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American Woodmark (NASDAQ:AMWD)

Q2 2014 Earnings Call

November 26, 2013 11:00 am ET

Executives

Glenn Eanes - Vice President and Treasurer

Kent B. Guichard - Chairman of The Board and Chief Executive Officer

Analysts

Scott Rednor - Zelman & Associates, LLC

Garik S. Shmois - Longbow Research LLC

Nick Coppola

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Operator

Good day, and welcome to this American Woodmark Corporation Conference Call. Today's conference is being recorded.

The company has asked us to read the following Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statement. Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

And at this time, I'd like to turn the call over to Glenn Eanes, Vice President and Treasurer. Please go ahead, sir.

Glenn Eanes

Thank you. Good morning, ladies and gentlemen, and welcome to this American Woodmark conference call to review the financial results of our second fiscal quarter ending October 31, 2013.

Thank you for taking time to participate. Participating on the call today with me will be Kent Guichard, Chairman and Chief Executive Officer. Kent will begin with a review of the quarter and will conclude with an outlook on the future. And after Kent's comments, we'll be happy to answer your questions. Kent?

Kent B. Guichard

Thank you, Glenn. This morning, we released the results of our second quarter ended October 31, 2013.

First, the financial headlines for the quarter. Net sales were $191 million, representing an increase of 19% over the same period last year, and reported net income was $5.3 million or $0.34 per diluted share this year versus $2 million or $0.13 per diluted share last year.

For the 6 months ended October, net sales were $368.6 million, representing an increase of 20% over the same period last year. Reported net income was $11.9 million or $0.70 per diluted share this year versus $2.5 million or $0.17 per diluted share last year.

For the first 6 months of the current fiscal year, the company generated $15.8 million in cash from operating activities compared to a use of $2.2 million for the first 6 months of last year.

Now moving underneath the headlines starting with sales performance on the new construction side. Housing starts from the U.S. Census Bureau are not yet available for September and October due to the reporting delays resulting from the federal government shutdown. Our expectation based on reported August preliminary data and general media sources is that overall housing starts and single-family starts, in particular, during the 3 months covered by our most recent fiscal quarter were elevated over the same quarter in calendar 2012.

The period covered by our second fiscal quarter was the last quarter with relatively low year-over-year comparisons. Between July and October of 2012, single-family starts increased 16% from 512,000 annualized seasonally adjusted starts in July to 595,000 in October.

Single-family starts increased approximately another 5% during the first calendar quarter of 2013 before settling back to approximately 600,000 starts where they have stayed since April. As a result, housing activity during our second fiscal quarter, while flat on a sequential basis, was up 15% to 20% on a comparative year basis. In this environment, our new construction based revenue increased over 40% for the quarter. We believe our growth in excess of starts continues to be driven by our partnerships with national and regional builders that are gaining share of total starts and by our increased share with those builder partners.

Moving over to the remodel side of the business. The remodeling picture remains murky, with the most commonly referenced indicators painting a less-than-uniform outlook. Residential investment as a percent of GDP continues to improve, albeit slowly. Over the last 6 sequential calendar quarters, it's moved from 2.7 for the quarter ended June 2012 to 3.2 for the quarter ended September 2013. Improved, but still well below the 4.5 historical average.

October existing home sales of $5.12 million were 6% above the same period last year, but retreated for the second consecutive month of the current year falling 3% from September. While the fixed 30-year mortgage rate fell from September to October, mortgage rates remained elevated versus October of 2012. The 30-year average commitment rate for a 30-year conventional mortgage was 4.2% for the month ended October versus 3.4% in the same month of 2012.

Home prices continued to rise with composites up in the low-teens on a year-over-year basis in most markets. Positive implication of rising home prices -- restoring of homeowner equity. The number of units with negative equity dropped by over 30% from December 2012 to July 2013. The negative implication of home prices continuing to rise is that the combination of those higher home prices and increased interest rates have reduced affordability, particularly for the first time buyer.

[indiscernible] home sales declined throughout our second fiscal quarter, with October marking the fifth consecutive month of sequential decline. The unemployment situation is unbalanced, and, in our opinion, unfavorable. The economy did create some 200,000 jobs in October, but unemployment was steady at 7.3%.

[indiscernible] as the participation rate dropped to 62.8%, with the total number of nonparticipants reaching an all-time high.

Finally, in relation to the remodel market, consumer confidence has been unable to gain any consistent traction, and in fact, recently took a significant drop on the heels of the partial federal government shutdown and the constant partisan wrangling in Washington.

When absorbed in its totality, our view of the overall remodeling market is that demand is relatively flat in terms of activity, this trend demonstrating little, if any lift.

Our evaluation of the remodel side of the industry is that it's slightly down in terms of overall units, but up in the mid- to high-single digits from a revenue perspective due to improved product mix and some pricing.

The dealer channel within the remodel business is more than likely generating a higher growth that the big-box channel due to the more affluent nature of their customer base, but, both are still in single-digit territory.

This environment we reflected the low side of the market during the second fiscal quarter on the remodel side of our business. We have held share in the big-box environment and gained share in the dealer business.

We're under index the market, however, in terms of dealer versus big-box mix, with result being we weighted average to the lower side of the growth band or mid-single digit growth.

Moving on to gross profit. The company's gross profit margin for the second quarter of fiscal year 2014 was 16.9% of net sales versus 15.5% reported in the same quarter of last year. The company generated year-over-year incremental gross margin of $7.5 million on incremental net sales of $30.8 million, resulting in an incremental gross margin rate of 24%.

The improvement in gross margin versus the prior year was driven by improvement in labor, freight and overhead cost.

Regarding the labor improvement in gross margin, during the first and second quarters of last year, we experienced significant labor inefficiencies related to the closure of 2 plants during April and May of 2012 and the resulting relocation of that production to our remaining facilities. These inefficiencies were further exacerbated by an increase in overall production levels during the same period to meet growth in new construction demand. The inefficiencies began to moderate during the third quarter and were resolved by the fourth quarter fiscal 2013.

The improvement in labor component of gross margin for the second quarter of the current fiscal year reflects current productivity versus the inefficiencies of the prior year.

Regarding the freight impact in gross margin, our freight cost declined as a percentage of net sales this year versus last year due to higher volume across our delivery network. This increased utilization of the platform resulted in leverage on our semi-fixed and fixed capacities.

Regarding the over impact -- overhead impact on gross margin, very similar to the freight impact higher volume generated favorable leverage on fixed and semi-fixed cost. The favorable impacts in gross margin from labor, freight and overhead were partially offset by rising material cost across a broad range of inputs, including hardwood lumber, particle board, plywood, linerboard and finishing materials.

Material inflation continues to be significant with the impact on gross margin from second quarter this year versus second quarter in the prior year of approximately 260 basis points.

On a sequential basis, gross margin during the second quarter of the current fiscal year declined approximately 200 basis points from the first quarter of the current fiscal year.

There were 3 primary impacts first quarter and second quarter to the current fiscal year. Approximately 1/3 of the decline is due to continued raw material inflation.

Another 1/3 is due to the continuing shift towards new construction, which generally contains a higher cost of goods sold component associated with both the product mix and the installed nature in that channel and distribution. And the final 1/3 is due to timing associated with various overhead expenditures.

Spreading the timing impact associated with overhead, gross profit margin for the first 6 months of the current fiscal year was 17.9% of net sales versus 15.2% reported in the same period of last year. The company generated year-over-year incremental gross margin of $19.2 million and incremental net sales of $60.6 million, resulting in an incremental gross margin rate of 32% for the first half of the fiscal year.

From a broader picture of the gross profit level, the primary challenge is recovering sustained material inflation from the marketplace. I mentioned in last quarter's call that we had, at that time, seen some early movement in marketplace pricing to recover some of these costs, but it was too soon in our judgment to determine whether or not this movement would hold in the marketplace or whether or not they would be sufficient to recover current and anticipated cost increases.

As of today, it appears that some of the pricing movement will hold. It does not, however, look to be sufficient to recover the full impact of material cost increases, but it will have a meaningful impact on offsetting these costs. I would expect the market to begin to reflect these pricing changes through our fiscal third quarter of the current year and be fully effective in our fourth quarter of the current fiscal year.

Regarding operating expenses. Total operating expenses were improved from 13.5% of net sales in the second quarter of the prior year to 12.3% this fiscal year. For 6 months, SG&A improved from 13.6% of net sales to 12.5%.

Breaking down operating expenses, selling and marketing expenses were 8.3% of net sales in the second quarter this year, down from 9.3% in the prior year, and general administrative expenses were 4% of net sales in the second quarter of the fiscal 2014 compared with 4.1% in the prior year.

The improvement in our operating expense ratio was the result of leverage from higher volume combined with controlled spending levels.

Briefly on capital spending and cash flows. The company generated operating cash flow of $15.8 million during the first 6 months of fiscal 2014, an improvement of $18 million over the same period in the prior year. The improvement in operating cash flow was driven by higher profitability and some timing associated with various accrued liabilities.

Investing activities in capital spending and promotional displays were $5.8 million for the first 6 months of the current fiscal year. Investing activities, excluding the sale of assets for the same period last year, was $8 million.

The decline in year-over-year was due to project timing and is not reflective of the company's project activity. Excluding any significant capacity expansion project, the company expects capital spending to be consistent with the prior year.

The company increased cash by $21.5 million during the first 6 months of fiscal 2014, ending October with $118.5 million in cash and cash equivalents on hand.

The Board of Directors has approved the stock repurchase authorization of $10 million, replacing all prior programs that have been terminated. After reviewing the company's previous program and in light of the company's capital plans and forecast, the Board decided that smaller authorizations would provide more timely information to our shareholders.

Going forward, the Board will approve repurchases that are most likely to occur in the following 12 months. The company did not repurchase any shares during the second quarter just completed, while the Board reviews the repurchase program.

In closing our prepared remarks, we continue to be pleased with our overall progress as the industry recovers from the great housing recession. Through the first half of fiscal 2014, we've continued to increase revenue with net sales up 20%. We've improved gross margin by 270 basis points, despite significant headwinds in our material costs. We reported net income almost 5-fold from the same period last year and greater than the full-year in fiscal 2013. We've strengthened the balance sheet, giving us access to unprecedented financial resources. And most importantly, we have positioned the company for continued success as the new construction and remodel markets recover.

The return to normalcy will not, however, be linear, and the second quarter is reflective of the obstacles we will undoubtedly face during the period ahead. As we look towards the second half of our current fiscal year, we're focused on 2 main challenges. First, dealing with the ongoing impact of material cost inflation, offsetting increases internally to the extent possible and supporting efforts by the industry to recover legitimate changes in the basic cost of raw materials. And second, balancing our cost structure with demand in an extremely fluid environment made even more volatile by the continuing dysfunction in Washington and the negative impact successive rounds of partisanship behavior have on consumer confidence.

With that, I would be happy to answer any questions you have at this time.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question will come from Scott Rednor with Zelman & Associates.

Scott Rednor - Zelman & Associates, LLC

As you think about the back half of the year with what you're seeing in Ross [ph] and the offset of pricing, do you think you could back to that 30% incremental on the gross profit line?

Kent B. Guichard

Well, I mean, there's, obviously, a lot of moving parts there. From -- there are a couple of things, I would say, on your question, specifically, and then I'll add kind of another element to the mix. The thing that I would add is that some way -- it appears that the marketplace, as I said in my prepared comments, is that the marketplace is supporting some pricing, but we continue to live in a materially inflationary environment, so you're kind of always a little bit behind the curve. So the return in gross margin, while I think that the pricing activity looks like it will hold as we get through our third and certainly into our fourth quarter, the question is everything else doesn't standstill and what happens to material cost between now and then? As we've talked about before several times on the call, there's a little bit of a lag between when we get hit by material cost and when we're able to as an industry to pass them through to the marketplace. So I think it depends a lot on -- the back half of the year, specifically to that part of your question, I think it depends a lot on what happens on material cost inflation going forward. If it continues to rise, it's kind of the same rate that we've seen over the last 12 to 18 months then we're going kind of be chasing that again. The industry will kind of be chasing that for a while. If it takes a pause and kind of levels out, then I think that you'll see what the industry has been able to do in terms of passing some of that on through to the end consumer, I think you'll help that'll buoy margins back up. And the other element that kind of comes into the mix, I kind of mentioned it briefly, although probably not specifically enough, is what happens to the volume. And we've got 2 things going on. I did mention it when I talked about new construction. Really, October last year, we kind of hit the 600,000 single-family starts level, and it's been pretty much flat since then. So as we get into the back half of the year, our year-over-year comps in terms of the industry volume on the new construction side look to certainly not be as robust in terms of the growth. We still think we'll outgrow the industry based on our share improvements, but I think we're going to start to get some more kind of volume challenges in terms of growth rates on the new construction side. On the remodel side, kind of this 90-day successive rounds of having to deal with the federal budget and with the debt ceiling, if you look probably I'd point mostly at consumer confidence numbers, that's probably a good thing to look at. If you look at the toll that that's taking on consumer confidence, which rolls through to the discretionary big-ticket items, as we talk about going through the third and end of the fourth quarter, we're a little bit more concerned about industry volumes maintaining then we probably were 3 or 6 months ago just because of the impact that these kind of successive rounds are having on the consumer.

Scott Rednor - Zelman & Associates, LLC

So if I hear you right, if the new construction comps follow, do you think that this been holding raw materials content, should be the low point for incremental margin going forward given that this is the lowest in 4 or 5 quarters in terms of that 24% drop down?

Kent B. Guichard

Well, I mean, you're asking to give some guidance. And I mean, to me, what I would suggest, just work through those individual pieces. I mean, while I kind of go with this, that I don't think we're going to see as robust growth on the top line. And your forecast are probably as good as mine in terms of what happens on material inflation. The real driver of what's happening on our gross margin side is material cost. So it all comes down to what is material cost and how quickly can the industry move to recover those, understanding that there's a bit of a lag associated with that.

Scott Rednor - Zelman & Associates, LLC

Okay, fair enough. And then just on the remodeling market, to your point, when you noticed that the difference between volume and price mix is somewhere an order of magnitude of 10 points. Are you guys, participating in that mix-up, do you feel confident that you guys are seeing that revenue acceleration you're picking it up in your results? Or is there some part of it that's priced above your product offering that may be the consumers coming back into?

Kent B. Guichard

No, we think it's more a channel of distribution than it is actual products within those channels of distribution. Now we continue to introduce new products based on where the consumer is shopping, to specifically to your point from a price point perspective. So we don't think that we are losing out because of our price position and our product price position in the dealer market versus the other. It's just that versus the industry, our dealer business is still relatively small versus the total remodel. We're still over-index, as I mentioned, we're still over-indexed to -- by a good margin to big-box versus the industry. And so that will weight us average down. Our remodel, our dealer business continues to grow. We continue to be very successful. We're a little over 3 years in terms of since when we launched that product. We launched it really in the spring of 2010. So it continues to gain momentum. It continues to gain critical mass, but it's still, versus the industry we're under-indexed. So on a like versus like basis, we're fine. Was just don't have the same presence in that channel of distribution as, let's say, the industry average.

Operator

And our next question will come Garik Schmois with Longbow Research.

Garik S. Shmois - Longbow Research LLC

Just first off, you mentioned that sequentially, quarter-to-quarter, you had about a 1/3 of the margin aggregation came from higher overhead costs, and those, I would anticipate, were coming from performance-based compensation expense. Is that expected to continue again into the third quarter sequential increase?

Kent B. Guichard

Well, there's a couple of certainly. There is some performance based in there. The other one is there was just some timing associated with -- I'll just call it the lumpiness of expenditure. So there are certain expenditures that you have, for example, higher and relocation costs that don't come in equal increments, and that is one of the big -- probably one of the big items that we had in our manufacturing and overhead line was we hired a couple of senior people and we have their hiring in relocation costs. So I would say that going forward kind of our expectation is the first quarter was probably a little abnormally low. The second quarter was probably a little abnormally high. So our -- my expectations would be that those overhead costs would moderate as we got into the second half of the year.

Garik S. Shmois - Longbow Research LLC

Okay. And again switching to pricing. You're indicating that you left the tough comps on the new housing side or apparently remodel is still pretty choppy. You are seeing raw material inflation, which normally would be supportive of pricing, and you're getting pricing in the market. But is there any concern right now that some of the promotional activity that's abated over the last several quarters starts to come back as the industry starts feeling a little bit uneasy about the rate of volume growth?

Kent B. Guichard

Well, yes. I mean sure, we all have -- from the 6 years we've been through, those scars if you will, are pretty close to the surface. So there's always I think some concern that we might get the high level of promotional activity that might come back in. My kind of view is that while that's possible, I don't think it's probable. I think the industry is running at capacity utilizations that are very different than they were 3, 4 years ago when a lot of that really started. I think that people are a little bit more -- with that are a little bit more concerned about concentrating on the business that they are doing or covering some reasonable margin structure. So I think that that's possible, I think there have been some things, particularly the utilization capacity, utilization of industry that they are different than they were 3 or 4 years ago. So my guess is it's probably pretty stable now. Of course, anything can happen, but my guess is it's probably pretty stable. I don't see the industry kicking off another round, but you never know.

Garik S. Shmois - Longbow Research LLC

Okay. I mean, just one follow-up question to the incremental margin question that was asked previously. With respect to what happened in the quarter and your view on raw material cost inflation moving forward, and again some of the volume trends that are starting to emerge, is there any change in your view long-term to the 25% to 30% incremental margin outlook that's been provided previously? And should we be concerned with all of that long-term view what the business could do is at risk?

Kent B. Guichard

Well, I mean, the target that we've put out there as we think, particularly, as we kind of go through this recovery phase to get back to some historical norms in terms of marketplace volumes and those types of things, that band that we've given of 25% to 30% is still a band as a target that we're comfortable with. And even comps are starting to come up in the second quarter. We had some, like I said, those things some additional material inflation that the growth in new construction -- the continued growth of new construction out of balance with remodeling because that does have a higher cost of goods sold content for us. And even with some of our overhead expenditures, we still were basically at the bottom of that 25% to 30% band and through the 6 months we were over that band. So that's still our target. As you talk about longer term, longer-term our target particularly when you're in a recovery phase getting back to some level of normal volumes in the marketplace, which would be probably 1.5 million starts and probably in the order of 6.2 million to 6.4 million existing homes sold. As long as we're back on that kind of -- journey back to those kind of normalized or historical averages, we would look to continue to kind of do that 25% to 30% incremental.

Operator

[Operator Instructions] And our next question will come from Nick Coppola with Thompson Research Group.

Nick Coppola

Going back to raw material cost issue. What did that really hit? Was that more of an October phenomenon or was it throughout the quarter?

Kent B. Guichard

Well, yes. I mean it's not limited to a month. I mean we started to get to see -- there've been some discussion about and some conversation in the building materials industry going back to last year. We really started to see it in terms of spot market and other direct market activity at the beginning of calendar 2013. But based on our contractual relationships and the partnerships we had with vendors, we didn't really see it start to flow through our books until sometime after that. So it probably really started to hit us late first quarter, but certainly, we got quite a bit of it in the second quarter.

Nick Coppola

And now, did the Chinese plywood tariff issue have an impact on you?

Kent B. Guichard

Well when that -- when it was initially done last year, last December, when the initial ruling was that there was dumping, we saw the markets move. I mean, in anticipation of that, the market -- the pricing in the market moved up significantly, kind of high 15% to 20%. It moved pretty quickly and then leveled out. Of course, the initial decision by commerce was not upheld by the ITC. It was overturned. And so that's been a relatively recent event, and so I'm not sure exactly. We haven't really seen a lot happen, one way or the other, in the plywood market since then. If you think the run-up in January, February, March was due to the potential for the dumping at the hold, then you might anticipate that the markets would settle back down, maybe not go all the way back to where they started, but would certainly settle back down, but we haven't really seen that yet. But that's only one of the material components. Lumber has been on -- hardwood lumber has been on a pretty steady march up now for well over a year, and we're also seeing pressure on other things like finishing materials and particle board and linerboard and those types of things. So we're in a general inflationary environment here, it's not just plywood.

Nick Coppola

Okay, that's helpful. And then you may or may not be able to answer this one, but looking for a little bit more color on what growth CapEx could look like? I know last quarter we talked about what kind of run rate we have left. And just wanted to see if you had any updated thinking on that?

Kent B. Guichard

I'm sorry, something happened right there in the middle of there, and there was kind of a skip. It was about revenue growth?

Nick Coppola

No, no. I'm sorry, CapEx -- growth CapEx. Last quarter, there was some comments about 18 months of runway, and you are evaluating alternatives?

Kent B. Guichard

Yes, we still are. We actually, in our discussions with the Board, we did present them some long-term capital forecast, and that's led into the decision on the new share repurchase program. And we are still presenting alternatives to the Board. When we get to the point where we -- if it involves a significant investment -- a change in our CapEx outflow, we'll actually go ahead at that point when the Board approves that, which may or may not be before the next regularly scheduled meeting that we would go ahead and do a release on that, so that everybody knows what that is. But when you go through these, we have presented some things to the Board. They've had some questions, the discussions are ongoing. As we've talked about before, our current forecast continue to suggest that we need some meaningful capacity in the Spring of 2015. And if you backed that up in terms of the lead time of the facility and equipment, our target date to make a decision is, certainly, early in calendar '14. So certainly before the Springtime, we would look to ask the Board to approve our capital plans, and then we'd be able to communicate that.

Operator

And our next question will come from Peter Lisnic with Robert W. Baird.

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

First question, I just want to make sure I understand the margins and pricing and everything. In the second quarter, did you realize any price to offset some of the raw material costs? Or did you realize any price in the quarter to help offset some of that impact?

Kent B. Guichard

It was de minimis.

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Presumably, you've put through a price increase, because I think the comment was in the back half of materials kind of stabilized it, you should largely cover the inflation all of [ph] sequel, correct?

Kent B. Guichard

Well, we actually said was, and that was little bit in between both actual and anticipated costs but in the pricing that we've seen in the marketplace, it doesn't quite cover everything we've experienced in terms of cost inflation so far. But it is significant.

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Okay, all right. So can you give us a little bit of help as to what sort of incremental price, all [ph] sequel, I guess, if commodities kind of stay where they're at. What sort of price increase you might need to help cover what you've seen so far from an inflationary standpoint?

Kent B. Guichard

Well, what I said is our material increase year-over-year is 260 basis points in the second quarter, so...

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

And material's is what percentage of sales or comps [ph]? I can try, right?

Kent B. Guichard

Yes, historically, what we've kind of talked about, is just in real rough numbers, is our cost of goods sold is about 1/3 material, it's about 1/3 labor and associated cost, and it's about 1/3 overhead. With the inflation we've had -- material inflation we've had over the last year or so, materials probably moved up or from that a little bit, but that'll kind of get you in the ballpark.

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Yes, okay. That's helpful. And then just in terms of your end-market exposures, in terms of a potential incremental price increase, that's not something that you can do real-time, correct? I mean, there is only a certain points during the year, where we can expect to see some sort of price increase?

Kent B. Guichard

Well, yes. I mean in a -- again in a normal environment, that would be the case. That there are, and they're different based on your channel of distribution, that if you get on the new construction side, the vast majority of our volume on the new construction side with the national and regional builders is contractual relationships, and those contracts have clauses in them that relate to passing through price increases. Each contract's a little bit different in terms of the wording. Each contract has many of the -- has these kind of different trigger points in different periods. So on the new construction side, it does take some time between when you decide to go to the marketplace if the market will support it, and when you could actually get that through your pricing. On the remodel side, it's pretty similar. You have a couple of windows a year, usually, where you can go ahead and try to get a price increase through -- not 100%, but that's about what it is. And that's kind of why my comment, the guidance I kind of gave or the comment I made was that we expect to see that pricing kind of become effective through the third quarter and be fully in effect for the fourth quarter. So we would expect it to be, even when we saw it, really, at the beginning of our second quarter 3 months ago, and started to move that way, again, that's kind of that 6-month lag we've talked about for a long time.

Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Okay, and then just on the capital allocation, the press release with the share buyback, I was just wondering in term, of as you look forward and the Board, any sort of discussion about reinstituting a dividend of any kind? I know we've talked about it in the past, but I just wondering if that came up during the conversations?

Kent B. Guichard

It's come -- of course, all of our capital uses, including any returns of excess cash, not needed to reinvest in the business to the shareholders, that's always a topic of discussion. And at the moment, for quite a lot of reasons, I don't know if you want go into them all, but the Board is not of a mind to put a dividend back in.

Operator

[Operator Instructions] And we have no further questions in the queue, and I'd like to turn the call back over to our presenters for any additional or closing remarks.

Glenn Eanes

Thank you. Since there are no additional questions, this will conclude our call. Again, thank you for taking time to participate. And speaking on behalf of management of American Woodmark, we appreciate your continuing support. Thank you, and have a good day.

Operator

That does conclude our conference for today. Thank you for your participation.

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