WINCHESTER, Va., Dec. 1, 2017 /PRNewswire/ -- American
Woodmark Corporation (NASDAQ: AMWD) ("American Woodmark") today
announced that it has entered into a definitive agreement and plan
of merger with RSI Home Products, Inc. ("RSI"), a leading
manufacturer of kitchen and bath cabinetry and home storage
products. Under the terms of the agreement, the implied
enterprise value for RSI is approximately $1.075 billion, including $140 million in American Woodmark common stock to
be issued to RSI shareholders (based on the most recent 5 trading
day average closing price), approximately $346 million in net cash to be paid to RSI
shareholders and approximately $589
million of RSI debt to be assumed by American
Woodmark. The cash portion of the consideration is subject to
customary working capital adjustments.
Founded in 1989 by Ron Simon with
a vision of creating exceptional value for customers by providing
high quality products at affordable prices not otherwise available
in the industry, RSI has grown to one of the largest in-stock and
value-based cabinet makers in North
America providing kitchen, bathroom, home and garage
organization cabinetry, counter tops and accessories with over 100
styles and finishes to home centers, builders, dealers and
remodeling contractors. RSI expects to generate net income of
over $40 million and adjusted EBITDA
of over $120 million on approximately
$560 million of revenue for its
fiscal year ending December 31, 2017,
representing an adjusted EBITDA margin of over 21%.
The acquisition is expected to be immediately accretive to
American Woodmark's profit margins and earnings per share ("EPS"),
excluding transaction costs and before giving effect to anticipated
synergies. Although there can be no assurance, the
transaction is expected to close in American Woodmark's quarter
that ends January 31, 2018, subject
to antitrust regulatory review and approvals and other customary
closing conditions. The transaction does not require approval
of American Woodmark shareholders and has already received approval
from the RSI shareholders.
"RSI has built a tremendous reputation and position in our
industry by delivering quality products at a compelling value
position, and we are excited to welcome them to the American
Woodmark family," said Cary Dunston,
American Woodmark's Chairman and CEO. "The acquisition of RSI
will further enhance American Woodmark by creating a broader
product and brand portfolio that is well-positioned to fully
leverage our industry-leading service platform across all channels
and to drive improved profitability and long-term value for
shareholders. RSI's strong culture of continuous improvement
with a relentless focus on innovation and reengineering throughout
their operational and business practices complements our existing
capabilities. Most importantly, American Woodmark and RSI
share a similar culture that rests soundly on a foundation of
extraordinary employees and creating value through people."
Alex Calabrese, RSI's Chairman
and CEO commented, "This is an exciting day for RSI and reflects
the hard work and dedication of everyone involved in our proud
history and success over the past 28 years, most specifically, our
dedicated associates as well as our valued customers and suppliers.
We have great respect for American Woodmark, and are honored
to be joining forces with a company that shares our culture, values
and vision. This shared foundation makes the two companies an
ideal fit. RSI looks forward to continuing its growth
and delivering the highest value and best services to its
customers."
"We couldn't be more excited and optimistic about the future
potential for RSI and its loyal employee associates," said
Ron Simon, RSI's Founder and current
director. "This merger creates a company that will be a
stronger competitor in the kitchen and bath industry than RSI could
be on its own. The fact that the two companies share the same
culture in the way they value their associates and customers will
go a long way to ensure great future success. We believe RSI
is the industry's lowest cost manufacturer, and American Woodmark
has unmatched logistics and service capabilities, as well as a very
broad product line. This combination enables American
Woodmark to bring the greatest value by making higher quality
products affordable to more consumers."
Transaction Highlights
(Pro forma metrics represent unaudited financial
information)
- The combined company will have approximately $1.6 billion in pro forma annual revenue along
with a broader product portfolio that is well-positioned to deliver
growth, improved profitability and shareholder value.
- Annual run-rate synergies are anticipated to be $30-40 million, phased in over 3 years, to be
achieved through identified opportunities in sales and marketing,
purchasing and manufacturing efficiencies through the sharing of
operational best practices.
- American Woodmark expects to fund the $346 million net cash payment and transaction
fees and expenses with cash on hand and committed financing from
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 revolver and, if
necessary, may draw on such facility for any remaining cash
payments for the transaction.
- Prior to the closing of the transaction, RSI intends to conduct
a consent solicitation with respect to its 6
1/2% Senior Secured Second Lien Notes 2023
(the "RSI Notes") in order to amend the related indenture so that
the change of control provisions contained therein will not apply
to the transaction. In addition, American Woodmark expects to
explore options to refinance the RSI Notes either in connection
with or after the closing of the transaction.
- Immediately following the closing of the transaction, RSI
shareholders will own approximately 8% of American Woodmark shares
outstanding. These shares will be subject to a six-month lock up
period.
- American Woodmark is suspending its share repurchase program in
conjunction with the transaction.
- The combined company will be managed by American Woodmark's
management team (led by Chairman and CEO Cary Dunston).
- RSI will operate as a subsidiary of American Woodmark following
the transaction with its existing brands, channel strategy and
operational philosophy remaining.
The Company will host a conference call today with investors,
December 1, 2017 at 11:00 EST. A presentation, which will
accompany the call, will be available at www.americanwoodmark.com
and will remain available after the call.
Advisors:
Robert W. Baird & Co. Incorporated is serving as financial
advisor and McGuireWoods LLP is serving as legal counsel to
American Woodmark. Intrepid Investment Bankers LLC is serving
as financial advisor and O'Melveny & Myers LLP is serving as
legal counsel to RSI.
About RSI Home Products, Inc.:
Since RSI Home Products, Inc. was founded in 1989 it has been a
customer-focused, quality-driven manufacturer of bath, kitchen and
home organization products throughout the U.S. and Canada. The company has outpaced its
competition and continues to offer high-quality, low-cost,
value-rich products. RSI Home Products employs more than
4,200 people and has manufacturing and distribution facilities in
California, North Carolina, Texas, and Mexico. For more information, visit
www.rsihomeproducts.com.
About American Woodmark Corporation:
American Woodmark Corporation manufactures and distributes
kitchen cabinets and vanities for the remodeling and new home
construction markets. Its products are sold on a national
basis directly to home centers, major builders and through a
network of independent distributors. The Company presently
operates nine manufacturing facilities and seven service centers
across the country. For more information, visit
www.americanwoodmark.com.
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, risks
associated with the financing of the transaction, 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.
Non-GAAP Reconciliation
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, as adjusted
("Adjusted EBITDA") referred to in this presentation to the most
directly comparable GAAP measure reflected in each company's
financial statements.
|
Calendar Year
Ending December 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
|
|
Adjusted
EBITDA
|
130.5
|
|
|
123.0
|
|
|
253.5
|
|
_______________________
Note: Adjusted 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.
(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.
|
Note: the estimated financial numbers for RSI and American
Woodmark provided above represent estimates by RSI's management and
American Woodmark's management, respectively, as of the date of
this release only and (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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SOURCE American Woodmark Corporation