Creating ValueThrough People

WHO WE ARE

HOW WE DO IT

American Woodmark is an organization of employees and shareholders who have combined their resources to pursue a common goal.

WHAT WE DO

Our common goal is to create value by providing kitchens and baths of pride for the American family.

WHY WE DO IT

We pursue this goal to earn a profit, which allows us to reward our shareholders and employees, and to make a contribution to our society.

Four principles guide our actions:

CUSTOMER SATISFACTION

Provide the best possible quality, service and value to the greatest number of people by doing whatever is reasonable and sometimes unreasonable.

INTEGRITY

Do what is right: act fairly and responsibly, care about the dignity of each person and be a good citizen within the community.

TEAMWORK

Understand that we must all work together in order to succeed. Realize that each person must contribute to the team to be part of the team.

EXCELLENCE

Strive to perform every job or action in a superior way.

Be innovative, always helping others become the best they can be.

ONCE WE'VE DONE IT

When we achieve our goal, good things happen: sales increase, profits are made, shareholders and employees are rewarded, jobs are created, our communities benefit, we have fun, and our customers are happy and proud - with a new kitchen or bath from American Woodmark.

To OurShareholders

Our fiscal year 2020 will be a year we will never forget, beginning with the exciting launch of our 2025 Vision, followed by a number of unique events that created cost headwinds, and ending with the impact of COVID-19. Despite the challenges, we remained extremely focused on our new vision. A vision like no other in the history of the company, inspiring us to re-innovate the entire value stream of our business.

Financially, considering the significant cost headwinds we faced within the fiscal year, we are pleased with our results. Our adjusted EBITDA came in at 14.3% of sales for the year. Within this, we absorbed the incremental cost associated with the tariffs, the particle board supply disruption, the move of our PCS facility in CA, and the disruption of our operations due to COVID-19. Although tariffs remain in place, the plant move was a discreet, one-time cost; our particle board supply continues to improve; and although we are feeling the macro impact of COVID-19 on the economy, our plants are fully operational. The fact is, our company was very fortunate to be considered an essential supplier to the housing industry and allowed to operate during the pandemic. I cannot begin to state how grateful I am to all of our employees that kept our operations running and in a safe manner.

With regards to sales, we experienced significant volatility by channel. Within our Timberlake direct business, we once again leveraged our service platform to gain share within the single-family new construction market. Growing high single digits over prior year, we continued to separate ourselves from the competition with our nationwide service to the country's top builders. Unfortunately, our PCS builder business in Southern California comped negatively for the year. Affordability has become a key issue in the region, with new construction starts falling off significantly over prior year. The business did stabilizetowards the end of our fiscal year and we are in hopes to see some recovery in our new fiscal year, pending the macro impact of COVID-19.

In home center, our made-to-order platform declined while our stock kitchen and bath business had a strong positive comp. Home centers have been struggling for some time within made-to-order, relying heavily on promotions in an attempt to engage customers. With the changing demographics of our customer base, we strongly believe it will require a strategic transition to better attract and serve the younger consumer. As such, in alignment with our new vision, we are working closely with our business partners on future-state solutions. On the other hand, our stock kitchen business experienced strong double-digit growth in the year. Not only did we benefit from regaining the Northeast market with our home center partner, but we comped positively throughout the country. The benefit of our stock platform has also become very evident during the COVID-19 crisis, with lower price point cabinets showing more resiliency during the downturn.

With regards to our dealer/distributor channel, we were down for the year. As with home center, we believe the dealer business is being impacted by the changing demographics of our consumer base. Overall affordability within the housing industry is the key driver as younger consumers struggle to purchase an existing single-family home. The fact that existing home inventory at the opening price point remains at record lows is a contributing factor. However, we firmly believe that it is only a matter of time before younger consumers become the predominant driver in our industry.

As we now look ahead, our short-term view is clouded by the current COVID-19 crisis. Far too many variables exist to

accurately predict the near-term outlook on our industry. One thing is for certain, due to our low-cost Origins product within our direct-to-builder channel and our stock product within home center, we will fare much better than many. In addition, as with prior downturns in our market, we know how to operate and make the right strategic choices to win during the recovery. COVID-19 has awakened a different way of thinking in many; including our business partners, our consumers, and within our own company. Even prior to the pandemic, few would argue that the world around us was changing at an ever-increasing pace. Our industry must adapt and learn to be innovative and drive change at the same pace, or we will quickly fall behind. Our 2025 Vision is inspiring us to do just this. Our entire company is united around a vision that leverages the incredible energy that connects us all. We will drive innovation in everything that we do, from how we produce our product to how we service our customers. Digital technology has opened the door for us to fully interface with our consumers, from inspiration to project completion. With our installed nationwide service platform, we have the footprint to expand to offer a truly customized experience for all consumers. Our future has never been more exciting. We look forward to continuing to separate ourselves from ourcompetition by stretching ourselves toward a higher level of excellence, engaging and better understanding every customer we serve.

In closing, I would like to extend a very heartfelt thank you to each and every one of our teammates that kept the livelihood of our company running during the pandemic. It was their courage and passion that allowed us to not only operate, but to do it in a very safe way. Our commitment to safety runs deep as it is engrained in our culture and day-to-day lives. Manufacturing 10.4 million cabinets in our fiscal year is extraordinary within itself, but doing it with a world-class OSHA safety rate of 1.23 is simply incredible!

On behalf of the Board of Directors, the leadership team, and the entire Company, we thank you for your continued support.

Please reference the reconciliation of generally accepted accounting principles ("GAAP") to non-GAAP financial measures used in this letter beginning on page 21 of the

Company's Form 10-K.

S. Cary Dunston

Chairman and Chief Executive Officer

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AWC - American Woodmark Corporation published this content on 07 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 July 2020 12:38:04 UTC