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 January 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 7,607,515 shares outstanding
Class as of March 8, 1996
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--January 31, 1996 and April 30, 1995 3
Statements of Income--Three months ended January 31, 1996
and 1995; Nine months ended January 31, 1996 and 1995 4
Statements of Cash Flows--Nine months ended January 31, 1996
and 1995 5
Notes to Financial Statements--January 31, 1996 6-8
Item 2. Management's Discussion and Analysis 9-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13-14
SIGNATURE 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
AMERICAN WOODMARK CORPORATION
BALANCE SHEETS
(in thousands, except share data)
January 31 April 30
1996 1995
---------- ----------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 1,196 $ 2,876
Refundable deposits -- 1,708
Customer receivables 20,336 19,639
Inventories 10,600 10,775
Prepaid expenses 562 550
Other current assets 537 621
---------- ----------
Total Current Assets 33,231 36,169
Property, Plant and Equipment 34,410 33,722
Other Assets 4,681 4,517
---------- ----------
$72,322 $74,408
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 7,317 $ 8,876
Accrued compensation and related expenses 7,244 7,156
Current maturities of long-term debt 2,694 2,800
Other current liabilities 3,275 3,175
---------- ----------
Total Current Liabilities 20,530 22,007
Long-Term Debt, less current maturities 13,427 15,534
Long-Term Pension Liabilities 2,205 2,038
Deferred Income Taxes 2,620 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 7,607,149
shares at January 31, 1996; 7,551,109 shares
at April 30, 1995 17,673 17,479
Retained earnings 15,867 14,322
---------- ----------
Total Stockholders' Equity 33,540 31,801
---------- ----------
$72,322 $74,408
========== ==========
See notes to financial statements
3
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
January 31 January 31
------------------ --------------------
1996 1995 1996 1995
-------- -------- --------- ---------
Net sales $46,793 $48,144 $142,970 $147,666
Cost of sales and distribution 37,325 37,089 114,546 112,472
-------- -------- --------- ---------
Gross Profit 9,468 11,055 28,424 35,194
Selling and marketing expenses 5,853 5,868 18,072 18,090
General and administrative expenses 2,524 3,103 7,027 8,748
Restructuring costs -- -- -- 516
-------- -------- --------- ---------
Operating Income 1,091 2,084 3,325 7,840
Interest expense 341 332 951 1,062
Other (income) expense (155) 10 (153) 4
-------- -------- --------- ---------
Income Before Income Taxes 905 1,742 2,527 6,774
Provision for income taxes 346 640 982 2,619
-------- -------- --------- ---------
Net Income $ 559 $ 1,102 $ 1,545 $ 4,155
======== ======== ========= =========
Earnings Per Share:
Average shares outstanding 7,606,447 7,548,919 7,590,756 7,542,630
Net income per share $ 0.07 $ 0.15 $ 0.20 $ 0.55
======== ======== ========= =========
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
January 31
------------------
1996 1995
-------- --------
Operating Activities
Net income $1,545 $4,155
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 5,813 5,801
Net loss on disposal of property, plant and equipment 109 33
Deferred income taxes (311) 203
Restructuring costs -- 239
Other 191 241
Changes in operating assets and liabilities:
Receivables (730) 589
Inventories 16 117
Refundable deposits 1,708 (605)
Other assets (2,032) (2,227)
Accounts payable (1,559) (1,137)
Accrued compensation and related expenses 115 1,289
Other 212 (374)
-------- --------
Net Cash Provided by Operating Activities 5,077 8,324
-------- --------
Investing Activities
Payments to acquire property, plant and equipment (4,849) (2,673)
Funds designated for capital expenditures -- 252
Proceeds from sales of property, plant and equipment 168 51
-------- --------
Net Cash Used by Investing Activities (4,681) (2,370)
-------- --------
Financing Activities
Payments of long-term debt (2,270) (2,577)
Net decrease in short-term borrowings -- (2,000)
Common Stock issued through stock options 194 65
-------- --------
Net Cash Used by Financing Activities (2,076) (4,512)
-------- --------
Increase (Decrease) In Cash And Cash Equivalents (1,680) 1,442
Cash And Cash Equivalents, Beginning Of Period 2,876 460
-------- --------
Cash And Cash Equivalents, End Of Period $1,196 $1,902
======== ========
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 nine month period
ended January 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending April 30,
1996. 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, 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 results of
operations or financial position.
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:
January 31 April 30
(in thousands) 1996 1995
---------- ----------
Gross customer receivables $21,465 $20,820
Less:
Allowance for doubtful accounts (289) (243)
Allowance for returns and discounts (840) (938)
---------- ----------
Net customer receivables $20,336 $19,639
========== ==========
6
<PAGE>
NOTE E--INVENTORIES
The components of inventories were:
January 31 April 30
(in thousands) 1996 1995
---------- ----------
Raw materials $ 5,415 $ 5,650
Work-in-process 9,465 9,876
Finished goods 1,469 1,110
---------- ----------
Total FIFO inventories $16,349 $16,636
Reserve to adjust inventories
to LIFO value (5,749) (5,861)
---------- ----------
Total LIFO inventories $10,600 $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 nine month period ended
January 31, 1996, total transactions through the revolving credit
facility were borrowings and payments of $7.2 million. For the
nine month period ended January 31, 1995, 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 January 31, 1996 and 1995.
NOTE G--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Nine Months Ended
January 31
-----------------
(in thousands) 1996 1995
-------- --------
Cash paid during the period for:
Interest $ 823 $ 928
Income taxes $ 915 $3,140
7
<PAGE>
NOTE H--OTHER INFORMATION
During the third quarter of fiscal 1996, the Company received a
tax refund from the City of Winchester pertaining to property
taxes paid in prior years for the Company's Corporate Office in
Winchester, Virginia. This tax refund, net of specific recovery
expenses, increased other income by $398,000.
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 NINE MONTHS ENDED JANUARY 31, 1996 AND 1995
RESULTS OF OPERATIONS
The Company's net sales for the third quarter of fiscal 1996
decreased 2.8% over the third quarter of the prior year. Net
sales for the nine month period ending January 31, 1996 decreased
3.2% over the first nine months of the prior year. The decrease
in net sales for both periods was primarily attributable to a
decline in unit volumes in the home center channel, the Company's
largest market segment. The Company was adversely impacted by
the continuance of a general economic slowdown in the home center
industry, especially for durable, big ticket items. Contributing
to the overall decline in net sales for the third quarter of
fiscal 1996 was the impact of severe winter weather conditions
during January in the midwestern and northeastern regions of the
United States. Unit volumes for both periods increased slightly
in the distributor channel due to continuing pockets of economic
growth in new construction. Unit volumes for both periods
remained relatively flat in the builder channel. Current year
average unit prices increased for both periods over prior year
due to general price increases implemented during the third
quarter of both the current and prior fiscal years. The increase
in unit prices for the three and nine month periods was partially
offset by an unfavorable shift in product mix attributed to the
economic slowdown.
Fiscal 1996 third quarter and nine month period gross margins
were 20.2% and 19.9% of net sales, decreasing from comparative
fiscal 1995 gross margins of 23.0% and 23.8%, respectively. The
decline in gross margins for both periods was primarily
attributable to increased labor costs, higher freight costs and
the impact of unfavorable leverage with lower volume on fixed and
semi-fixed costs. Increased labor costs resulted from normal
rate increases, temporary inefficiencies relating to capital
projects at several manufacturing facilities, an increase in
employee benefits expense and less than anticipated demand for
product. Implementation of new service programs continued to
contribute to higher freight costs than were experienced in both
periods of the prior fiscal year. Decreased material costs,
caused by declining lumber prices and realization of savings from
capital projects implemented at several manufacturing facilities,
helped offset the decline in margins for both periods.
General and administrative expenses decreased $579,000 for the
third quarter of fiscal 1996 and $1.7 million for the first nine
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 lower payroll costs resulting from changes in
management structure and expenses incurred in the second and
third quarters of the prior year relating to additions to the
executive management team.
9
<PAGE>
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 $111,000 during the first nine months
of fiscal 1996 compared to the first nine months of fiscal 1995.
The decrease in interest expense resulted from reduced short-term
borrowings under the Company's revolving credit facility and the
Company's continued reduction in long-term debt.
During the third quarter of fiscal 1996, the Company received a
tax refund from the City of Winchester pertaining to property
taxes paid in prior years for the Company's Corporate Office in
Winchester, Virginia. This tax refund, net of specific recovery
expenses, increased other income by $398,000.
LIQUIDITY AND CAPITAL RESOURSES
The Company's operating activities in the first nine months of
fiscal 1996 generated $5.1 million net cash compared to $8.3
million the prior year. Lower profits, an increase in working
capital requirements, 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 Company continued an aggressive cost reduction capital
spending program, investing $4.9 million in capital expenditures
for the first nine 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 nine months of fiscal
1996 were limited to necessary or replacement items and cost
savings projects.
Net cash used in financing activities in the first nine months of
fiscal 1996 decreased $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.
The Company reduced overall debt by $2.2 million during the first
nine months of fiscal 1996. Long-term debt to total equity
declined from 48.8% at April 30, 1995 to 40.0% at January 31,
1996. The Company believes that cash flow from operations,
combined with available borrowing capacity, will be sufficient to
meet forecasted working capital requirements, service existing
debt obligations, and fund capital expenditures for the remainder
of fiscal 1996.
10
<PAGE>
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.
On November 27, 1995 the Company's Board of Directors elected
James J. Gosa to President and Chief Operating Officer. Gosa,
formerly Executive Vice President, is now responsible for the
operating performance of the Company. William F. Brandt, Jr.,
formerly President, now serves as Chairman of the Board of
Directors and Chief Executive Officer, devoting a greater portion
of his efforts to strategic planning.
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
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.
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 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 January 31, 1996.
13
<PAGE>
AMERICAN WOODMARK CORPORATION
Exhibit 11
Computation of Earnings per Share
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
January 31 January 31
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
Net income $ 559 $1,102 $1,545 $4,155
Divided by weighted
average common shares
outstanding 7,606 7,549 7,591 7,543
------ ------ ------ ------
Earnings per share $ 0.07 $ 0.15 $ 0.20 $ 0.55
====== ====== ====== ======
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: March 8, 1996 /s/ KENT B. GUICHARD
Kent B. Guichard
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer
15
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 1,196
<SECURITIES> 0
<RECEIVABLES> 21,465
<ALLOWANCES> 1,129
<INVENTORY> 10,600
<CURRENT-ASSETS> 33,231
<PP&E> 77,730
<DEPRECIATION> 43,320
<TOTAL-ASSETS> 72,322
<CURRENT-LIABILITIES> 20,530
<BONDS> 13,427
0
0
<COMMON> 17,673
<OTHER-SE> 15,867
<TOTAL-LIABILITY-AND-EQUITY> 72,322
<SALES> 142,970
<TOTAL-REVENUES> 142,970
<CGS> 114,546
<TOTAL-COSTS> 114,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 951
<INCOME-PRETAX> 2,527
<INCOME-TAX> 982
<INCOME-CONTINUING> 1,545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,545
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
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