FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
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
incorporation or organization) Identification No.)
3102 Shawnee Drive, Winchester, Virginia 22601
(Address of principal executive offices) (Zip Code)
(540) 665-9100
(Registrant's telephone number, including area code)
Not Applicable
(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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, no par value 7,606,324 shares outstanding
Class as of December 12, 1995
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--October 31, 1995 and April 30, 1995 3
Statements of Income--Three months ended October 31, 1995
and 1994; Six months ended October 31, 1995 and 1994 4
Statements of Cash Flows--Six months ended October 31, 1995
and 1994 5
Notes to Financial Statements--October 31, 1995 6-8
Item 2. Management's Discussion and Analysis 9-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12-13
SIGNATURE 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
AMERICAN WOODMARK CORPORATION
BALANCE SHEETS
(in thousands, except share data)
October 31 April 30
1995 1995
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 953 $ 2,876
Refundable deposits -- 1,708
Customer receivables 20,056 19,639
Inventories 11,146 10,775
Prepaid expenses 764 550
Other current assets 486 621
------- -------
Total Current Assets 33,405 36,169
Property, Plant and Equipment 35,227 33,722
Other Assets 4,593 4,517
------- -------
$73,225 $74,408
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 7,948 $ 8,876
Accrued compensation and related expenses 6,773 7,156
Current maturities of long-term debt 2,688 2,800
Other current liabilities 3,115 3,175
------- -------
Total Current Liabilities 20,524 22,007
Long-Term Debt, less current maturities 14,739 15,534
Long-Term Pension Liabilities 2,205 2,038
Deferred Income Taxes 2,785 3,028
Stockholders' 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 7,604,124
shares at October 31, 1995; 7,551,109 shares
at April 30, 1995 17,664 17,479
Retained earnings 15,308 14,322
------- -------
Total Stockholders' Equity 32,972 31,801
------- -------
$73,225 $74,408
======= =======
See notes to financial statements
3
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
October 31 October 31
------------------ -----------------
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $48,927 $54,004 $96,177 $99,522
Cost of sales and distribution 39,265 40,651 77,221 75,383
-------- -------- -------- --------
Gross Profit 9,662 13,353 18,956 24,139
Selling and marketing expenses 6,211 6,312 12,219 12,222
General and administrative expenses 2,091 3,126 4,503 5,645
Restructuring costs -- 516 -- 516
-------- -------- -------- --------
Operating Income 1,360 3,399 2,234 5,756
Interest expense 316 339 610 730
Other expense (income) 21 (5) 2 (6)
-------- -------- -------- --------
Income Before Income Taxes 1,023 3,065 1,622 5,032
Provision for income taxes 398 1,180 636 1,979
-------- -------- -------- --------
Net Income $ 625 $1,885 $ 986 $ 3,053
======== ======== ======== ========
Earnings Per Share:
Average shares outstanding 7,598,826 7,544,390 7,582,910 7,539,434
Net income per share $ 0.08 $ 0.25 $0.13 $0.40
======== ======== ======== ========
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
October 31
-----------------
1995 1994
-------- --------
Operating Activities
Net income $ 986 $ 3,053
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 3,685 3,868
Net loss on disposal of property, plant and
equipment 4 6
Deferred income taxes (156) 263
Restructuring costs -- 344
Other 9 100
Changes in operating assets and liabilities:
Receivables (334) 472
Inventories (465) 1,637
Refundable deposits 1,708 (1,066)
Other assets (1,284) (1,499)
Accounts payable (929) 51
Accrued compensation and related expenses (356) 1,043
Other (89) 207
-------- --------
Net Cash Provided by Operating Activities 2,779 8,479
-------- --------
Investing Activities
Payments to acquire property, plant and equipment (4,068) (1,414)
Funds designated for capital expenditures -- 153
Proceeds from sales of property, plant and equipment 88 36
-------- --------
Net Cash Used by Investing Activities (3,980) (1,225)
-------- --------
Financing Activities
Payments of long-term debt (907) (1,151)
Net decrease in short-term borrowings -- (2,000)
Common Stock issued through stock options 185 64
-------- --------
Net Cash Used by Financing Activities (722) (3,087)
-------- --------
Increase (Decrease) In Cash And Cash Equivalents (1,923) 4,167
Cash And Cash Equivalents, Beginning Of Period 2,876 460
-------- --------
Cash And Cash Equivalents, End Of Period $ 953 $4,627
======== ========
See notes to financial statements
5
<PAGE>
AMERICAN WOODMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
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 Article 10 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 six month period ended
October 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending April 30, 1996. 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, 1995.
Certain fiscal 1995 amounts have been reclassified to conform
to fiscal 1996 presentation.
NOTE B--CHANGES IN ACCOUNTING POLICY
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," in the
first quarter of fiscal 1996. Adoption of this Statement did
not have a material impact on the Company's financial condition
or results of operations. In addition, no future material impact
on financial condition or results of operations is expected.
NOTE C--EARNINGS PER SHARE
Earnings per share are based on the weighted average common
shares outstanding. The dilutive effect of stock options on
earnings per share is not significant and has been excluded for
all periods presented.
NOTE D--CUSTOMER RECEIVABLES
The components of customer receivables were:
October 31 April 30
(in thousands) 1995 1995
---------- ---------
Gross customer receivables $21,111 $20,820
Less:
Allowance for doubtful accounts (189) (243)
Allowance for returns and discounts (866) (938)
---------- ---------
Net customer receivables $20,056 $19,639
========== ==========
6
<PAGE>
NOTE E--INVENTORIES
The components of inventories were:
October 31 April 30
(in thousands) 1995 1995
---------- ----------
Raw materials $ 5,428 $ 5,650
Work-in-process 10,178 9,876
Finished goods 1,255 1,110
---------- ----------
Total FIFO inventories $16,861 $16,636
Reserve to adjust inventories to LIFO value (5,715) (5,861)
---------- ----------
Total LIFO inventories $11,146 $10,775
========== ==========
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--LOANS PAYABLE
The revolving credit facility is used by the Company as a working
capital account. As such, borrowings and repayments routinely
occur on a daily basis. For the six month period ended
October 31, 1995, total transactions through the revolving
credit facility were borrowings and payments of $7.0 million.
For the six month period ended October 31, 1994, total transactions
through the revolving credit facility were borrowings of $10.2
million and payments of $12.2 million, resulting in a net reduction
of $2.0 million for the period. There were no revolving credit
loans outstanding at October 31, 1995 and 1994.
NOTE G--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Six Months Ended
October 31
----------------
(in thousands) 1995 1994
------- -------
Cash paid during the period for:
Interest $ 638 $ 765
Income taxes $ 693 $1,165
7
<PAGE>
NOTE H--OTHER INFORMATION
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.
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 records liabilities for all probable and reasonably
estimable loss contingencies on an undiscounted basis. For loss
contingencies related to environmental matters, liabilities are
based on the Company's proportional share of the contamination
obligation of a site since management believes it "probable"
that the other parties, which are financially solvent, will
fulfill their proportional contamination obligations. 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. 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's results of operations or
financial position.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE AND SIX MONTHS ENDED OCTOBER 31, 1995 AND 1994
RESULTS OF OPERATIONS
The Company's net sales for the second quarter of fiscal 1996
decreased 9.4% over the second quarter of the prior year. Net
sales for the six month period ending October 31, 1995
decreased 3.4% over the first six months of the prior year.
The decrease in net sales for both periods was attributable to
a decline in unit volumes in the home center channel. The
Company was adversely impacted by a general economic slowdown
in the home center industry, especially for durable, big ticket
items. Unit volumes for both periods increased slightly in the
Distributor and Builder Channels due to continuing pockets of
economic growth in new construction. Current year average unit
prices increased over prior year prices due to a general price
increase implemented during the third quarter of the prior
fiscal year.
Fiscal 1996 second quarter and six month period gross margins
were 19.7% of net sales, decreasing from comparative fiscal
1995 gross margins of 24.7% and 24.3%, respectively. The
decline in gross margins for both periods was primarily
attributable to manufacturing labor inefficiencies and higher
freight costs. Increased labor costs resulted from normal rate
increases, temporary inefficiencies relating to capital
projects at several manufacturing facilities and less than
anticipated demand for product. Implementation of new service
programs contributed to higher freight costs than experienced
in the first six months of the prior year.
General and administrative expenses decreased $1.0 million for
the second quarter of fiscal 1996 and $1.1 million for the
first six months compared to the prior year. The decline in
expenses for both periods was primarily due to reduced employee
compensation associated with the Company's performance
incentive programs. Contributing to the expense reductions for
both periods of the current year were expenses incurred in the
second quarter of the prior year relating to additions to the
executive management team.
In fiscal 1995, the Company recognized $516,000 in
restructuring activities initiated in fiscal 1993 that did not
become accruable until fiscal 1995. These costs included
severance, lease termination costs, losses on lease
commitments, and equipment and leasehold improvement write-
downs.
Interest expense decreased $120,000 and $23,000 for the six
month period and second quarter of fiscal 1996, respectively, as
compared to the prior year. The decrease in interest expense
resulted from the Company's continued reduction in debt. Total
average outstanding debt for the six month period of fiscal
1996 declined $4.0 million from the same period in fiscal 1995.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities in the first six months of
fiscal 1996 generated $2.8 million net cash compared to $8.5
million the prior year. Lower profits, an increase in working
capital, and reduced accruals relating to the Company's
performance incentives were the primary factors for the lower
cash in-flows in the current period. Cash provided by
operating activities was favorably impacted during the current
period by the refund of short-term deposits made during the
prior fiscal year to fund the construction of equipment now in
operation at the Toccoa, Georgia component plant. The
equipment was financed through an operating lease.
The Company continued an aggressive cost reduction capital
spending program, investing $4.1 million in capital
expenditures for the first six months of fiscal 1996. During
this period, equipment was purchased for the Hardy County, West
Virginia facility to increase efficiency and lower overall
production costs. Spending continued for the expansion of the
Toccoa, Georgia facility to accommodate additional equipment
that promotes a more efficient and cost effective process flow.
In addition, a capital project to improve lumber processing at
the Orange, Virginia facility was completed during the period.
All other capital expenditures during the first six months of
fiscal 1996 were limited to necessary or replacement items and
cost savings projects.
Net cash used in financing activities in the first six months
of fiscal 1996 was $722,000, a decrease of $2.4 million from
the prior year. The difference is primarily the result of
payments in fiscal 1995 that eliminated the Company's
short-term revolving debt balance. Cash flow from operations,
combined with available borrowing capacity, is expected to be
sufficient to meet forecasted working capital requirements,
service existing debt obligations, and fund capital
expenditures for fiscal 1996.
OTHER
The Company anticipates an overall economic environment of slow
growth supported by stable interest rates and low inflation for
the remainder of fiscal 1996. Within this macroeconomic
environment, the Company also anticipates sluggish demand for
big ticket, special order items such as kitchen cabinets. The
Company expects this sluggish demand will be a significant
factor in the home center industry as remodeling projects are
adversely impacted by high consumer debt, pressure on
disposable income and fragile consumer confidence. The Company
does not anticipate overall sales growth in this environment,
although the Company does expect to gain share in a down market
based on its position with major customers. The Company expects
gross margins to improve from the first half of fiscal 1996 as
the Company aggressively pursues cost reductions in the current
industry environment. The Company expects to remain profitable
and to maintain the strength of the Company's balance sheet.
10
<PAGE>
During the first quarter of fiscal 1996, the Company adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The
effect of this adoption did not have a material impact on the
Company's results of operations or financial position.
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 results of
operations or financial position.
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 records liabilities for all probable and reasonably
estimable 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 share of the contamination
obligations. 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.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11--Earnings Per Share Computation Page 13
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended October 31, 1995.
12
<PAGE>
AMERICAN WOODMARK CORPORATION
Exhibit 11
Computation of Earnings per Share
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
October 31 October 31
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net income $ 625 $1,885 $ 986 $3,053
Divided by weighted
average common shares
outstanding 7,599 7,544 7,583 7,539
-------- -------- -------- --------
Earnings per share $ 0.08 $ 0.25 $ 0.13 $0.40
======== ======== ======== ========
13
<PAGE>
SIGNATURE
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)
Date: December 12, 1995 /s/ Kent B. Guichard
Kent B. Guichard
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer
14
<PAGE>
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