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EX-99.1 - EXHIBIT 99.1 - AMERICAN WOODMARK CORP | ex9912017121.htm |
EX-10.1 - EXHIBIT 10.1 - AMERICAN WOODMARK CORP | ex101-commitmentletter.htm |
EX-2.1 - EXHIBIT 2.1 - AMERICAN WOODMARK CORP | ex21-mergeragreement.htm |
8-K - 8-K - AMERICAN WOODMARK CORP | amwd-121178k.htm |
American Woodmark’s
Acquisition of
RSI Home Products
December 1, 2017
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Forward Looking Statements
This communication contains certain “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements as to the anticipated timing of completion of the proposed transaction, expected
cost synergies, future financial and operating results, and other expected effects of the proposed transaction. These forward-
looking statements may be identified by the use of words such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,”
“should,” “could,” “would,” “plan,” “may,” “ intend,” “prospect,” “goal,” “will,” “predict,” or “potential” or other similar words
or variations thereof. These statements are based on the current beliefs and expectations of the management of American
Woodmark and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ
materially from those expressed herein. These risks and uncertainties include, but are not limited to, the occurrence of any
event, change or other circumstances that could give rise to the termination of the merger agreement or a delay in the
completion of the proposed transaction, a failure by either or both parties to satisfy conditions to closing, a failure to obtain
any required regulatory or third-party approvals, including any required antitrust approvals, the effect of the announcement
of the proposed transaction on the ability of American Woodmark and RSI to retain customers, maintain relationships with
their suppliers and hire and retain key personnel, American Woodmark’s ability to successfully integrate RSI into its business
and operations, and the risk that the economic benefits, costs savings and other synergies anticipated by American
Woodmark are not fully realized or take longer to realize than expected. Additional risks and uncertainties that could impact
American Woodmark’s future operations and financial results are contained in American Woodmark’s filings with the
Securities and Exchange Commission (“SEC”), including in its Annual Report on Form 10-K for the year ended April 30, 2017
under the heading “Risk Factors” and its most recent Quarterly Report on Form 10-Q for the period ended July 31, 2017 under
the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward Looking
Statements.” These reports, as well as the other documents filed by American Woodmark with the SEC, are available free of
charge at the SEC’s website at www.sec.gov.
Estimated Financial Information
This presentation includes certain estimated financial information, including, but not limited to, CY 2017 Adj. EBITDA Margin,
CY 2017 Revenue and CY 2017 Adj. EBITDA. This information, which incorporates actual, unaudited financial results through
October 31, 2017, in the case of American Woodmark, and September 30, 2017, in the case of RSI, represents estimates by
both RSI's management and American Woodmark's management as of the date of this release only. These estimates (i)
are based upon a number of assumptions and estimates that are inherently subject to business, economic and competitive
uncertainties and contingencies, many of which are beyond our control, (ii) are based upon certain specific assumptions with
respect to future business decisions, some of which will change, and (iii) are necessarily speculative in nature. Some or all
of the assumptions and estimates utilized may not materialize or may vary significantly from actual results. As a result,
investors are urged to put the estimated numbers provided in context and not to place undue reliance on them.
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Today’s Presenters
Cary Dunston – Chairman and
Chief Executive Officer
Scott Culbreth – Sr. Vice President
and Chief Financial Officer
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Cabinetry Market is Large and Growing
$12.7
$17.3
2014 2019
U.S. Cabinet Industry
($ in billions)
Housing market still recovering with continued release
of pent-up demand driving future growth
Deferred R&R spending from the recession beginning to
be released
Market expected to grow to 1.5 million starts and 5% to
6% annual R&R growth by 2018
Single and multi-family housing built during 1996 to 2006
are entering a remodel period
Continued credit availability, improving job market and
recovering home prices drive consumer confidence, and
home improvement spending
Combination of American Woodmark and RSI is well-positioned in an attractive industry
Source: Freedonia and management estimates.
Bath
13%
In-Stock
9%
Stock
28%
Stock
Plus
13%
Semi-
Custom
25%
Custom
12%
Product Segment Breakdown
Market End-Use Breakdown
Repair &
Remode
l 63%
New
Constru
ction
37%
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AWC Expansion Strategy
Combination of American Woodmark and RSI aligns with communicated strategy
P
ri
c
e
Content & Platform Complexity
In
S
toc
k
St
oc
k
Sem
i-
Cus
to
m
Cus
to
m
Stock Plus
AWC’s
Current
Position
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Transaction Overview
Consideration
¡ Implied transaction value of $1.075 billion funded with:
– Approximately $346 million in net cash to be paid to RSI shareholders
– $140 million in American Woodmark common stock to be issued to RSI shareholders
– Approximately $589 million of RSI debt to be assumed by American Woodmark
¡ American Woodmark expects to fund the cash payment and transaction fees and expenses with cash on the balance sheet
and a new term loan agreement with Wells Fargo Bank, National Association. American Woodmark also expects to enter into
a new $100 million revolving credit facility with Wells Fargo Bank, National Association to replace its existing credit facility in
connection with the transaction and, if necessary, may draw on such facility for any remaining cash payments for the
transaction.
¡ RSI shareholders will own approximately 8% of American Woodmark diluted shares outstanding following the transaction
Financial
Benefits
¡ Broader revenue opportunities with an expanded product line and enhanced manufacturing capabilities
¡ Immediately accretive to American Woodmark’s profit margins and EPS, excluding anticipated synergies
¡ Anticipated annual run-rate synergies of $30 – $40 million, phased in over 3 years
¡ Additional upside potential from sales and marketing, purchasing and sharing of manufacturing best practices
¡ Enhanced cash flow generation
Leverage
Profile
¡ Expected net debt to adj. EBITDA ratio of approximately 3.0x (2) following transaction
¡ Combined Company is expected to generate significant cash flow that will facilitate rapid debt reduction
– Expected to reduce net debt to adj. EBITDA ratio to near 1.5x by the end of calendar year 2019 including
impact of anticipated synergies.
Organizational
Structure
¡ Combined company will be managed by American Woodmark’s management team (led by President, CEO and Chairman
Cary Dunston)
¡ RSI will operate as a subsidiary of American Woodmark following the transaction
Closing
¡ Expected to close in American Woodmark’s fiscal quarter that ends January 31st, 2018, subject to antitrust regulatory review
and approval and other customary closing conditions
_____________________
(1) Based on average closing price for the 5 trading days prior to the signing date.
(2) Represents unaudited financial estimate; EBITDA exclusive of anticipated synergies.
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RSI Home Products Inc.
A Proven Market Leader Within The
In-Stock and Value-Based Cabinetry Market
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RSI Home Products (“RSI”) Overview
Key Strengths ~$560M in revenue
~22% Adj. EBITDA margin(1)
~4K retail customer locations
9 manufacturing and
distribution facilities
3M+ square feet of
manufacturing and distribution
space
~4,300 dedicated employees
Highly Efficient
Operator
Exceptional Customer
Value Proposition
Strong
Relationships with
Key Customers
Proven Track Record
of Strong Performance
Multiple Avenues
for Growth
Highly Experienced
Management Team
RSI is a highly profitable manufacturer of in-stock and value-based kitchen and bath cabinetry
and home storage products in North America
Recession Resilient
with Value Focused
Portfolio
(1) Excludes transaction costs and anticipated synergies
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RSI’s Strong Reputation and Complementary Product Portfolio
Broad range of value-focused solutions for the Kitchen, Bath and Organization segments
Product
Category
Kitchen Solutions Bath Solutions Home Organization
Product
Offering
In-Stock Stock In-Stock Stock In-Stock
Kitchen cabinets
and accessories;
offering with basic
door styles, finishes
and box sizes
Frameless line
with broad
selection of door
styles, finishes,
drawer boxes
and accessories
Vanities, wood
medicine
cabinets, bath
storage cabinets,
vanity tops and
vanity / top
combination units
Vanities and tops;
broader selection
of sizes, finishes
and decorative
styles
Wall cabinets, closet systems and
garage storage products
Brands
Hampton Bay and Glacier Bay are a registered trademarks of The Home Depot. Home Decorators Collection is an exclusive brand of The Home Depot. Style Selections, Project Source and Blue Hawk
are registered trademarks of LF, LLC
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The “New” American Woodmark
Improved diversification and positioned for growth
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12.5%
11.8%
13.2%
Pro Forma
16.7%
Expanding Margin Profile of American Woodmark
Highly-efficient engineering and
manufacturing techniques to drive “Value In”
to products while taking “Costs Out”
― Continuous reengineering of products
and processes to remove unnecessary
costs while improving quality
Regular evaluation of organizational
productivity and supply chains
Sophisticated logistics network supported by
strategically located manufacturing and
distribution facilities throughout North America
Vertically-integrated production and
assembly lines, standardized product
construction and investments in automation
allowing for continuous improvement and
productivity increases
Pro Forma Margin Profile
CY 2017 Adj. EBITDA Margin(1)
RSI’s margins are highly accretive to American Woodmark
RSI’s Operational Excellence
_________________
Source: RSI management and public filings.
12.3%
RSI
Contribution
Pro Forma
~16.0%
(1) Excludes transaction costs and anticipated synergies
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Nationwide Manufacturing and Distribution Footprint
AMWD Service Centers RSI Sales Offices AMWD HQ RSI HQ
AMWD Manufacturing
Provides broad North American footprint with extensive capabilities and operating flexibility
RSI Manufacturing
Map for Editing
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Greater
Scale
(Revenue $mm)
Balanced
Revenue
Base
Diverse
Business Mix
Home Center
55%
New
Construction
38%
Dealers /
Others
7%
Creating a Larger and More Diversified Platform
$1,059
$1,622 $563
_____________________
Source: American Woodmark, RSI and combined Company profile based on American Woodmark and RSI Management estimates.
Stock Plus
52%
Stock
22%
In-Stock
Kitchen
12%
Bath
14%
New
Construction
52%
Home Center
38%
Dealers /
Others
10%
Home Center
87%
New
Construction
11%
[CATEGORY
NAME]
2%
Stock Plus
75%
Stock
25%
In-Stock
Kitchen
36%
Bath
39%
Stock
16%
[CATEGORY
NAME]
9%
CY2017E
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Financing and Liquidity
Pro Forma Balance Sheet Financing
Implied transaction value of $1.075 billion
Financing structure
― Net cash: $346 million
― Debt assumed: $589 million(1)
― New AMWD common stock: $140 million (2)
American Woodmark expects to fund the cash
payment and transaction fees and expenses with
cash on the balance sheet and a new $250 million
term loan.
American Woodmark will also enter into a new $100
million revolving credit facility to replace its existing
credit facility and, if necessary, may draw on such
facility for any remaining cash payments for the
transaction.
American Woodmark will pursue a refinance of the
2nd Lien Notes at the appropriate time.
Pro forma net debt-to-adj. EBITDA ratio of 3.0x (3)
― Equity issued to sellers preserves balance sheet
flexibility
Approximately $200 million in liquidity expected
at close
― ~$150 million of remaining cash on hand
― ~$50 million undrawn capacity on new revolver
Strong combined cash flow supports rapid delevering
― Net debt-to-EBITDA target below 1.5x by the end
of calendar year 2019 including impact
of synergies
_____________________
(1) Includes 6.50% 2nd Lien Notes due 2023. Transaction will trigger a Change of Control and American Woodmark will purse a consent to waive the Change of Control.
(2) Based on average closing price for the 5 trading days prior to the signing date.
(3) Note: Represents unaudited financial estimate; EBITDA exclusive of anticipated synergies.
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Compelling Strategic Combination
Strategic combination will drive long-term shareholder value
(1) Excludes anticipated synergies.
Continued commitment to creating value through people
Solidifies American Woodmark’s position as an industry leader in cabinetry
Creates greater scale through a broader product and brand portfolio
Deepens relationships with key channel partners
Expands national footprint with low cost manufacturing and distribution
Strengthens operational expertise and manufacturing excellence
Shared focus on quality, value and customer satisfaction
Immediately accretive to American Woodmark’s margins and EPS (1)
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Calendar Year Ending December 31, 2017
AMWD (1) RSI (2) Pro Forma
Net Income $72.0 $41.4 $113.4
Interest Expense (1.8) 39.0 37.2
Income Taxes 36.5 21.4 57.9
Depreciation &
Amortization
21.2 16.8 38.0
Other(3) 2.7 4.4 7.1
Adj. EBITDA 130.5 123.0 253.5
Net Debt 752.1
Net Debt to Adj EBITDA Ratio 2.97
Reconciliation of Non-GAAP Measures
The following information provides reconciliations of non-GAAP financial measures from operations, which are presented in
the accompanying presentation, to the most comparable financial measures calculated and presented in accordance
with accounting principles generally accepted in the U.S. (“GAAP”). Each company has provided non-GAAP financial
measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition
to the financial measures presented in the accompanying presentation that are calculated and presented in accordance
with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the presentation.
The non-GAAP financial measures in the accompanying presentation may differ from similar measures used by other
companies. The following tables reconcile the non-GAAP measure of Earnings Before Interest, Taxes, Depreciation and
Amortization (“EBITDA”), as well as factoring in any adjustments to EBITDA, (“Adj. EBITDA”) referred to in this presentation to
the most directly comparable GAAP measure reflected in the each company’s financial statements.
_____________________
Note: Adj. EBITDA defined as operating income plus depreciation and amortization and impact of certain non-recurring / non-cash items not considered to be part of normal operations.
Note: Net Debt to Adj. EBITDA defined as total long term debt and debt maturing within one year net of cash and cash equivalents divided by Adj. EBITDA
1 - Unaudited financial estimate. Includes actuals through October 31, 2017.
2 - Unaudited financial estimate. Includes actuals through September 30, 2017.
3 - AMWD adjusted for corporate business development expenses related to a potential M&A target that we ultimately decided not to pursue. RSI adjusted for restructuring and other non-recurring costs.