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 July 31, 1996
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 7,673,056 shares outstanding
Class as of September 6, 1996
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--July 31, 1996 and April 30, 1996 3
Statements of Income--Three months ended
July 31, 1996 and 1995 4
Statements of Cash Flows--Three months ended
July 31, 1996 and 1995 5
Notes to Financial Statements--July 31, 1996 6-8
Item 2. Management's Discussion and Analysis 9-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
AMERICAN WOODMARK CORPORATION
BALANCE SHEETS
(in thousands, except share data)
July 31 April 30
1996 1996
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $10,327 $ 7,201
Customer receivables 18,748 19,709
Inventories 10,180 10,326
Prepaid expenses and other 1,278 899
Deferred income taxes 1,165 527
------ ------
Total Current Assets 41,698 38,662
Property, Plant and Equipment 32,654 33,188
Intangible Pension Assets 504 504
Deferred Costs and Other Assets 4,037 3,982
------ ------
$78,893 $76,336
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,202 $ 7,651
Accrued compensation and related expenses 8,389 8,467
Current maturities of long-term debt 2,719 2,719
Other accrued expenses 4,134 4,416
------ ------
Total Current Liabilities 23,444 23,253
Long-Term Debt, less current maturities 12,605 12,866
Long-Term Pension Liabilities 1,592 1,592
Deferred Income Taxes 3,228 2,780
Commitments and Contingencies -- --
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 7,633,841 shares at
July 31, 1996; 7,608,761 shares at
April 30, 1996 17,756 17,677
Retained earnings 20,268 18,168
------ ------
Total Stockholders' Equity 38,024 35,845
------ ------
$78,893 $76,336
====== ======
See notes to financial statements
3
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Quarter Ended
July 31
------------------
1996 1995
------ ------
Net sales $ 53,362 $ 47,250
Cost of sales and distribution 39,810 37,956
------ ------
Gross Profit 13,552 9,294
Selling and marketing expenses 6,688 6,008
General and administrative expenses 3,443 2,412
------ ------
Operating Income 3,421 874
Interest expense 199 294
Other income (125) (19)
------ ------
Income Before Income Taxes 3,347 599
Provision for income taxes 1,247 238
------ ------
Net Income $ 2,100 $ 361
====== ======
Earnings Per Share
Average shares outstanding 7,627,179 7,566,994
Net income per share $ 0.28 $ 0.05
====== ======
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Quarter Ended
July 31
----------------
1996 1995
------ ------
Operating Activities
Net income $ 2,100 $ 361
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 1,911 1,811
Net (gain) loss on disposal of property, 1 (5)
plant and equipment
Deferred income taxes (190) (113)
Other non-cash items 908 69
Changes in operating assets and liabilities:
Refundable deposits -- 550
Customer receivables 113 1,582
Inventories 87 (297)
Other assets (690) (500)
Accounts payable 551 (669)
Accrued compensation and related expenses (78) (1,419)
Other (662) 297
------ ------
Net Cash Provided by Operating Activities 4,051 1,667
------ ------
Investing Activities
Payments to acquire property, plant and
equipment (748) (1,509)
Proceeds from sales of property, plant and
equipment 5 42
------ ------
Net Cash Used by Investing Activities (743) (1,467)
------ ------
Financing Activities
Payments of long-term debt (261) (320)
Proceeds from the issuance of Common Stock 79 138
------ ------
Net Cash Used by Financing Activities (182) (182)
Increase In Cash And Cash Equivalents 3,126 18
Cash And Cash Equivalents, Beginning Of Period 7,201 2,876
------ ------
Cash And Cash Equivalents, End Of Period $10,327 $ 2,894
====== ======
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 three month period ended July 31, 1996
are not necessarily indicative of the results that may be
expected for the year ending April 30, 1997. The unaudited
financial statements should be read in conjunction with the
financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended April 30,
1996.
Certain fiscal 1996 amounts have been reclassified to conform to
fiscal 1997 presentation.
NOTE B--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 C--CUSTOMER RECEIVABLES
The components of customer receivables were:
July 31 April 30
(in thousands) 1996 1996
------- -------
Gross customer receivables $21,114 $21,215
Less:
Allowance for doubtful accounts (1,459) (629)
Allowance for returns and discounts (907) (877)
------- -------
Net customer receivables $18,748 $19,709
======= =======
Allowance for doubtful accounts increased $800,000 during the
first quarter due to a Chapter 11 filing by a customer of the
Company. Total allowance for doubtful accounts attributable to
this customer is $1.3 million and reflects all of this customer's
outstanding receivables.
6
<PAGE>
NOTE D--INVENTORIES
The components of inventories were:
July 31 April 30
(in thousands) 1996 1996
------- -------
Raw materials $ 5,458 $ 5,261
Work-in-process 9,527 9,336
Finished goods 999 1,392
------- -------
Total FIFO inventories $15,984 $15,989
Reserve to adjust inventories
to LIFO value (5,804) (5,663)
------- -------
Total LIFO inventories $10,180 $10,326
======= =======
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 E--LOANS PAYABLE
The revolving credit facility is used by the Company as a working
capital account. As such, borrowings and repayments may
routinely occur on a daily basis. There was no activity through
the revolving credit facility during the first quarters of fiscal
1997 and 1996. There were no revolving credit loans outstanding
at July 31, 1996 and 1995.
The Company's primary loan agreement was amended during the first
quarter of fiscal 1997, allowing the Company to pay cash
dividends on Common Stock.
NOTE F--CASH FLOW
Supplemental disclosures of cash flow information:
Three Months Ended
July 31
------------------
(in thousands) 1996 1995
------ ------
Cash paid during the period for:
Interest $ 129 $ 330
Income taxes 1,145 83
7
<PAGE>
NOTE G--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 is
also involved in other matters under the direction of state
environmental authorities.
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 MONTHS ENDED JULY 31, 1996 AND 1995
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 1997 were $53.3
million, up 12.9% over the prior year. Sales increased as a
result of higher unit volume with key home center accounts,
distributors and builders. Current year average unit prices rose
due to a general price increase implemented during the third
quarter of the prior fiscal year and sales in the current year of
a richer product mix.
Fiscal 1997 first quarter gross margin of 25.4% of net sales
increased from comparative fiscal 1996 gross margin of 19.7%.
The increase was primarily attributable to better material
utilization, increased labor productivity and the impact of
favorable leverage with higher volume on fixed and semi-fixed
costs. Material cost per unit decreased as the Company
recognized improved operating efficiencies from capital projects
and material utilization programs. Significant increases in
labor productivity resulting from the use of new equipment and
manufacturing techniques more than offset normal rate increases,
higher health care costs, and increased incentive pay expenses.
General and administrative expenses increased $1.0 million for
the first quarter of fiscal 1997 compared to the prior year. The
increase in expenses was primarily due to employee compensation
costs associated with the Company's performance incentive
programs and the recognition of additional bad debt reserves.
Sales and marketing expenses increased $680,000 compared to the
prior year. The increase was primarily attributed to increases
in variable promotional costs and sales commissions.
Interest expense for the quarter decreased $95,000 from the first
quarter of the prior fiscal year due to continued reduction in
long-term debt. As of July 31, 1996, long-term debt to total
capital declined to 24.9%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities in the first quarter of fiscal
1997 generated $4.1 million in net cash compared to $1.7 million
the prior year. Increased profits and other non-cash items were
the primary contributors to the increase during the current
period. An $800,000 increase in bad debt reserves, reflected in
other non-cash items, was made to fully reserve against the
receivables of a customer which filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy
Code.
9
<PAGE>
Capital spending in the first quarter of fiscal 1997 decreased
$761,000 over the prior year as the Company completed several
projects designed to increase efficiency and lower overall
production costs. The Company anticipates that capital spending
will increase in the second quarter of the current fiscal year
with the initiation of future projects designed to lower overall
costs and improve the Company's competitive position.
Net cash used by financing activities of $183,000 during the
first quarter of fiscal 1997 was relatively unchanged from the
first quarter of the prior year. The Company decreased long-term
debt by $261,000, reducing long-term debt to total equity from
35.9% at April 30, 1996 to 33.2% at July 31, 1996. There were no
borrowings against the Company's short-term revolving credit
facility during the period.
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 the remainder of fiscal 1997.
OTHER
The Company anticipates an overall economic environment of low to
moderate growth supported by stable interest rates and low
inflation for the remainder of fiscal 1997. The Company
anticipates that demand in the domestic cabinet market will
return to the levels experienced prior to the economic downturn
which impacted the home center industry in the first half of
fiscal 1996. In this environment, the Company expects to gain
market share and to generate higher sales based on its position
with major customers, its broad stock product offering and its
ability to deliver quality products with superior service.
The Company expects to improve the profitability experienced in
fiscal 1996. Additional volume, the full-year impact of the
general price increase implemented during the third quarter of
fiscal 1996 and higher productivity should be sufficient to
offset the anticipated rise in other costs.
The Company currently maintains sufficient overall capacity to
meet projected growth over the next two years. In this
environment, the Company's strategy is, on average, to reinvest
at least depreciation on an annual basis. The Company is
anticipating average to slightly above average capital
expenditures in fiscal 1997. Identified projects include
expansion to remove specific capacity limitations in certain
processes, productivity improvements, cost savings and
replacement of aging equipment. The Company establishes debt to
equity targets in order to maintain the financial health of the
Company and is prepared to trim capital spending plans if cash
flow from operations is below planned levels. The Company
anticipates capital expenditures will be funded from a
combination of cash flow from operations and cash on hand.
10
<PAGE>
While the Company is not currently aware of any events that would
result in a material decline in earnings from fiscal 1996, we
participate in an industry that is subject to rapidly changing
conditions. The preceding forward looking statements are based
on current expectations, but there are numerous factors that
could cause the Company to experience a decline in sales or
earnings including: (1) overall industry demand at depressed
levels, (2) economic weakness in a specific channel of
distribution, especially the home center industry, (3) the loss
of sales from specific customers due to their loss of market
share, bankruptcy or switching to a competitor, (4) a sudden and
significant rise in basic raw material costs, and (5) the need to
respond to competitive initiatives launched by a competitor.
While the Company believes these risks to be manageable and
believes that these risks will not materially impact the long-
term performance of the Company, these risks could under certain
circumstances have a materially adverse impact on short-term
operating results.
On August 20, 1996 the Company's Board of Directors elected James
J. Gosa to President and Chief Executive Officer. William F.
Brandt, Jr., formerly Chairman of the Board of Directors and
Chief Executive Officer, will continue to serve as Chairman.
On August 20, 1996 the Company announced a $0.02 per share cash
dividend on its Common Stock. The cash dividend will be paid on
September 27, 1996, to shareholders of record on September 13,
1996.
During the first quarter of fiscal 1997, a customer of the
Company filed a petition for reorganization under Chapter 11 of
the United States Bankruptcy Code. As of April 30, 1996, the
Company's allowance for doubtful accounts included adequate
reserves against the receivables from this customer and, as of
July 31, 1996, the Company has fully reserved for all outstanding
receivables from this customer. The Company's management
anticipates that this change in legal status of the customer will
not have any material adverse effect on the Company's future
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.
11
<PAGE>
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.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of American Woodmark
Corporation held on August 20, 1996, the holders of 7,150,195 of
the total 7,632,081 shares of Common Stock outstanding and
eligible to vote duly executed and delivered valid proxies. The
shareholders approved the four items outlined within the
Company's Proxy Statement that was solicited to shareholders and
reported to the Commission pursuant to Regulation 14A under the
Act.
The following items were approved at the Company's Annual
Meeting:
Negative/
Affirmative Withheld Abstentions/
Votes Votes Non-Votes
----------- --------- ------------
1. Re-election of the 7,140,027- 10,168- --
Board of Directors. * 6,955,221 194,974
2. Ratification of Selection 7,136,433 10,131 3,631
of Independent Certified
Public Accountants.
3. Stock Option Plan for 6,230,579 250,292 669,324
Employees.
4. Shareholder Value Plan 7,012,924 41,299 95,972
for Employees.
* As the members of the Board of Directors were elected
individually, the aforementioned tallies pertaining to re-
election represent a range of affirmative and negative votes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11--Earnings Per Share Computation Page 14
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended July 31, 1996.
13
<PAGE>
AMERICAN WOODMARK CORPORATION
Exhibit 11
Computation of Earnings per Share
(in thousands, except per share amounts)
Quarter Ended
July 31
----------------
1996 1995
------ ------
Net income $ 2,100 $ 361
Divided by weighted
average common shares
outstanding 7,627 7,567
------ ------
Earnings per share $ 0.28 $ 0.05
====== ======
14
<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: September 6, 1996 /s/ KENT B. GUICHARD
Kent B. Guichard
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 10,327
<SECURITIES> 0
<RECEIVABLES> 21,114
<ALLOWANCES> 2,366
<INVENTORY> 10,180
<CURRENT-ASSETS> 41,698
<PP&E> 77,017
<DEPRECIATION> 44,363
<TOTAL-ASSETS> 78,893
<CURRENT-LIABILITIES> 23,444
<BONDS> 12,605
0
0
<COMMON> 17,756
<OTHER-SE> 20,268
<TOTAL-LIABILITY-AND-EQUITY> 78,893
<SALES> 53,362
<TOTAL-REVENUES> 53,362
<CGS> 39,810
<TOTAL-COSTS> 39,810
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 830
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 3,347
<INCOME-TAX> 1,247
<INCOME-CONTINUING> 2,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,100
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
