Here is the title for the article: "Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Unfortunately, the provided text is not a financial report, but rather the beginning of a Form 10-Q filing with the Securities and Exchange Commission (SEC). A Form 10-Q is a quarterly report that publicly traded companies are required to file with the SEC. It typically includes financial statements, management’s discussion and analysis, and other information about the company’s financial performance and condition. To summarize the financial report, I would need the actual financial statements and data, which are not provided in this text. If you could provide the rest of the report, I would be happy to help you summarize the key financial figures, main events, and significant developments.
Overview
American Woodmark Corporation is a manufacturer and distributor of kitchen, bath, and home organization products for the remodeling and new home construction markets. The company operates 18 manufacturing facilities in the United States and Mexico, eight primary service centers, and one distribution center.
The third quarter of fiscal 2025, which ended on January 31, 2025, was a challenging period for the company. They were impacted by several macroeconomic trends, including lower existing home sales, higher unemployment, rising mortgage rates, declining consumer sentiment, and persistent inflation. These factors put pressure on the company’s sales and profitability.
Financial Performance
American Woodmark’s net sales for the third quarter of fiscal 2025 were $397.6 million, a decrease of 5.8% compared to the same period in the prior year. For the first nine months of fiscal 2025, net sales were $1.31 billion, a 6.1% decrease from the same period in fiscal 2024.
The company’s remodeling sales, which include independent dealer/distributor and home center retail sales, decreased 2.3% in the third quarter and 8.8% in the first nine months of fiscal 2025 compared to the prior year. Builder sales, which are tied to new home construction, decreased 10.4% in the third quarter and 2.5% in the first nine months.
Gross profit margin for the third quarter was 15.0%, down from 19.2% in the same period last year. For the first nine months, gross margin was 18.2% compared to 21.1% in the prior year. The decline in gross margin was due to lower sales volumes, which impacted manufacturing efficiency, as well as higher input costs for raw materials and labor.
Selling and marketing expenses decreased by 11.0% in the third quarter and 4.9% in the first nine months, but increased as a percentage of net sales due to the decline in revenue. General and administrative expenses decreased by 40.1% in the third quarter and 40.7% in the first nine months, primarily due to the absence of amortization of customer intangibles and lower incentive/profit sharing costs.
The company’s effective income tax rate was 16.0% in the third quarter and 21.9% in the first nine months, lower than the prior year periods, due to the benefit of renewable energy tax credits and higher research and development tax credits.
Non-GAAP Measures
American Woodmark uses several non-GAAP financial measures to provide additional insight into its performance:
EBITDA (earnings before interest, taxes, depreciation, and amortization) and Adjusted EBITDA, which exclude certain one-time or non-cash items. Adjusted EBITDA margin was 9.7% in Q3 and 12.3% in the first nine months, down from 12.0% and 14.2% in the prior year periods.
Adjusted EPS (earnings per share), which excludes the per-share impact of acquisition expenses, restructuring charges, intangible amortization, debt modifications, and changes in foreign exchange contracts. Adjusted EPS was $1.05 in Q3 and $5.28 in the first nine months, compared to $1.56 and $6.81 in the prior year.
Outlook
Looking ahead, American Woodmark expects a mid-single digit decline in net sales for fiscal 2025 compared to fiscal 2024, due to a softer repair and remodel market and a decline in larger remodel projects, as well as continued softness in new home construction.
The company’s outlook for Adjusted EBITDA in fiscal 2025 has been adjusted to a range of $210-$215 million, down from prior expectations, due to the manufacturing deleverage from lower sales volumes.
Macroeconomic concerns for the remainder of the fiscal year include further declines in consumer sentiment, ongoing inflation risk, and a lack of near-term relief from rising interest rates. The company will continue to invest in its digital transformation and automation, while prioritizing share repurchases over debt repayment.
Analysis
American Woodmark faced significant headwinds in the third quarter and first nine months of fiscal 2025 due to the challenging macroeconomic environment. The decline in both remodeling and new construction activity put pressure on the company’s sales and profitability.
The 5.8% decrease in Q3 net sales and 6.1% decline in year-to-date sales reflect the softness in the company’s key markets. The remodeling segment, which accounts for the majority of sales, saw a 2.3% drop in Q3 and 8.8% decline year-to-date, as consumers pulled back on larger home improvement projects. The new construction market also weakened, with a 10.4% decrease in Q3 builder sales.
The contraction in sales volumes had a significant impact on the company’s gross margin, which fell by 420 basis points in Q3 and 290 basis points year-to-date. While the company was able to reduce selling/marketing and general/administrative expenses, the deleverage from lower sales was the primary driver of the margin compression.
American Woodmark’s use of non-GAAP metrics like EBITDA and Adjusted EPS provides a clearer picture of the underlying business performance, excluding the impact of one-time or non-cash items. The declines in Adjusted EBITDA margin and Adjusted EPS highlight the profitability challenges the company faced in the reported periods.
Looking ahead, the company’s guidance for a mid-single digit sales decline and lower Adjusted EBITDA in fiscal 2025 reflects the continued uncertainty in the macroeconomic environment. Factors like weakening consumer sentiment, persistent inflation, and rising interest rates are expected to weigh on both the remodeling and new construction markets.
In response, American Woodmark plans to continue investing in its digital transformation and automation initiatives, which should help improve efficiency and profitability over the long term. The company also remains committed to opportunistic share repurchases, while deprioritizing debt repayment given its current leverage position.
Overall, American Woodmark’s financial performance in the third quarter and first nine months of fiscal 2025 was challenged by the broader economic conditions impacting its key markets. While the company has taken steps to control costs and optimize its operations, the path to recovery will likely depend on a stabilization or improvement in the macroeconomic environment in the coming quarters.
