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, 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 7,743,788 shares outstanding
Class as of September 4, 1997
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--July 31, 1997 and
April 30, 1997 3
Statements of Income--Three months ended
July 31, 1997 and 1996 4
Statements of Cash Flows--Three months ended
July 31, 1997 and 1996 5
Notes to Financial Statements--July 31, 1997 6-8
Item 2. Management's Discussion and Analysis 9-11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 12
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)
July 31 April 30
1997 1997
----------- ---------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $20,952 $17,339
Customer receivables 21,595 20,488
Inventories 10,841 10,356
Prepaid expenses and other 711 940
Deferred income taxes 956 720
-------- --------
Total Current Assets 55,055 49,843
Property, Plant and Equipment 32,694 32,252
Deferred Costs and Other Assets 4,491 4,335
Intangible Pension Assets 727 727
-------- --------
$92,967 $87,157
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 9,900 $ 9,312
Accrued compensation and related expenses 10,182 11,180
Current maturities of long-term debt 2,101 2,229
Other accrued expenses 7,414 3,680
------- --------
Total Current Liabilities 29,597 26,401
Long-Term Debt, less current maturities 10,505 10,637
Deferred Income Taxes 2,539 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 7,740,789 shares at
July 31, 1997; 7,722,656 shares at
April 30, 1997 18,112 18,043
Retained earnings 30,721 28,255
-------- -------
Total Stockholders' Equity 48,833 46,298
-------- -------
$92,967 $87,157
======== =======
See notes to financial statements
3
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Quarter Ended
July 31
1997 1996
------- -------
Net sales $55,970 $53,362
Cost of sales and distribution 39,639 39,810
------- -------
Gross Profit 16,331 13,552
Selling and marketing expenses 8,656 6,688
General and administrative expenses 3,406 3,443
------- -------
Operating Income 4,269 3,421
Interest expense 224 199
Other income (210) (125)
------- -------
Income Before Income Taxes 4,255 3,347
Provision for income taxes 1,634 1,247
------- -------
Net Income $ 2,621 $2,100
======= =======
Earnings Per Share
Average shares outstanding 7,730,318 7,627,179
Net income per share $0.34 $0.28
========= =========
Cash dividends per share $0.02 --
========= =========
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Quarter Ended
July 31
1997 1996
Operating Activities ------- ------
Net income $ 2,621 $2,100
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 1,902 1,911
Net (gain) loss on disposal of property,
plant and equipment (3) 1
Deferred income taxes (25) (190)
Other non-cash items 90 908
Changes in operating assets and liabilities:
Customer receivables (1,195) 113
Inventories (520) 87
Other assets (808) (690)
Accounts payable 588 551
Accrued compensation and related expenses (998) (78)
Other 3,996 (662)
----- -----
Net Cash Provided by Operating Activities 5,648 4,051
----- -----
Investing Activities
Payments to acquire property, plant and
equipment (1,702) (748)
Proceeds from sales of property, plant and
equipment 13 5
----- -----
Net Cash Used by Investing Activities (1,689) (743)
----- -----
Financing Activities
Payments of long-term debt (260) (261)
Proceeds from the issuance of Common Stock 69 79
Payment of dividends (155) --
------ ------
Net Cash Used by Financing Activities (346) (182)
------ ------
Increase In Cash And Cash Equivalents 3,613 3,126
Cash And Cash Equivalents, Beginning Of Period 17,339 7,201
------ ------
Cash And Cash Equivalents, End Of Period $20,952 $10,327
====== ======
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, 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
<PAGE>
NOTE D--CUSTOMER RECEIVABLES
The components of customer receivables were:
July 31 April 30
(in thousands) 1997 1997
------ ------
Gross customer receivables $23,069 $21,869
Less:
Allowance for bad debt (215) (210)
Allowance for returns and discounts (1,259) (1,171)
------ ------
Net customer receivables $21,595 $20,488
NOTE E--INVENTORIES
The components of inventories were:
July 31 April 30
(in thousands) 1997 1997
----- -----
Raw materials $ 6,067 $ 6,270
Work-in-process 10,830 9,684
Finished goods 1,493 1,115
------ ------
Total FIFO inventories $18,390 $17,069
Reserve to adjust inventories
to LIFO value (7,549) (6,713)
------ ------
Total LIFO inventories $10,841 $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:
Three Months Ended
July 31
------------------
(in thousands) 1997 1996
Cash paid during the period for: ------- --------
Interest $ 165 $ 193
Income taxes $ 77 $ 1,145
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 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, 1997 AND 1996
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 1998 were $55.9 million,
an increase of 4.9% over the prior year. Sales increased as a
result of higher unit volume with key home center accounts.
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.
Gross Margin increased to 29.2% in the first quarter of fiscal 1998
from 25.4% in the first quarter of the prior year. The increase
was primarily attributable to improved labor productivity, the
impact of favorable leverage with higher volume on fixed and semi-
fixed costs and better material utilization. An increase in
material cost per unit resulting from increased lumber prices was
partially offset by a decrease in particleboard prices and improved
material utilization. Continued increases in labor productivity
more than offset normal rate increases and higher incentive pay
expenses.
General and administrative expenses remained flat compared to the
prior year as increases in expenses associated with the Company's
performance incentive program were offset by a reduction in bad
debt expense. Sales and marketing expenses rose $1.9 million
compared to the first quarter of the prior fiscal year. The
increase was primarily attributed to increased promotional costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities generated $5.6 million in net
cash in the first quarter of fiscal 1998 compared to $4.1 million
net cash generated the same period of the prior fiscal year.
Increased profits and an increase in other operating liabilities
relating to accrued promotional costs and income taxes payable were
the primary contributors to the current period increase in cash.
Partially offsetting this increase in cash was an increase in
customer receivables of $1.2 million during the current period.
Capital spending in the first quarter of fiscal 1998 increased
$954,000 over the prior year to $1.7 million as the Company
continued its capital spending program designed to lower overall
cost and improve the Company's competitive position. The capital
spending in the current period was primarily attributable to the
expansion of the Jackson, Georgia facility to increase production
capacity.
9
<PAGE>
Net cash used by financing activities increased $164,000 over the
prior year to $346,000, primarily due to the payment of cash
dividends in the current period. Long-term debt to total equity
declined from 23.0% at April 30, 1997 to 21.5% at July 31, 1997.
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 1998.
OTHER
On August 27, 1997 the Company's Stockholders elected Fred S. Grunewald,
President and Chief Operating Officer of Overhead Door Corporation, to
the Board of Directors.
On August 27, 1997 the Board of Directors approved a $.03 per share
cash dividend on its Common Stock. The cash dividend will be paid
on October 1, 1997 to shareholders of record on September 17, 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 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 matter, 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.
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
10
<PAGE>
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 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.
11
<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 27, 1997, the holders of 7,596,410 of
the total 7,737,089 shares of Common Stock outstanding and eligible
to vote duly executed and delivered valid proxies. The
shareholders approved the two 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. Election of the 7,585,205 18,105 --
Board of Directors. 7,578,305 11,205 --
2. Ratification of 7,590,829 4,286 1,295
Selection of
Independent Certified
Public Accountants.
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 13
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended July 31, 1997.
12
<PAGE>
AMERICAN WOODMARK CORPORATION
Exhibit 11
Computation of Earnings per Share
(in thousands, except per share amounts)
Quarter Ended
July 31
1997 1996
----- -----
Net income $2,621 $2,100
Divided by weighted
average common shares
outstanding 7,730 7,627
----- -----
Earnings per share $ 0.34 $ 0.28
====== ======
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: September 8, 1997 /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
14
<PAGE>
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0
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