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, 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 7,715,556 shares outstanding
Class as of March 11, 1997
<PAGE>
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets--January 31, 1997 and April 30, 1996 3
Statements of Income--Three months ended January 31, 1997
and 1996; Nine months ended January 31, 1997 and 1996 4
Statements of Cash Flows--Nine months ended January 31, 1997
and 1996 5
Notes to Financial Statements--January 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)
January 31 April 30
1997 1996
----------- ---------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 11,811 $ 7,201
Customer receivables 18,890 19,709
Inventories 11,356 10,326
Prepaid expenses and other 1,323 899
Deferred income taxes 1,176 527
----------- ---------
Total Current Assets 44,556 38,662
Property, Plant and Equipment 32,544 33,188
Intangible Pension Assets 504 504
Deferred Costs and Other Assets 4,391 3,982
----------- ---------
$ 81,995 $ 76,336
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 9,341 $ 7,651
Accrued compensation and related expenses 8,446 8,467
Current maturities of long-term debt 2,471 2,719
Other accrued expenses 2,906 4,416
----------- ---------
Total Current Liabilities 23,164 23,253
Long-Term Debt, less current maturities 10,943 12,866
Long-Term Pension Liabilities 1,592 1,592
Deferred Income Taxes 2,859 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
7,701,956 shares at January 31, 1997;
7,608,761 shares at April 30, 1996 17,951 17,677
Retained earnings 25,486 18,168
----------- ---------
Total Stockholders' Equity 43,437 35,845
----------- ---------
$ 81,995 $ 76,336
=========== =========
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
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Net sales $ 51,643 $ 46,793 $ 161,981 $ 142,970
Cost of sales and distribution 37,189 37,325 117,482 114,546
---------- ---------- ---------- ----------
Gross Profit 14,454 9,468 44,499 28,424
Selling and marketing expenses 7,698 5,853 21,664 18,072
General and administrative expenses 3,071 2,524 10,025 7,027
---------- ---------- ---------- ----------
Operating Income 3,685 1,091 12,810 3,325
Interest expense 246 341 708 951
Other income (150) (155) (363) (153)
---------- ---------- ---------- ----------
Income Before Income Taxes 3,589 905 12,465 2,527
Provision for income taxes 1,526 346 4,840 982
---------- ---------- ---------- ----------
Net Income $ 2,063 $ 559 $ 7,625 $ 1,545
========== ========== ========== ==========
Earnings Per Share
Average shares outstanding 7,687,774 7,606,447 7,659,808 7,590,756
Net income per share $ 0.27 $ 0.07 $ 1.00 $ 0.20
========== ========== ========== ==========
See notes to financial statements
4
<PAGE>
AMERICAN WOODMARK CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
January 31
---------------------
1997 1996
--------- ---------
Operating Activities
Net income $ 7,625 $ 1,545
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and amortization 5,786 5,813
Net loss on disposal of property, plant and
equipment 58 109
Deferred income taxes (570) (311)
Other non-cash items 1,131 206
Changes in operating assets and liabilities:
Refundable deposits -- 1,708
Customer receivables (188) (691)
Inventories (1,154) (38)
Other assets (2,354) (2,032)
Accounts payable 1,690 (1,559)
Accrued compensation and related expense (21) 115
Other (1,934) 212
--------- ---------
Net Cash Provided by Operating Activities 10,069 5,077
--------- ---------
Investing Activities
Payments to acquire property, plant and equipment (3,318) (4,849)
Proceeds from sales of property, plant and equipment 63 168
--------- ---------
Net Cash Used by Investing Activities (3,255) (4,681)
--------- ---------
Financing Activities
Payments of long-term debt (2,171) (2,270)
Proceeds from the issuance of Common Stock 274 194
Payment of dividends (307) --
--------- ---------
Net Cash Used by Financing Activities (2,204) (2,076)
--------- ---------
Increase (Decrease) In Cash And Cash Equivalents 4,610 (1,680)
Cash And Cash Equivalents, Beginning Of Period 7,201 2,876
--------- ---------
Cash And Cash Equivalents, End Of Period $ 11,811 $ 1,196
========= =========
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 and nine-month periods ended January 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended 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:
January 31 April 30
(in thousands) 1997 1996
---------- ---------
Gross customer receivables $ 21,393 $ 21,215
Less:
Allowance for doubtful accounts (1,437) (629)
Allowance for returns and discounts (1,066) (877)
---------- ---------
Net customer receivables $ 18,890 $ 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:
January 31 April 30
(in thousands) 1997 1996
---------- ---------
Raw materials $ 6,120 $ 5,261
Work-in-process 9,523 9,336
Finished goods 1,600 1,392
---------- ---------
Total FIFO inventories $ 17,243 $ 15,989
Reserve to adjust inventories to LIFO value (5,887) (5,663)
---------- ---------
Total LIFO inventories $ 11,356 $ 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 nine months of fiscal 1997. For the nine-month period ended January 31,
1996, total transactions through this revolving credit facility were borrowings
and repayments of $7.2 million. There were no revolving credit loans
outstanding at January 31, 1997 and 1996.
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:
Nine Months Ended
January 31
------------------
(in thousands) 1997 1996
------- -------
Cash paid during the period for:
Interest $ 616 $ 814
Income taxes $ 6,544 $ 1,263
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 AND NINE MONTHS ENDED JANUARY 31, 1997 AND 1996
RESULTS OF OPERATIONS
Net sales of $51.6 million for the third quarter of fiscal 1997 increased 10.4%
over the third quarter of fiscal 1996. The increase in net sales between third
quarters was attributable to sales growth in the home center channel resulting
from a stronger economy and less severe winter weather conditions in the
Midwestern and Northeastern regions of the United States. Net sales of $162.0
million for the nine-month period ended January 31, 1997 were 13.3% higher than
the same period of the prior year. The increase in net sales for the nine-month
period resulted from growth in unit volumes in all three market channels, as the
Company benefitted from improved overall economic conditions and specific
relationships with key home centers, distributors and builders. Current year
average unit prices increased over prior year due to a general price increase
implemented during the third quarter of the prior fiscal year, favorable changes
in market channel sales mix and a shift towards the higher end of the Company's
broad stock product offering.
Fiscal 1997 third quarter and nine-month period gross margins were 28.0% and
27.5% of net sales, a significant increase over comparative fiscal 1996 gross
margins of 20.2% and 19.9%, respectively. The margin improvement for both
periods was primarily attributed to better material utilization, increased labor
productivity and the impact of favorable leverage with higher volume on fixed
and semi-fixed costs. These gains were partially offset by increases in lumber
prices. Normal labor rate increases and increased incentive pay expenses for
both periods were more than offset by increases in labor productivity resulting
from the use of new equipment and manufacturing techniques.
Selling and marketing expenses increased $1.8 million for the third quarter of
fiscal 1997 and $3.6 million for the first nine months compared to the prior
year. The increase for both periods resulted from increased incentive pay
expenses, one-time costs associated with a national sales event, and increases
in advertising and variable promotional costs. General and administrative
expenses were 5.9% and 6.2% of net sales for the three-month and nine-month
periods ended January 31, 1997 as compared to 5.4% and 4.9% for the comparable
periods of fiscal 1996. The increase for both periods was primarily due to
employee compensation costs associated with the Company's performance incentive
programs. Recognition of $830,000 in bad debt reserves also unfavorably
impacted the nine-month period of fiscal 1997.
Interest expense decreased $95,000 to $246,000 for the third quarter of fiscal
1997 compared to the prior year, and decreased $243,000 to $708,000 for the
current nine-month period compared to the prior year. The decline resulted from
continued reduction in long-term debt. As of January 31, 1997, long-term debt
to total capital has been reduced to 20.1%.
9
<PAGE>
Other income increased $210,000 for the first nine months compared to the prior
year due to a combination of increased interest income from short-term
investments of cash and less expenses pertaining to the disposal of property,
plant and equipment. The effect of this increase over prior year was lessened
by a property tax refund received by the Company in the third quarter of the
prior fiscal year which, net of specific recovery expenses, increased other
income by $398,000.
Fiscal 1997 effective tax rates reflected in the statement of income differ from
the U.S. federal statutory rate because of state taxes and the effects of
tax-exempt interest income. The effective tax rate for the third quarter of
fiscal 1997 also includes an adjustment to reflect year-to-date earnings at a
higher federal statutory rate.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities generated $10.1 million in cash for the first nine months
of fiscal 1997 as compared to $5.1 million in the comparable period of fiscal
1996. The increase in cash generated from operations was attributable to
increased profits. Other non-cash items and increased accounts payable had
favorable impacts upon cash flow, but were offset by a seasonal increase in
inventory and timing differences pertaining to the payment of accrued
promotional costs and income taxes. An $800,000 increase in bad debt reserves,
reflected in other non-cash items, was made in the first quarter to fully
reserve against the receivables of a customer which filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy Code.
Capital expenditures were $3.3 million for the first nine months of fiscal 1997.
During this period, the Company purchased equipment to optimize lumber
processing for the Orange, Virginia facility, and completed several projects
designed to increase efficiency and lower overall production costs. The Company
anticipates that, with the initiation of future projects designed to lower
overall costs and improve the Company's competitive position, capital spending
will increase in the last quarter of the fiscal year, with total fiscal 1997
capital spending approximating or exceeding fiscal 1996.
The Company reduced overall debt by $2.2 million during the first nine months of
fiscal 1997. Long-term debt to total equity declined from 35.9% at April 30,
1996 to 25.2% at January 31, 1997. There were no borrowings against the
Company's short-term revolving credit facility during the period.
Cash flow from operations, combined with 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 1997.
10
<PAGE>
OTHER
The Company anticipates an overall economic environment of 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 experience continued improvement from 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 more than 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 anticipates capital expenditures
will be funded from a combination of cash flow from operations and cash on hand.
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.
During fiscal 1997, a customer of the Company announced plans to liquidate under
provisions provided by the United States Bankruptcy Code. As of January 31,
1997, the Company has fully reserved for all outstanding receivables pertaining
to this customer. The Company's management anticipates that these events will
not have any material adverse effect on the Company's future results of
operations or financial position.
Richard A. Graber, Director and Retired Vice President, Marketing, resigned from
the Board of Directors effective February 1, 1997.
On February 24, 1997 the Company announced a $0.02 per share cash dividend on
its Common Stock. The cash dividend will be paid on March 21, 1997, to
shareholders of record on March 7, 1997.
11
<PAGE>
The Company is involved in various suits and claims in the normal course of
business. Included therein are claims against the Company pending before the
Equal Employment Opportunity Commission. Although management believes that such
claims are without merit and intends to vigorously contest them, the ultimate
outcome of these matters cannot be determined at this time. In the opinion of
management, after consultation with counsel, the ultimate liabilities and
losses, if any, that may result from suits and claims involving the Company will
not have any material adverse effect on the Company's results of operations or
financial position.
The Company is voluntarily participating with a group of companies which is
cleaning up a waste facility site at the direction of a state environmental
authority.
The Company records liabilities for all probable and reasonably estimable loss
contingencies on an undiscounted basis. For loss contingencies related to
environmental matters, liabilities are based on the Company's proportional 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.
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 nine months
ended January 31, 1997.
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 October 31
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
Net income $ 2,063 $ 559 $ 7,625 $ 1,545
Divided by weighted average
common shares outstanding 7,688 7,606 7,660 7,591
------- ------- ------- -------
Earnings per share $ 0.27 $ 0.07 $ 1.00 $ 0.20
======= ======= ======= =======
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 11, 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
15
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 11,811
<SECURITIES> 0
<RECEIVABLES> 21,393
<ALLOWANCES> 2,503
<INVENTORY> 11,356
<CURRENT-ASSETS> 44,556
<PP&E> 77,262
<DEPRECIATION> 44,718
<TOTAL-ASSETS> 81,995
<CURRENT-LIABILITIES> 23,164
<BONDS> 10,943
0
0
<COMMON> 17,951
<OTHER-SE> 25,486
<TOTAL-LIABILITY-AND-EQUITY> 81,995
<SALES> 161,981
<TOTAL-REVENUES> 161,981
<CGS> 117,482
<TOTAL-COSTS> 117,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 830
<INTEREST-EXPENSE> 708
<INCOME-PRETAX> 12,465
<INCOME-TAX> 4,840
<INCOME-CONTINUING> 7,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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