American Woodmark - 10-Q quarterly report FY

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 July 31, 2000

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)

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.

AMERICAN WOODMARK CORPORATION
FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

AMERICAN WOODMARK CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

Share Information

AMERICAN WOODMARK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

NOTE D--CUSTOMER RECEIVABLES

The components of customer receivables were:

NOTE E--INVENTORIES

The components of inventories were:

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:

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.

Management's Discussion and Analysis
Three Months Ended July 31, 2000 and 1999

Net sales for the first quarter of fiscal 2001 were $106.5 million, an increase of 13.1% over the same period in fiscal 2000. Higher sales were the result of continued growth across all channels of distribution, particularly with the Company's strategic home center partners. Overall unit volume between the periods resulted in a 3.3% growth due to new styles, colors and available accessories. The average revenue per unit in fiscal 2001 increased 9.4% over the first quarter of fiscal 2000 due to a shift in mix to higher end products and a general price increase announced in January 2000.

Gross margin for the first quarter of fiscal 2001 declined to 27.4% from 27.7% for the same period of the previous fiscal year. The decline was due primarily to higher manufacturing overhead and distribution costs. Higher overhead costs were the result of expenses related to increased production capacity, required to support demand for the Company's products. Increased distribution costs were the result of increased freight charges from third party carriers, including rising fuel surcharges.

Selling and Marketing expenses for the first quarter of fiscal 2001 were $16.2 million or 15.2% of net sales, an increase of $2.0 million over the same period of fiscal 2000 in which sales and marketing expenses were 15.1% of net sales. Increased sales and marketing expenses are due primarily to performance based marketing programs and promotional expense to support merchandising efforts.

General and administrative expenses, as a percent of net sales, declined to 4.0% in fiscal 2001 from 4.5% in fiscal 2000, as incremental spending was more than offset by the increase in sales. Total general and administrative expenses increased $68 thousand when comparing the first quarter of fiscal 2001 to the same period in fiscal 2000. Reductions in the company's bad debt expense and lower information systems operating costs were offset by an increase payroll expense resulting from additional staffing at the corporate level and increased accruals for the Company's pay-for-performance incentive plan.

In the first quarter of fiscal 2001 the Company substantially completed its restructuring activities relating to the conversion of its Ham Lake, Minnesota facility from custom cabinet manufacturing to manufacturing of components and accessories.

Interest expense for the first quarter of fiscal 2001 was $250 thousand, an increase of $121 thousand from the same period of the prior fiscal year. Additional interest expense on increased debt was only partially offset by capitalized interest.

Liquidity and Capital Resources

The Company's operating activities generated $6.3 million in net cash during the first three months of fiscal 2001 compared to $2.8 million net cash generated in the same period of fiscal 2000. The increase in cash generated from operations over prior year was due primarily to increased net income, an increase in the provision for depreciation and amortization, increased accruals for tax, as well lower consumption of cash required for inventories and promotional display investment. The period over period favorable impacts to cash were only partially offset by a decrease in cash generated from reduced customer receivables. Depreciation and amortization expense increased as a result of the Company's capital investment initiatives. The increased accrual for income taxes resulted from increased earnings and the timing of tax payments. Changes in cash flow from investment in inventory and promotional display activity were due to seasonal activity and timing.

Capital spending during the first quarter of fiscal 2001 was $10.2 million as compared to $7.3 million in the same period of fiscal 2000, an increase of $2.9 million, as the Company continues to invest capital into additional capacity through a combination of new facility construction and process enhancement. During the first quarter of fiscal 2001 the Company completed the majority of the building construction and began to install production equipment for its new flat-stock facility in Humboldt, Tennessee. Additional investments made during the quarter included funding for continued ramp up of the Company's assembly facility in Gas City, Indiana, expanded capacity for the Company's lumber facility in Monticello, Kentucky and other minor projects intended to expand production capacity. The Company expects that in order to support continued sales growth, it will be necessary to make additional investments in plant, property and equipment during the remainder of fiscal 2001. Total capital expenditures for fiscal 2001 remain targeted between $25 and $30 million.

Net cash provided by financing activities was $1.5 million for the first three months of fiscal 2001 as proceeds from borrowings offset payments. For the same period of fiscal 2000 the Company used $407 thousand for financing activities. During the first three months of fiscal 2001 the Company continued to borrow against its $45 million credit facility as cash on-hand combined with cash generated from operations was insufficient to support payments to acquire plant, property and equipment. The outstanding balance on the revolving credit facility was $14.4 million on July 31, 2000. Cash dividends of $401 thousand were paid during the first quarter of fiscal 2001.

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 2001.

The Company is involved in various suits and claims in the normal course of business which 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.

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.

The Company is also exposed to changes in interest rates primarily from its long-term debt arrangements and, secondarily, its investments in securities. The Company uses interest rate swap agreements to manage exposure to interest rate changes on certain long-term borrowings. The Company has variable-rate debt instruments representing approximately 67% of its total long-term debt at July 31, 2000. If interest rates average 25 basis points (.25%) more in fiscal 2001 than during fiscal 2000, the Company's interest expense would be increased by approximately $42,000. These amounts are determined by considering the impact of the hypothetical interest rates on the Company's variable-rate, long-term debt at July 31, 2000.

While the Company is not currently aware of any other events that would result in a material decline in earnings from fiscal 2000, 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 short-term operating results.

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 31, 2000, the holders of 6,511,547 of the total 8,021,854 shares of Common Stock outstanding and eligible to vote duly executed and delivered valid proxies. The shareholders approved the three 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:

Item 6. Exhibits and Reports on Form 8-K

(a) Reports on Form 8-K

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.