American Woodmark Corp., the maker of private-label cabinets for the big boxes and Timberlake Cabinetry for the new-home market, swung to a net loss of $9.1 million in its fiscal third quarter ended Jan. 31 on a 32% decline in net sales to $89.2 million.
Promotions by the home centers in last year's third fiscal quarter made this year's sales total look comparatively worse, chairman and CEO Kent Guichard said in a news release. "The company continues to actively pursue and achieve market share gains, and absent the impact of the prior year promotions, believes it gained sustainable market share during the third quarter," he said.
As for the net loss--particularly compared with the $23,000 in net income it posted in the year-earlier third quarter--Guichard said the numbers "reflect our ongoing strategy to retain the organizational and production capacity to service our customers as demand for new construction and big ticket remodeling projects recovers. The company's financial position remains outstanding.
The coimpany didn't give separate financial reports for Timberlake, but it did say that sales declines in its remodeling channel exceeded the overall drop in sales. The company's American Woodmark line is sold exclusively at The Home Depot, while Potomac Cabinetry, a line from its Shenandoah Cabinetry subsidiary, is sold exclusively at Lowe's.
Between last spring and last fall, American Woodmark cut costs by permanently closing two factories, suspending operations at a third plant, and cutting salaried personnel. Nevertheless, gross profit in the third quarter shrank to 6.6% of net sales fomr a year-earlier 15.5% and for the first nine months of this fiscal year it's running at 10.3% of net sales vs. a year-earlier 15.3%. These declines "primarily reflected the unfavorable impact of inefficiencies in direct labor and manufacturing overhead costs stemming from the impact of lower sales volumes," the company said. "Partly offsetting these adverse factors were favorable impacts from lower fuel and material costs, as well as reduced manufacturing overhead costs related to the aforementioned plant closures."
For the first nine months of this fiscal year, the company has generated a net loss of $20.8 million compared with a $301,000 loss in the first three quarters of fiscal 2009. Sales declined 27% to $294.1 million.
During the quarter, American Woodmark terminated its primary credit facility with Bank of America and entered into a $35 million secured revolving line of credit agreement with Wells Fargo Bank.
"The company's financial position remains outstanding, as evidenced by its generation of free cash flow during the quarter and its ability to obtain an improved credit facility at competitive rates and terms despite the ongoing credit crunch," Guichard said.