FORM 10-Q
UNITED STATES
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, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14798
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American Woodmark Corporation
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(Exact name of registrant as specified in its charter)
Virginia 54-1138147
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3102 Shawnee Drive, Winchester, Virginia 22601
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(Address of principal executive offices) (Zip Code)
(540) 665-9100
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(Registrant's telephone number, including area code)
Not Applicable
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(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
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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 8,260,096 shares outstanding
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Class as of March 7, 2002
AMERICAN WOODMARK CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
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Item 1. Financial Statements
Consolidated Balance Sheets--January 31, 2002
and April 30, 2001 3
Consolidated Statements of Income--Three months
ended January 31, 2002 and 2001; Nine months ended
January 31, 2002 and 2001 4
Consolidated Statements of Cash Flows--Nine months
ended January 31, 2002 and 2001 5
Notes to Consolidated Financial Statements--
January 31, 2002 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
Item 3. Quantitative and Qualitative Disclosures of
Market Risk 12
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
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2
PART I. FINANCIAL INFORMATION
AMERICAN WOODMARK CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
January 31, April 30,
2002 2001
ASSETS (Unaudited) (Audited)
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Current Assets
Cash and cash equivalents $ 7,376 $ 1,714
Customer receivables 35,695 29,410
Inventories 33,406 30,267
Income taxes receivable 1,572 --
Prepaid expenses and other 2,304 1,728
Deferred income taxes 5,732 4,760
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Total Current Assets 86,085 67,879
Property, Plant, and Equipment - Net 106,440 93,641
Deferred Costs and Other Assets 21,533 18,848
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$ 214,058 $ 180,368
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 22,267 $ 17,038
Accrued compensation and related expenses 20,006 16,269
Current maturities of long-term debt 1,200 2,118
Accrued marketing expenses 4,400 3,505
Other accrued expenses 4,817 6,289
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Total Current Liabilities 52,690 45,219
Long-Term Debt, less current maturities 16,284 16,819
Deferred Income Taxes 9,629 7,246
Long-Term Pension Liabilities 1,571 1,571
Other Long-Term Liabilities 384 --
Stockholders' Equity
Preferred Stock, $1.00 par value;
2,000,000 shares authorized, none
issued
Common Stock, no par value; 20,000,000
shares authorized; issued and
outstanding 8,202,971 shares at
January 31, 2002; 8,079,093 shares
at April 30, 2001 30,044 24,412
Retained earnings 103,689 85,101
Other Comprehensive Income (233) --
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Total Stockholders' Equity 133,500 109,513
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$ 214,058 $ 180,368
See notes to consolidated financial statements
3
AMERICAN WOODMARK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
January 31 January 31
--------------------------------- ----------------------------------
2002 2001 2002 2001
----------------- ------------ ------------- -------------
Net Sales $ 128,254 $ 98,940 $ 379,293 $ 307,094
Cost of sales and distribution 90,540 75,142 269,487 232,570
------------ ------------ ------------- -------------
Gross Profit 37,714 23,798 109,806 74,524
Selling and marketing expenses 18,290 14,209 53,461 42,467
General and administrative expenses 6,683 3,410 17,488 10,885
------------ ------------ ------------- -------------
Operating Income 12,741 6,179 38,857 21,172
Interest expense 102 432 587 1,039
Other (income)/expense (37) 32 258 108
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Income Before Income Taxes 12,676 5,715 38,012 20,025
Provision for Income Taxes 5,007 2,284 14,994 8,012
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Income before cumulative effect
of change in accounting principles $ 7,669 $ 3,431 $ 23,018 $ 12,013
Cumulative effect of change in
accounting principles -- -- -- (1,583)
------------ ------------ ------------- -------------
Net Income $ 7,669 $ 3,431 $ 23,018 $ 10,430
============ ============ ============= =============
Earnings Per Share
Weighted average
shares outstanding
Basic 8,177,054 8,074,993 8,149,061 8,047,594
Diluted 8,416,977 8,131,562 8,371,030 8,124,137
Net income per share
before cumulative effect
of change in accounting
principles
Basic $ 0.94 $ 0.42 $ 2.82 $ 1.49
Diluted $ 0.91 $ 0.42 $ 2.75 $ 1.48
Net income per share
after cumulative effect
of change in accounting
principles
Basic $ 0.94 $ 0.42 $ 2.82 $ 1.30
Diluted $ 0.91 $ 0.42 $ 2.75 $ 1.28
See notes to consolidated financial statements
4
AMERICAN WOODMARK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
January 31
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2002 2001
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Operating Activities
Net income $ 23,018 $ 10,430
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of change in accounting
Principles -- 1,583
Provision for depreciation and
Amortization 17,483 14,267
Net (gain) loss on disposal of property,
plant and equipment 71 6
Deferred income taxes 1,411 949
Other non-cash items 84 1,109
Changes in operating assets and
liabilities:
Customer receivables (6,202) 150
Income taxes receivable (1,572) (135)
Inventories (3,306) (3,182)
Other assets (11,657) (9,784)
Accounts payable 5,229 (4,089)
Accrued compensation and related
expenses 3,736 (2,081)
Other 912 413
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Net Cash Provided by Operating
Activities 29,207 9,636
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Investing Activities
Payments to acquire property, plant, and
Equipment (21,241) (15,944)
Proceeds from sales of property, plant,
and equipment 11 10
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Net Cash Used by Investing
Activities (21,230) (15,934)
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Financing Activities
Payments of Long-term debt (20,459) (86,603)
Proceeds from Long-term Borrowings 19,007 89,050
Proceeds from the issuance of Common
Stock 3,567 1,299
Repurchase of common stock (3,205) --
Payment of dividends (1,225) (1,207)
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Net Cash Provided (Used) by
Financing Activities (2,315) 2,539
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Increase(Decrease) In Cash And Cash Equivalents 5,662 (3,759)
Cash And Cash Equivalents, Beginning of Period 1,714 4,183
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Cash And Cash Equivalents, End of Period $ 7,376 $ 424
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See notes to consolidated financial statements
5
AMERICAN WOODMARK CORPORATION
NOTES TO CONSOLIDATED 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, 2002 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 2002. 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, 2001.
NOTE B--NEW ACCOUNTING PRONOUNCEMENTS
The Company was required to adopt SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" as amended by SFAS No. 138, "Accounting for
Derivative Instruments and Certain Hedging Activities" in the first quarter of
fiscal 2002. The new standards establish accounting and reporting requirements
for derivative instruments and hedging activities. The statement requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. By
adoption of SFAS No. 133 and as a result of the use of interest rate swaps, the
company has recognized a $239,000 gain in accumulated other comprehensive
income, net of tax, and a $233,000 loss in accumulated other comprehensive
income, net of tax, during the third quarter and first nine months of the fiscal
year, respectively. Comprehensive income was $7.9 and $22.8 million for the
quarterly and nine months periods ended January 31, 2002, respectively. The
adoption of SFAS No. 133 did not have a material impact on the Company's
financial position or results of operations.
In May 2000, the Financial Accounting Standards Board's Emerging Issues Task
Force (EITF) reached a consensus on Issue No. 00-14, "Accounting for Certain
Sales Incentives." This issue addresses the recognition, measurement and income
statement classification for various types of sales incentives, including
discounts, coupons, rebates and free products. The Company is required to adopt
EITF 00-14 no later than the fourth quarter of fiscal 2002. The adoption of EITF
00-14 will have no impact on the net income or earnings per share of the
Company. The Company is in the process of determining the amounts to be
reclassified.
In April 2001, the Financial Accounting Standards Board's Emerging Issues Task
Force (EITF) reached a consensus on Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration to a Purchaser of the Vendor's Products or
Services." The Company is required to adopt EITF 00-25 no later than the fourth
quarter of fiscal 2002. EITF 00-25 requires that certain activities such as the
payment of "slotting fees", cooperative advertising arrangements and "buy downs"
be classified as a reduction in revenue. The adoption of EITF 00-25 will have no
impact on the net income or earnings per share of the Company. The impact of the
adoption on the consolidated financial statements will result in a material
adjustment to both net sales and selling and marketing expense due to the
reclassification of cooperative advertising costs.
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NOTE C--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (Note, all numbers in thousands except for per share data):
Three Months Ended Nine Months Ended
January 31 January 31
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2002 2001 2002 2001
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Numerator:
Net income used
for both basic and
dilutive earnings
per share $7,669 $3,431 $23,018 $10,430
Denominator:
Denominator for
basic earnings
per share-
Weighted average shares 8,177 8,075 8,149 8,047
Effect of dilutive
securities:
Employee Stock
Options 240 57 222 77
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Denominator for
Diluted earnings per
share -
adjusted weighted
average shares and assumed
conversions 8,417 8,132 8,371 8,124
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Net income per share before
cumulative effect of change
in accounting principles
Basic $ 0.94 $ 0.42 $ 2.82 $ 1.49
Diluted $ 0.91 $ 0.42 $ 2.75 $ 1.48
Net income per share after
cumulative effect of change
in accounting principles
Basic $ 0.94 $ 0.42 $ 2.82 $ 1.30
Diluted $ 0.91 $ 0.42 $ 2.75 $ 1.28
------------------- ------------------- ------------------- -------------------
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NOTE D--CUSTOMER RECEIVABLES
The components of customer receivables were:
January 31 April 30
(in thousands) 2002 2001
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Gross customer receivables $ 40,101 $ 34,066
Less:
Allowance for doubtful accounts (976) (1,350)
Allowance for returns and discounts (3,430) (3,306)
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Net customer receivables $ 35,695 $ 29,410
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NOTE E--INVENTORIES
The components of inventories were:
January 31 April 30
(in thousands) 2002 2001
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Raw materials $ 12,492 $ 12,041
Work-in-process 22,814 20,600
Finished goods 5,765 5,079
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Total FIFO inventories $ 41,071 $ 37,720
Reserve to adjust inventories to
LIFO value (7,665) (7,453)
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Total LIFO inventories $ 33,406 $ 30,267
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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:
Nine Months Ended
January 31
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(in thousands) 2002 2001
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Cash paid during the period for:
Interest $ 1,009 $ 1,322
Income taxes $ 14,751 $ 7,844
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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.
9
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
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Net Sales for the third quarter of fiscal 2002 were $128.3 million, an increase
of 29.6% over the same period in fiscal 2001. Net sales for the nine-month
period ended January 31, 2002 were $379.3 million representing an increase of
23.5% over the same period in fiscal 2002. Improved sales for both the quarter
and nine-month period were the result of continued growth in shipments to both
remodel and new construction customers. Unit volume increased 25.9% during the
quarter due to the impact of new products and additional outlets. The average
price per unit for the most recent quarter increased 3% over the same period in
the prior year due to a continued shift in product mix.
Third quarter gross margin in fiscal 2002 was 29.4%, up from 24.1% in the third
quarter of fiscal 2001. Gross margin was 29.0% for the first nine months of
fiscal 2002, up from the previous year nine-month gross margin of 24.3%.
Improvements in gross margin for both the quarter and nine-month period were due
to the combination of lower material costs, improved productivity, lower freight
expense and favorable leverage on fixed costs with higher volume.
Selling and marketing expenses for the third quarter of fiscal 2002 were $18.3
million or 14.3% of net sales as compared to $14.2 million or 14.4% of net sales
for the third quarter of fiscal 2001. For the first nine months of fiscal 2002,
selling and marketing expenses were $53.5 million or 14.1% of net sales, as
compared to $42.5 million or 13.8% of net sales for the same period in fiscal
2001. The increased expenses for the quarter and nine-month period were
primarily attributable to performance based marketing programs, promotional
expense to support merchandising efforts and employee pay-for-performance plans.
General and administrative expenses for the third quarter of fiscal 2002 were
$6.7 million or 5.2% of net sales, representing an increase of $3.3 million from
the third quarter of fiscal 2001. For the first nine months of fiscal 2002
general and administrative expenses were $17.5 million or 4.6% of net sales
compared to $10.9 million or 3.5% of net sales in the first nine months of
fiscal 2001. The increases during the quarter and nine month period are due to
higher accruals for performance based employee incentive plans.
Interest expense for the third quarter and first nine months of fiscal 2002 was
$102 thousand and $587 thousand, respectively, compared to $432 thousand and
$1.0 million in the same periods from the prior year. The decrease was due
primarily to lower debt balances and an increase in capitalized interest as the
company moved forward with its capital expansion plans.
The Company and The Home Depot have come to the mutual conclusion that the
Company's continued participation in the Thomasville brand is not in the best
interest of the overall special order cabinet category at The Home Depot or the
long term performance and growth potential of the Company. Therefore, the
Company will be phasing out of the Thomasville brand of cabinetry in the coming
periods and does not expect any material impact from this decision.
10
Liquidity and Capital Resources
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The Company's operating activities generated $29.2 million in net cash during
the first nine months of fiscal 2002 compared to $9.6 million for the same
period in fiscal 2001. The increase in cash generated from operations over prior
year was due primarily to an increase in net income, an increase in the
provision for depreciation and amortization and a larger increase in working
capital in the previous year.
Capital spending during the first nine months of fiscal 2002 was $21.2 million
as compared to $15.9 million in the same period of fiscal 2001. Capital spending
rose due to increased activity in the company's expansion program. In order to
support continued sales growth, the company expects to make additional
investments in plant, property and equipment during the remainder of fiscal year
2002. Major projects include the expansion of Monticello, Kentucky, lumber
processing; expansion of the Kingman, Arizona, assembly operation; construction
of a new lumber processing facility in Hazard, Kentucky and a new assembly
facility in Tahlequah, Oklahoma.
Net cash used by financing activities was $2.3 million for the first nine months
of fiscal 2002, as proceeds from borrowings did not offset payments. For the
same period in fiscal 2001, the company received $2.5 million from financing
activities. Cash dividends of $1.2 million were paid during the first nine
months of fiscal 2002. The company repurchased $3.2 million in Common Stock
during the first nine months of fiscal 2002.
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 of the remainder of fiscal 2002.
Legal Matters
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The Company is involved in various suits and claims in the normal course of
business that includes claims against the Company pending before the Equal
Employment Opportunity Commission. Although management believes that such suits
and EEOC 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.
Dividends Declared
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On February 28, 2002, the Board of Directors approved a $.05 per share cash
dividend on its Common Stock. The cash dividend will be paid on April 1, 2002,
to shareholders of record on March 18, 2002.
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Item 3. Quantitative and Qualitative Disclosures of Market Risk
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The Company's business has historically been subjected to seasonal influences,
with higher sales typically realized in the second and fourth fiscal quarters.
The costs of the Company's products are subject to inflationary pressures and
commodity price fluctuations. Inflationary pressure and commodity price
increases have been relatively modest over the past five years, except for
lumber prices, which rose significantly during fiscal 1997. The Company has
generally been able over time to recover the effects of inflation and commodity
price fluctuations through sales price increases.
On January 31, 2002, the company had no material exposure to changes in interest
rates for its debt agreements. All significant borrowings of the company carry a
fixed interest rate between 5% and 6%.
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. These include (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) a dramatic increase
to the cost of diesel fuel, and/or transportation related services, (6) the need
to respond to price or product initiatives launched by a competitor, (7) a
significant investment which provides a substantial opportunity to increase
long-term performance, and (8) sales growth at a rate that outpaces the
Company's ability to install new capacity. 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 operating results.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three months
ended January 31, 2002.
12
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
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(Registrant)
/s/Dennis M. Nolan, Jr. /s/Kent B. Guichard
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Dennis M. Nolan, Jr. Kent B. Guichard
Corporate Controller Senior Vice President, Finance
and Chief Financial Officer
Date: March 7, 2002 Date: March 7, 2002
Signing on behalf of the Signing on behalf of the
registrant and as principal registrant and as principal
accounting officer financial officer
13