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, 1997
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 7,751,624 shares outstanding
Class as of December 10, 1997
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--October 31, 1997 and
April 30, 1997 3
Statements of Income--Three months ended
October 31, 1997 and 1996; Six months ended
October 31, 1997 and 1996 4
Statements of Cash Flows--Six months ended
October 31, 1997 and 1996 5
Notes to Financial Statements--October 31, 1997 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)
October 31 April 30
1997 1997
----------- ---------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $21,260 $17,339
Customer receivables 24,081 20,488
Inventories 10,821 10,356
Prepaid expenses and other 1,073 940
Deferred income taxes 792 720
------- -------
Total Current Assets 58,027 49,843
Property, Plant and Equipment 32,603 32,252
Deferred Costs and Other Assets 5,140 4,335
Intangible Pension Assets 727 727
------- -------
$96,497 $87,157
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $10,609 $ 9,312
Accrued compensation and related expenses 11,952 11,180
Current maturities of long-term debt 1,980 2,229
Other accrued expenses 5,220 3,680
------- -------
Total Current Liabilities 29,761 26,401
Long-Term Debt, less current maturities 10,197 10,637
Deferred Income Taxes 2,335 2,328
Long-Term Pension Liabilities 1,493 1,493
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 7,747,288 shares at
October 31, 1997; 7,722,656 shares
at April 30, 1997 18,155 18,043
Retained earnings 34,556 28,255
------- -------
Total Stockholders' Equity 52,711 46,298
------- -------
$96,497 $87,157
======= =======
See notes to financial statements
3
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AMERICAN WOODMARK CORPORATION
STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
October 31 October 31
1997 1996 1997 1996
------ ------ ------- -------
Net sales $ 62,738 $ 56,976 $118,708 $110,338
Cost of sales and
distribution 43,376 40,483 83,015 80,293
------ ------ ------- -------
Gross Profit 19,362 16,493 35,693 30,045
Selling and marketing
expenses 9,354 7,278 18,010 13,966
General and administrative
expenses 3,377 3,511 6,783 6,954
------ ------ ------- -------
Operating Income 6,631 5,704 10,900 9,125
Interest expense 214 263 438 462
Other income (184) (88) (394) (213)
------- ------ ------- ------
Income Before Income
Taxes 6,601 5,529 10,856 8,876
Provision for income
taxes 2,535 2,067 4,169 3,314
------ ------ ------- -------
Net Income $ 4,066 $ 3,462 $ 6,687 $ 5,562
====== ====== ====== ======
Earnings Per Share
Average shares
outstanding 7,743,736 7,664,456 7,737,027 7,645,817
Net income per share $0.53 $0.45 $0.86 $0.73
========= ========= ========= =========
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
October 31
----------------
1997 1996
------ ------
Operating Activities
Net income $ 6,687 $5,562
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 3,791 3,829
Net loss on disposal of property, plant
and equipment 21 70
Deferred income taxes (65) (498)
Other non-cash items 254 991
Changes in operating assets and liabilities:
Customer receivables (3,820) (3,524)
Inventories (490) (686)
Other assets (2,121) (1,672)
Accounts payable 1,298 1,998
Accrued compensation and related expenses 771 1,832
Other 1,406 (1,127)
-------- --------
Net Cash Provided by Operating Activities 7,732 6,775
-------- --------
Investing Activities
Payments to acquire property, plant and
equipment (2,864) (2,292)
Proceeds from sales of property, plant and
equipment 18 22
-------- --------
Net Cash Used by Investing Activities (2,846) (2,270)
-------- --------
Financing Activities
Payments of long-term debt (676) (804)
Proceeds from the issuance of Common Stock 111 176
Payment of dividends (386) (154)
Principal payments under capital lease
obligations (13) --
-------- --------
Net Cash Used by Financing Activities (964) (782)
-------- --------
Increase In Cash And Cash Equivalents 3,922 3,723
Cash And Cash Equivalents, Beginning Of Period 17,338 7,201
-------- --------
Cash And Cash Equivalents, End Of Period $21,260 $10,924
======== ========
See notes to financial statements
5
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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, 1997
are not necessarily indicative of the results that may be
expected for the year ended April 30, 1998. 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, 1997.
Certain fiscal 1997 amounts have been reclassified to conform to
fiscal 1998 presentation.
NOTE B--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, FASB issued SFAS No. 128, "Earnings per Share,"
which the Company will be required to adopt for the fiscal
quarter ending January 31, 1998. At that time, the Company will
be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the
new requirements for calculating basic earnings per share, the
dilutive effect of common stock equivalents will be excluded.
The Company does not expect the adoption of SFAS No. 128 to have
a material impact on the determination of earnings per share.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which the Company will be required to adopt for the
fiscal quarter ending July 31, 1998. SFAS No. 130 establishes
standards for reporting comprehensive income and its components
in financial statements. Comprehensive income generally
represents all changes in shareholders' equity except those
resulting from investments by or distributions to shareholders.
The Company does not expect the adoption of SFAS No. 130 to have
a material impact on the financial statements.
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.
6
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NOTE D--CUSTOMER RECEIVABLES
The components of customer receivables were:
October 31 April 30
(in thousands) 1997 1997
--------- --------
Gross customer receivables $25,518 $21,869
Less:
Allowance for doubtful accounts (139) (210)
Allowance for returns and discounts (1,298) (1,171)
--------- --------
Net customer receivables $24,081 $20,488
========= ========
NOTE E--INVENTORIES
The components of inventories were:
October 31 April 30
(in thousands) 1997 1997
---------- ---------
Raw materials $ 6,210 $ 6,270
Work-in-process 10,663 9,684
Finished goods 1,056 1,115
---------- ---------
Total FIFO inventories $17,929 $17,069
Reserve to adjust inventories
to LIFO value (7,108) (6,713)
---------- ---------
Total LIFO inventories $10,821 $10,356
========== =========
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--CASH FLOW
Supplemental disclosures of cash flow information:
Six Months Ended
October 31
(in thousands) 1997 1996
------- -------
Cash paid during the period for:
Interest $ 414 $ 458
Income taxes $ 3,408 $ 4,023
7
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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 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
SIX MONTHS ENDED OCTOBER 31, 1997 AND 1996
Results of Operations
Net sales for the second quarter of fiscal 1998 were $62.7
million, an increase of 10.1% over the second quarter of fiscal
1997. Net sales of $118.7 million for the six-month period ended
October 31, 1997 were 7.6% higher than the same period of the
prior year. The increase in net sales for both periods was the
result of continued growth with the leading national home center
chains and increased direct shipments to new home builders. New
styles and colors in traditional wood species and the
introduction of a new line of hickory products drove volume,
especially in the home center channel. The strong performance in
home center and direct builder channels was partially offset by
lower sales to the distributor channel. Current year average
unit prices increased over prior year due to a price increase
implemented during the third quarter of the prior fiscal year,
changes in the market channel sales mix and a shift towards the
higher end of the Company's broad product offering.
Fiscal 1998 second quarter and six-month period gross margins
were 30.9% and 30.1% of net sales, increasing from comparative
gross margins of 28.9% and 27.2% of net sales for both periods in
fiscal 1997. The increases were primarily attributed to
favorable leverage from higher volume, a shift toward higher end
products and increased labor productivity. Material cost per
unit increased due primarily to the increased cost of hardwood
lumber and the shift towards more material intensive higher end
products. Continued increases in labor productivity resulting
from the use of new equipment and manufacturing techniques more
than offset normal rate increases and increased incentive pay
expenses.
Selling and marketing expenses increased $2.1 million for the
second quarter of fiscal year 1998 and $4.0 million for the first
six months compared to the prior year. The increased expenses for
both periods is primarily attributed to an increase in
performance based marketing programs. General and administrative
expenses remained flat compared to the prior year.
Liquidity and Capital Resources
The Company's operating activities generated $7.7 million in net
cash for the first six months of fiscal year 1998 compared to
$6.8 million net cash generated the same period of the prior
fiscal year. The increase in cash generated from operations was
primarily attributed to increased profits arising from sales
growth along with an increase in other operating liabilities
relating to accrued promotional cost. Other non-cash items,
increased accounts payable, and timing differences in the payment
9
<PAGE>
of performance based incentives had favorable impacts on cash
flow, but were partially offset by a seasonal increase in
accounts receivable and inventory.
Capital expenditures during the first six months of fiscal year
1998 were $2.9 million as the Company continued to invest in
equipment and processes designed to increase productivity and
increase the Company's competitive position. During this period
capital spending included expansion of the Company's Jackson,
Georgia facility and the purchase of wood dimensioning equipment
intended to increase capacity and efficiency in component
manufacturing. The Company anticipates that capital expenditures
will continue at a rate equal to or greater than that of the
first six months of the current fiscal year as the Company begins
construction of a new wood processing facility and continues to
fund projects designed to lower overall costs and improve the
Company's competitive position.
Net cash used by financing activities increased $182,000 over the
prior year to $964,000 due to the payment of cash dividends.
Long-term debt to total equity decreased from 23.0% at April 30,
1997 to 19.3% at October 31, 1997. There were no borrowings
against the Company's short-term revolving credit facility during
the period.
During the second fiscal quarter, the Company paid cash dividends
of $232,314 or $0.03 or per share.
Cash flow from operations combined with the accumulated cash on
hand and 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 year 1998.
Other
The Company anticipates continued underlying strength in the
domestic economy through the remainder of fiscal 1998. Under
normal conditions, this strength would result in the continued
growth and expansion of the relevant markets for the Company.
The Company also expects, however, that there is a significant
likelihood that either anticipated or actual increases in
interest rates will dampen this growth. The adverse impact of
higher interest rates on the new housing and remodeling sectors
could result in periods of low growth in the Company's primary
markets and overall growth for the remainder of fiscal 1998 that
is below the rate experienced during fiscal 1997.
In this environment, the Company expects to continue to gain
market share based on its position with major customers, its
broad stock product offering and its ability to deliver quality
products with superior service. During a period of growth in the
housing and remodeling sectors, the Company expects to continue
to generate higher sales. The Company expects to further enhance
10
<PAGE>
sales growth during the second half of fiscal 1998 through the
addition of new products and new markets.
The Company expects to maintain or increase recent profitability
performance while investing resources in future products,
facilities and markets. Additional volume and improved
efficiencies should be sufficient to offset the anticipated rise
in other costs.
The Company currently maintains sufficient overall capacity to
meet projected growth. Identified capital projects include
expansion to remove specific capacity limitations in certain
processes, productivity improvements, cost savings initiatives
and replacement of aging equipment. The Company is also
considering investment opportunities to increase the Company's
business base, to acquire new products, and to gain access to new
markets.
The Company establishes debt to equity targets in order to
maintain the financial health of the Company and is prepared to
trim investment plans to maintain financial strength.
While the Company is not currently aware of any events that would
result in a material decline in earnings from fiscal 1997, 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 and/or
earnings including (1) overall industry demand at reduced 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, (5) the need to respond to price or
product initiatives launched by a competitor, and (6) a
significant investment which provides a substantial opportunity
to increase long-term performance. While the Company believes
that these risks are manageable and will not adversely 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 November 12, 1997 the Board of Directors approved a $.03 per
share cash dividend on its Common Stock. The cash dividend will
be paid on December 19, 1997 to shareholders of record on
December 1, 1997.
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
11
<PAGE>
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.
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 obligation of a site. 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 October 31, 1997.
13
<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
------------------ ----------------
1997 1996 1997 1996
------- ------- ------- -------
Net income $4,066 $3,462 $6,687 $5,562
Divided by weighted
average common shares
outstanding 7,743 7,664 7,737 7,646
------- ------- ------- -------
Earnings per share $ 0.53 $ 0.45 $ 0.86 $ 0.73
======= ======= ======= =======
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)
/s/ WILLIAM A. ARMSTRONG /s/ KENT B. GUICHARD
William A. Armstrong Kent B. Guichard
Corporate Controller Vice President, Finance and
Chief Financial Officer
Date: December 12, 1997 Date: December 12, 1997
Signing on behalf of the
registrant and as principal
financial officer
15
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> OCT-31-1997
<CASH> 21,260
<SECURITIES> 0
<RECEIVABLES> 25,518
<ALLOWANCES> 1,437
<INVENTORY> 10,821
<CURRENT-ASSETS> 58,0827
<PP&E> 77,723
<DEPRECIATION> 45,120
<TOTAL-ASSETS> 96,497
<CURRENT-LIABILITIES> 29,761
<BONDS> 10,197
0
0
<COMMON> 18,155
<OTHER-SE> 34,556
<TOTAL-LIABILITY-AND-EQUITY> 96,497
<SALES> 62,738
<TOTAL-REVENUES> 62,738
<CGS> 43,376
<TOTAL-COSTS> 43,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214
<INCOME-PRETAX> 6,601
<INCOME-TAX> 2,535
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