 100,371
Gross profit 11,055 9,221 35,194 25,649
Selling and marketing
expenses 5,868 4,940 18,090 14,683
General and administrative
expenses 3,103 2,270 8,748 6,994
Restructuring costs 0 171 516 854
Operating income 2,084 1,840 7,840 3,118
Interest expense 332 453 1,062 1,469
Other (income) expense-net 10 (2) 4 (30)
Income before income taxes 1,742 1,389 6,774 1,679
Income tax expense 640 524 2,619 662
NET INCOME $ 1,102 $ 865 $ 4,155 $ 1,017
Earnings Per Share* - Note C
Weighted average shares
outstanding 7,548,894 7,527,415 7,543,160 7,527,415
Net income $0.15 $ 0.11 $0.55 $0.14
<FN>
See notes to financial statements.
*All share and per share data has been restated to reflect a
10% stock dividend issued on September 24, 1993.
</TABLE>
4<PAGE>
<TABLE>
AMERICAN WOODMARK CORPORATION
STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended
January 31
1995 1994
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 4,155 $ 1,017
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for depreciation and amortization 5,801 5,267
Net loss on disposal of property, plant,
and equipment 32 32
Deferred income taxes 203 274
Restructuring costs 239 603
Other 40 189
Changes in operating assets and liabilities:
Receivables 579 1,511
Income taxes receivable 0 529
Inventories 328 2,590
Other assets (2,227) (1,407)
Accounts payable (1,554) (3,255)
Accrued compensation and related expenses 1,706 1,784
Other (373) (80)
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,929 9,054
INVESTING ACTIVITIES
Payments to acquire property, plant, and
equipment (2,673) (2,592)
Funds designated to acquire property,
plant and equipment 252 627
Proceeds from sales of property, plant, and
equipment 51 21
NET CASH USED BY INVESTING ACTIVITIES (2,370) (1,944)
FINANCING ACTIVITIES
Payments of long-term debt (2,577) (2,947)
Net decrease in short-term borrowings (2,000) (5,450)
Operating lease equipment deposits (605) 0
Proceeds from sale of common stock 65 0
NET CASH USED BY FINANCING ACTIVITIES (5,117) (8,397)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,442 (1,287)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 460 1,778
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,902 $ 491
<FN>
See notes to financial statements.
</TABLE>
5
<PAGE>
AMERICAN WOODMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
January 31, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine month period ended January 31,
1995 are not necessarily indicative of the results that may be
expected for the year ending April 30, 1995. For further
information refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for
the year ended April 30, 1994.
Certain fiscal 1994 amounts have been restated to conform to the
fiscal 1995 presentation.
NOTE B--CHANGES IN ACCOUNTING POLICY
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 112 "Employer's Accounting for Postemployment
Benefits" in the first quarter of fiscal 1995. Adoption of this
Statement did not have a material impact on the Company's
operating results or financial position for the first nine months
of fiscal 1995. In addition, no future material impact on
operating results or financial position is expected.
NOTE C--EARNINGS PER SHARE
The dilutive effect of stock options on earnings per share is not
significant and has been excluded for all periods presented (See
Exhibit 11 -- Statement re: Computation of Earnings per Share).
6 <PAGE>
NOTE D--CUSTOMER RECEIVABLES
The components of customer receivables are (in thousands):
January 31 April 30
1995 1994
Gross customer receivables $19,465 $20,062
Less:
Allowance for doubtful accounts (346) (313)
Allowance for returns and discounts (894) (904)
Customer receivables (less allowances) $18,225 $18,845
NOTE E--INVENTORIES
Detail of inventories (in thousands):
January 31 April 30
1995 1994
Raw materials $ 5,853 $ 5,849
Work in process 9,390 8,885
Finished goods 2,210 3,206
LIFO reserve (6,066) (6,225)
$11,387 $11,715
As a result of LIFO inventory liquidations, cost of sales
reflected $308 thousand and $687 thousand less expense year-to-
date for fiscal 1995 and 1994, respectively, than would have been
recorded in a current cost environment. An actual valuation of
inventory under the LIFO method can be made only at the end of
each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based
on management's estimates of expected year-end inventory levels
and costs. Since they are subject to many forces beyond
management's control, interim results are subject to the final
year-end LIFO inventory valuation.
NOTE F--OTHER INFORMATION
The Company is voluntarily participating with a group of
companies which is cleaning up a waste facility site at the
direction of a state environmental authority. The Company is
also involved in other matters under the direction of state
environmental authorities. The Company records liabilities for
all probable and reasonably estimatable loss contingencies on an
undiscounted basis. For loss contingencies related to
environmental matters, liabilities are based on the Company's
proportional contamination of a site since management believes it
"probable" that the other parties, which are financially solvent,
will fulfill their proportional contamination obligations, and
there are no probable insurance or other indemnification
receivables recorded. The Company has accrued for all known
7<PAGE>
environmental remediation costs which are probable and can be
reasonably estimated, and such amounts are not material. Due to
factors such as the continuing evolution of environmental laws
and regulatory requirements, technological changes, and the
allocation of costs among potentially responsible parties,
estimation of future remediation costs is necessarily imprecise.
It is possible that the ultimate cost, which cannot be determined
at this time, could exceed the Company's recorded liability. As
a result, charges to income for environmental liabilities could
have a material effect on results of operations in a particular
quarter or year as assessments and remediation efforts proceed.
However, management is not aware of any matters which would be
expected to have a material adverse effect on the Company.
The Company is involved in various suits and claims in the normal
course of business. Included therein are claims against the
Company pending before the Equal Employment Opportunity
Commission. Although management believes that such claims are
without merit and intends to vigorously contest them, the
ultimate outcome of these matters cannot be determined at this
time. In the opinion of management, after consultation with
counsel, the ultimate liabilities and losses, if any, that may
result from suits and claims involving the Company will not have
a material adverse effect on the Company's results of operations
or financial position.
8<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Comparison of the Three and Nine Month Periods
Ending January 31, 1995 and January 31, 1994.
Net sales for the third quarter of fiscal 1995 increased 15% over
the third quarter of fiscal 1994. Net sales for the nine month
period increased 17% over the prior year. Sales rose due to
higher unit volumes and customer prices for both the three and
nine month periods. Volume in the Home Center channel increased
as a result of increased market share in selected areas and a
stronger remodeling sector in the current year. Pockets of
economic growth in the new construction sector contributed to
higher volumes in the Builder channel. For the three month
period comparison, volume remained relatively flat in the
Distributor channel due to some recent softening in the
marketplace. For the nine month period, volume in the
Distributor channel increased with the addition of new accounts
in the first two quarters of the prior fiscal year. Average unit
prices increased for both periods over the prior year due to
general price increases in December 1993 and January 1995 and a
continuing sales mix shift toward the upper-end of the Company s
broad, stock product offering.
Third quarter fiscal 1995 gross profit was 23% of net sales as
compared to 22% for the same period in fiscal 1994. Gross profit
for the nine month period was 24% of net sales, a significant
improvement over the 20% gross profit achieved during the same
period of the prior year. The margin improvement for both
periods compared to the prior year was attributed to the
favorable leverage impact that the increased unit sales volume
had on the semi-variable and fixed components of overhead costs.
The margin improvement for the three month period was less than
the nine month period improvement due to material cost increases
over the last six months for particle board and cardboard.
Manufacturing labor costs rose at the same rate as the sales
price increase due to the demands of product variety, the
movement toward a just-in-time manufacturing approach, and normal
pay-rate increases. Savings from prior period restructuring
activities to reconfigure the Company s distribution network were
mitigated by higher freight costs, additional costs for new
service programs, and increased depreciation in the second and
third quarters of the current year to reduce the carrying value
of equipment that will be replaced by the end of fiscal 1995.
Selling and marketing expenses increased $928 thousand for the
third quarter of fiscal 1995 compared to the prior year, and $3.4
million for the nine month period. The increase for both periods
was attributed to higher variable selling and promotion costs
resulting from further market penetration, the addition of new
customers and stores, and new product introductions. Competitive
pressures have increased with the consolidation of both customers
and cabinet suppliers into larger buying and supplying entities,
respectively.
9<PAGE>
General and administrative expenses were up $833 thousand for the
three month period and $1.8 million for the nine month period
over the prior year. The rise in costs for both periods was
primarily attributed to increased compensation as part of the
Company s performance incentive programs. Additions to the
executive management team since the first quarter of fiscal 1994
also contributed to the increase for the nine month period.
Partially offsetting these increases was a decline in bad debt
expense.
During the second quarter of fiscal 1995, the Company incurred
$516 thousand in restructuring expenses for facility write-downs
recorded to reflect the Company's reduced requirements for
warehouse space in California and Florida. This restructuring
charge included expenses for future net lease costs relating to
unused warehouse space and equipment write-downs. Total
warehouse space is now at the lower level required to facilitate
the Company's progress toward just-in-time manufacturing.
Operating income was reduced $854,000 in the first nine months of
fiscal 1994 to reflect restructuring activities. The Company
announced in the second quarter of fiscal 1994 that it would
discontinue its frameless line of cabinets effective April 1,
1994, for which the estimated loss was accrued. Also, facility
write-downs were recorded to reflect the Company's reduced
requirements for warehouse space in Illinois and California. The
majority of the restructuring charge was comprised of asset
write-downs and losses on lease commitments. Operating income
was reduced by $171,000 in the third quarter of fiscal 1994 to
reflect a refinement of estimated restructuring costs which were
recorded in the preceding second quarter.
Interest expense for the third quarter of fiscal 1995 was $121
thousand less than in the prior year third quarter. For the
first nine months of fiscal 1995, interest expense was $407
thousand less than in the first nine months of the prior year.
The decrease in both periods was due to a substantial reduction
in debt. Total average outstanding debt for the first nine
months of fiscal 1995 declined $7.7 million from the same period
in fiscal 1994.
As a result of LIFO inventory liquidation, cost of sales in the
first nine months of fiscal 1995 reflected $308 thousand less
expense than would have been recorded in a current cost
environment. (See Note E to the Financial Statements.)
Liquidity and Capital Resources
Total debt was reduced $4.6 million while cash reserves have
increased $1.4 million during the first nine months of fiscal
1995. Operating activities in the first nine months of fiscal
1995 generated $8.9 million net cash compared to $9.1 million
during the first nine months of fiscal 1994. Increased cash from
rising profits was offset by a slower rate of reduction of
inventories and an increase in the rate of promotional display
expenditures.
10<PAGE>
During the third quarter of the current fiscal year, additional
equipment for the Toccoa, Georgia facility was purchased to
support the Company s move towards a focused facilities
environment with a just-in-time manufacturing approach. Some
spending was also incurred at other Company facilities to improve
material efficiencies. All other expenditures for property,
plant and equipment during the first nine months of fiscal 1995
were limited to necessary or replacement items. Capital spending
is planned to increase in the next three quarters to continue
replacing equipment and to support the Company s progression
toward a focused facilities environment. Net cash used by
investing activities in the first nine months of fiscal 1995
increased $426 thousand from fiscal 1994 primarily as a result of
funding capital expenditures through cash generated from
operations instead of funding through industrial revenue bond
proceeds received in fiscal 1992.
Net cash used by financing activities in the first nine months of
fiscal 1995 was $5.1 million compared to $8.4 million during the
first nine months of the prior year. The Company's short-term
borrowings against the revolving credit facility were reduced in
fiscal 1994 from $8.0 million at April 30, 1993 to the
January 31, 1994 level of $2.6 million, a net reduction of $5.4
million. The remaining balance of short-term borrowings of $2.0
million at April 30, 1994 was paid off during the first quarter
of fiscal 1995. In addition, during the first nine months of
fiscal 1995, the Company invested cash in the form of a short-
term refundable deposit for the construction of equipment to be
used at the Toccoa, Georgia component plant to replace equipment
and support the just-in-time manufacturing approach. This
transaction was recorded in other current assets. The deposit
will be refunded to the Company upon the Company's acceptance of
the equipment which is expected near the beginning of the next
fiscal year. Upon receipt of the equipment, this project will be
fully funded through an operating lease.
Cash flow from operations, combined with available borrowing
capacity under the Company's existing revolving credit facility,
is expected to be sufficient to meet forecasted working capital
requirements, to service existing debt obligations, and to fund
capital expenditures for fiscal 1995. At the end of the first
quarter of fiscal 1995, the Company amended its loan agreement to
effectively lower the Company's interest rate on its revolving
credit facility. The Company currently has $12.0 million
available to borrow under this credit facility.
The Company expects total year earnings in fiscal 1995 to exceed
those experienced in the most recent full year. A general sales
price increase implemented during the third quarter of fiscal
1995 is not expected to have its full impact until the next
fiscal year. The marketplace has begun to soften, but a solid
posture with the Company's customer base is expected to provide
the unit volumes necessary to leverage the Company's semi-
variable and fixed costs. However, the Company expects cost
pressure from increased material prices and short-term
11 <PAGE>
manufacturing inefficiencies during transition to the just-in-
time manufacturing approach. This transition is expected to be
substantially complete in fiscal 1996.
Other
During the first quarter of fiscal 1995, the Company adopted SFAS
No. 112 "Employers' Accounting for Postemployment Benefits". The
effect of this adoption did not have a material impact on the
Company's operating results or financial position (See Note B to
the Financial Statements).
The Company is voluntarily participating with a group of
companies which is cleaning up a waste facility site at the
direction of a state environmental authority. The Company is
also involved in other matters under the direction of state
environmental authorities. The Company records liabilities for
all probable and reasonably estimatable loss contingencies on an
undiscounted basis. For loss contingencies related to
environmental matters, liabilities are based on the Company's
proportional contamination of a site since management believes it
"probable" that the other parties, which are financially solvent,
will fulfill their proportional contamination obligations, and
there are no probable insurance or other indemnification
receivables recorded. The Company has accrued for all known
environmental remediation costs which are probable and can be
reasonably estimated, and such amounts are not material (See
Note F to the Financial Statements).
The Company is involved in various suits and claims in the normal
course of business. Included therein are claims against the
Company pending before the Equal Employment Opportunity
Commission. Although management believes that such claims are
without merit and intends to vigorously contest them, the
ultimate outcome of these matters cannot be determined at this
time. In the opinion of management, after consultation with
counsel, the ultimate liabilities and losses, if any, that may
result from suits and claims involving the Company will not have
any material adverse effect on the Company's operating results or
financial position.
On August 24, 1994 the Board of Directors implemented a deferred
compensation program for the non-management Directors. The
implementation of this program did not materially alter the
operating results or financial position for the third quarter and
first nine months of fiscal 1995 and will not materially affect
future operating results or financial position.
On February 28, 1995 the Board of Directors elected two new
Directors. Elected were Jake Gosa, Executive Vice President of
American Woodmark, and Martha Dally, Executive Vice President for
Sara Lee Corporation. This brings the number of Directors to
eight persons. For more information, the Company Proxy Statement
issued July 18, 1994 should be referenced.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN WOODMARK CORPORATION
(Registrant)
/s/ Shawn E. Pentoney /s/ Kent B. Guichard
Shawn E. Pentoney Kent B. Guichard
Corporate Controller Chief Financial Officer
Date: March 17, 1995 Date: March 17, 1995
13<PAGE>
<TABLE>
Exhibit (11)
Statement re: Computation of Earnings per Share
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Income $1,102,000 $865,000 $4,155,000 $1,017,000
Divided by weighted
average shares
outstanding 7,548,894 7,527,415 7,543,160 7,527,415
Earnings per share $0.15 $0.11 $0.55 $0.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS
<FISCAL-YEAR-END> APR-30-1995 APR-30-1995
<PERIOD-END> JAN-31-1995 OCT-31-1994
<CASH> 1,902 4,627
<SECURITIES> 0 0
<RECEIVABLES> 19,465 19,590
<ALLOWANCES> 1,240 1,237
<INVENTORY> 11,387 9,997
<CURRENT-ASSETS> 33,208 35,224
<PP&E> 75,576 74,620
<DEPRECIATION> 41,487 40,338
<TOTAL-ASSETS> 71,815 73,896
<CURRENT-LIABILITIES> 20,086 21,903
<BONDS> 16,066 17,409
<COMMON> 17,475 17,474
0 0
0 0
<OTHER-SE> 13,121 12,019
<TOTAL-LIABILITY-AND-EQUITY> 71,815 73,896
<SALES> 147,666 99,522
<TOTAL-REVENUES> 147,666 99,522
<CGS> 112,472 75,383
<TOTAL-COSTS> 112,472 75,383
<OTHER-EXPENSES> 27,354 18,383
<LOSS-PROVISION> 40 20
<INTEREST-EXPENSE> 1,062 730
<INCOME-PRETAX> 6,774 5,032
<INCOME-TAX> 2,619 1,979
<INCOME-CONTINUING> 4,155 3,053
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,155 3,053
<EPS-PRIMARY> .55 .40
<EPS-DILUTED> .55 .40
</TABLE>
