American Woodmark Corp (AMWD) 2011 Q3 法說會逐字稿

Please stand by, we are about to begin. Good day and welcome to this American Woodmark Corporation third quarter conference call. Today's call is being recorded.(Operator Instructions)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 might 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 statements. 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 statement, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. At this time, I would like to turn the conference over to Mr. Glenn Eanes, Vice President and Treasurer. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to this American Woodmark conference call to review the financial results of our third fiscal quarter ending January 31, 2011. Thank you for taking time to participate. Participating on the call today from American Woodmark Corporation will be Kent Guichard, Chairman and Chief Executive Officer, and Jon Wolk, Chief Financial Officer. Jon will begin with a review of the quarter and outlook for the future. After Jon's comments, Kent and Jon will be happy to answer any of your questions. Jon.

Thank you, Glenn. This morning we released the results of our third quarter of fiscal year 2011 that ended January 31, 2011. Our earnings release contain the following highlights for the third quarter. Net sales for the quarter were $111.4 million, representing a 25% increase from the prior year's third quarter. Net loss was $5.8 million. Comparatively, the Company's net loss in the third quarter of its prior fiscal year was $9.1 million. Earnings per diluted share was a loss of $0.41 for the third quarter of fiscal year 2011.

The company lost $0.64 per diluted share in the third quarter of its prior fiscal year. The company generated negative $1.8 million of free cash flow during the third quarter of fiscal year 2011, compared with positive $2.9 million of free cash flow in the prior year's third quarter. For the nine month period ended January 31, 2011, net sales were $328.4 million, up 12% over prior year. Net loss was $16.6 million, lower than the net loss of $20.8 million in the prior fiscal year, which included $1.7 million of after-tax restructuring charges.

The company lost $1.17 per diluted share during the first nine months of the current fiscal year, compared with a loss of $1.47 per diluted share in the prior year, which included $0.13 per diluted share of restructuring charges. The company generated positive $3.4 million of free cash flow in the first nine months of the current fiscal year, a significant improvement from the $8.1 million of negative free cash flow generated in the prior fiscal year. Regarding our third quarter sales performance, net sales for the third quarter of fiscal 2011 were 25% higher than in the prior fiscal year.

Although the remodeling and new construction markets briefly improved earlier in the year, with the expiration of the second housing stimulus program, the remodeling market has returned to a mid-single digit decline for the last six months. Several positive factors were overshadowed by negatives. On the positive side, private sector job creation has continued to be positive with approximately one million jobs created in the last 12 months. Consumer confidence was reported by the Conference Board in January to have reached an eight month high. Existing home sales reached their highest level in six months and inventories reached their lowest level in a year. And, mortgage delinquencies as tracked by the Mortgage Banking Association reached their lowest levels in two years.

But on the negative side, gross private residential fixed investment, as supplied by the US Department of Commerce was 5% lower in both the third and fourth calendar quarters of 2010, compared with one year ago. Cabinetry sales, reported by members of the Kitchen Cabinet Manufacturers Association, were down by mid-single digits in recent months and for the entire calendar year 2010, and median prices of existing homes sold from September through January were approximately 2% lower than one year ago and are expected to continue to be down slightly for the next several months. Recognizing these challenging market conditions, the Company's largest remodeling customers employed aggressive sales promotions for the fall selling season and beyond, which took the form of free products and additional discounts based upon the amount of sale.

The Company met competitive activity to maintain a competitive promotional offering to the customer . Price-conscious consumers responded to the elevated level of promotions, causing the Company's incoming order rate to increase in the mid-teens compared with the prior year's second quarter and at a high single-digit rate compared with the prior year's third quarter. The difference between orders and sales is accounted for by the timing in the Company's backlog. Orders are generally shipped within two to three weeks of receipt. From a timing perspective, the Company's remodeling sales rose modestly during its second fiscal quarter, even as orders were increasing at a mid-teen rate.

During the third quarter, the company's remodeling sales rose by more than 25%, as orders increased in the high single digits with reductions in backlog comprising the difference. These strong sales gains in a difficult market are indicative of the compelling value offered by the Company's products and services. In new construction, total residential housing starts during the Company's third quarter of fiscal year 2011 were down approximately 4%, compared with prior year, and down by about 1% for the first nine months of the Company's fiscal year. In contrast, the Company's new construction sales grew at a double-digit rate, compared with prior year results during both its third quarter and first nine months, indicating the continuing impact of market share gains the Company has made in this channel.

Overall, the Company's net sales increased by 8% during its first quarter that ended July 31, in a market that was essentially flat, grew by 3% in the second quarter ended October 31, in a market that was down by mid-single digits, and grew by 25% in the just completed third quarter, in a market that was again down by mid-single digits. Year-to-date sales have risen by 12% in a down market, indicating that market share gains have been achieved in every quarter.

Gross profit for the third quarter of the fiscal year of 10.9% of net sales compared favorably with the 6.6% generated in the third quarter of the prior fiscal year and with the 9.1% that the Company generated in its previous quarter. Gross profit for the first nine months of the current fiscal year was 11.1%, compared with 10.3% in the first nine months of the prior fiscal year. The primary driver to the gross margin improvement was the 25% improvement in sales, which in turn drove improved labor efficiencies and more favorable absorption of fixed overhead costs compared with prior year. Partially offsetting these improvements were the impact of two factors.

The first was the elevated sales promotion levels that the Company chose to deploy in order to meet competitor's promotional offerings during its second and third quarters to drive sales growth in a challenging market. Because most of these sales promotions involve the use of free product or reimbursements back to its large retail customers, these costs were deducted from gross margin as opposed to being classified in operating expense. The second factor that partially offset the gains from higher volumes was the impact of rising materials costs including paint, cartons, particle board and imported components, as well as diesel fuel.

Regarding operating expenses, total SG&A expense was 19.3% of net sales in the third quarter of fiscal 2011, improved from 23.0% of sales in the third quarter of the prior fiscal year. Selling and marketing expenses were 14.4% of net sales in the third quarter of fiscal 2011, improved from 15.7% of net sales in the prior year's third-quarter. Selling and marketing costs in the third quarter increased by 13% over prior year on a 25% net sales increase, driven by increased volume-related cost, such as sales commissions, sales promotions and enhanced business development activities as the Company worked to expand its reach in the remodeling sector.

General and administrative expenses were 4.9% of net sales in the third quarter of fiscal 2011, compared with [7.1]% in the prior year's third quarter. G&A cost declined by 15% even as sales increased, driven by lower incentive compensation of bad debt cost. As previously mentioned, the Company completed it restructuring activities in its prior fiscal year. These activities consisted of closing two of its manufacturing plants and suspending operations at a third plant, as well as a reduction in force of salaried personnel. The Company recognized a total of $1.7 million of net of tax restructuring charges during its prior fiscal year, of which $1.6 million was recognized in the prior year's first quarter. The Company does not expect to incur any significant costs related to these activities during fiscal year of 2011.

Regarding capital spending, the Company's total outflow for capital expenditures and promotional displays deployed during the third quarter of fiscal 2011 was $1.9 million, down from the $2.7 million deployed in the prior year's third quarter. The reduction in capital investments is in line with reduced capital needs associated with fewer plants and reduced retail store growth by the Company's customers. The Company expects that its net capital spending for fiscal year 2011 will be approximately $4 million to $5 million less than the $11.5 million it invested in its prior fiscal year. The Company expects to continue to fund its capital spending from a combination of operating cash flow and existing cash on hand.

Regarding the balance sheet, the Company's financial position remains outstanding. The Company ended the quarter with a total of $67 million in cash, cash equivalents and restricted cash on hand, compared with long-term debt of $24.8 million. Debt to capital on a book value basis was 13.5% at January 31, 2011. During the third quarter, the Company had negative free cash flow of $1.8 million, compared with positive free cash flow of $2.9 million in the prior year's third quarter. The decline in the third quarter's free cash flow is due entirely to the timing of payments and collections compared with prior year.

The Company generated positive free cash flow of $3.4 million in the first nine months of itscurrent fiscal year, as compared with the negative $8.1 million in the first nine months of its prior fiscal year. Improvement and year-to-date cash flow, compared with prior year, resulted from the absence of prior year payments related to restructuring activities, as well as proceeds collected in the current fiscal year from an income tax refund and timing of payments and collections.

In closing, we continue to manage the business with the primary objective of creating long-term value for our shareholders. We have chosen to continue to invest in improving the quality and breadth of the Company's products and services, in driving market share gains despite challenging market conditions, and expanding channels of distribution that we have not previously emphasized, and in maintaining the capability for significant amount of future growth once difficult market conditions moderate. The Company continues to retain the organizational and production capacity and know-how to service demand in a market with average to above average new construction and remodel activity.

Management remains focused on maintaining the strength of its industry-leading balance sheet. Despite experiencing net losses, the Company has operated at or near breakeven cash flow levels for six consecutive quarters and continues to expect to generate positive free cash flow in fiscal year 2011. The Company's third quarter sales increase marked the third consecutive quarter of year-over-year sales growth, the first time this has happened in four years. The higher than normal promotional cost levels that the Company experienced during its second and third quarters are expected to moderate somewhat during its fourth quarter, but still remain at elevated levels.

Although the market remains difficult to predict in the short-term, management remains confident in the Company's ability to weather challenging market conditions until sustainable market growth occurs. We continue to expect that market activity will eventually return to its historical norms of 1.25 million to 1.4 million new households and 1.5 million new housing starts per year. However, in the short-term, many consumers are still unwilling or unable to make large ticket purchases because of uncertainty, lower home prices and lack of credit availability.

For the remainder of its current fiscal year that ends on April 30, 2011, the Company expects that the remodeling market will be roughly flat with prior year levels, as the impact of uncertainty as to home prices and credit availability continue to offset the beneficial impact of gradually -- of a gradually improving employment outlook. The Company further expects that its retail customers will experience sales comps that are roughly in line with remodeling market's flat performance. The Company believes that its revised expectation of total housing starts will approximate 575,000 to 600,000 housing starts during its fiscal year that ends April 30, 2011. This concludes our prepared remarks. We'd be happy to answer any questions you have at this time.

(Operator Instructions)We will take our first question from Peter Lisnic of Robert W. Baird.

Hello, good morning. This is Josh Chan filling in for Pete. I guess, so It sounds like the magnitude of the promotions are moderating a little bit in the fourth quarter. I guess one, is that a correct read? Then, two, if that's right, is it still reasonable to expect a seasonal uptick in your sales in the fourth quarter relative to the third quarter?

Yes, this is Kent. I will do the second one first. Yes, we are anticipating that we'll get a normal kind of seasonal uptick here as we enter the spring selling season. No, we don't have any indication that that's not going to be the case. Certainly the promotional activity will be out there to make it attractive for the consumer on the remodel side. On the new construction side, as soon as the weather breaks here, we're still getting some reasonably good feedback from our direct customer, our new construction customers, that they are starting -- doing some land deals. They are starting developments and they look to be putting some houses in the ground.

From a promotional perspective, certainly some of it's timing, but also as Jon mentioned, I think it is starting to moderate a little bit. So, we would anticipate still elevated levels versus what they have been historically, but probably not quite the same rate we saw in the fall selling season just ended.

Okay. Great. As you think about the promotions going on in the market and the amount of share you are taking, how do you think about responses from competitors? I mean, will you have to get back some share next year, or will there be a structurally lower profitability of the industry as a result of the competition?

Well I gues that's the $64 question that you get to. Our kind of approach is that we meet the market in terms of net pricing. And so, there are a lot of forces that play in terms of the level of pricing and promotional activity. Generally, what we try to do is meet what's out there in the competitive marketplace. We, generally, do not use price as a way to gain share. We use our product, we use our service, we use our customer care kind of programs to do that. So what we try to do is we try to equalize net pricing to the consumer through promotions or whatever other means.

So, from that perspective, we are, generally, the ones reacting to the marketplace as opposed to driving the marketplace in terms of promotional activity. In terms of what happens longer term, if you go through the whole supply chain all the way through to the consumer, this is -- what we've been through has obviously been pretty severe and there's really nobody in the whole chain I think that's earning a real long-term, sustainable return on their investment and on their business. So at some point, something will give. What that is, I don't know.

We may see some people leave the marketplace in terms of either retailing, new construction, or on our site from a supply standpoint. It may moderate, I don't know. I've said it on a couple of previous calls. What I would point to, is maybe what I expect, is more what we saw the auto industry go through in the last couple of years, where they ended up with some very, very deep discounts for a period of time that were clearly unsustainable, and you've seen that there is still promotional activity in the car industry, but it has moderated back to something that the overall margin structure of the industry can kind of support on a longer-term basis. So, that is what I would suspect would happen.

The time that it will happen over, I don't know. I think a lot of it depends on volume coming back. As soon as volume starts to come back and returns to more of the historical norms that Jon talked about, I think that's probably one of those keys that's going to release some pressure off of the promotional side, because people aren't going to be scrambling quite as hard or quite as hungry for that incremental sale.

Right, that definitely makes sense. Thanks a lot for your time.

Sure.

Sure.

Our next question comes from David Macgregor of Longbow Research

Yes, good morning, everyone.

Good morning.

Can you just talk about the raw material impact on gross margins in the quarter?

Yes, it wasn't huge at this point, but we're seeing pricing pressures, and vendors are having discussions with us along those lines. So, I'd say that at this point it wasn't a huge factor, but it did dampen margins to an extent. And there's certainly potentially for further impact.

Okay. Is it -- my understanding is there are a number of price increases that have been announced by a number of your competitors, but you've elected to hold the line on pricing. I'm just trying to reconcile that with your comments a moment ago about share gains and how you meet the market on net pricing. And I'm just wondering if net pricing means you hold your prices, but maybe you're not quite as promotional as well.Can you help me reconcile all of that?

Well, yes. I'm not going to talk specifically -- any specifics about a competitor or what might have happened. There are certain windows that everybody has to put a price increase through based on product launches and when you come out with new 20-20 discs and some of those types of thing. So, when I talk about from a pricing standpoint, I am talking about it over a period of time, not necessarily a month or even a quarter, because those things have a tendency to even out.

What I'd say on pricing is, as we've talked about before and I'll relate it to your earlier question on material costs, is what the industry has been able to do over the years is, generally speaking, we can recover from the marketplace, given enough time, we can recover from the marketplace permanent, kind of sustained and permanent increases in input costs. Not some of these fluctuations, you know the biggest one we've seen over the last couple years has been fuel costs. That has this tendency to do these kind of strange run-ups. We had a year and half or so ago and it really wasn't driven by the underlying price of oil, it was driven by some financial speculation in the markets, the commodity markets. And we saw that bubble that lasted to a little bit of time, a couple of quarters and then went away. Those are not the types of increases that the industry recovers.

But, general, sustained, permanent increases in raw materials we've been able to recover from the marketplace. We've not been able to recover things above and beyond that. Everybody's at a different place at a different time, depending on where they're getting material inputs, what their contracts are, when the last price increase that they passed through the marketplace was. So over time, what we do, is we basically price and to market, both on a gross and a net basis, at any particular time, pick one, you're going to get a little bit of kind of timing differences between the two. But if there are increases out there in raw material inputs that are sustainable, over time we'll all going to basically recover those from the marketplace.

Okay, thanks for that answer. The second question really stems from your discussion a moment ago about capacity leaving the market, or what might unfold in the way of a shakeout. I wonder if you could just help us understand your thoughts on maybe what the industry looks like five years from now.You've got larger players; Massco announced on their call that they're closing capacity. Will there be greater share held by sort of the smaller players at the end of the tale, or will there be more of an all oligopolistic structure five years from now?

Well the -- from a manufacturing standpoint, the industry, over the last 10 years to 15 years has had a significant amount of consolidation, not necessarily in the number of players. If you look at, for example, the number of manufactures registered with our trade association, it has been relatively constant. But as the -- the customer base, whether it be large national builders on the new construction side or the shakeout of the big box retailing with really kind of two primary winners obviously, is people that have a national -- manufacturers that have a national footprint that can supply and service those types of accounts, really, has from a sales standpoint or just an overall volume of the industry, there has been a significant consolidation in the industry over the last 10, 15, 20 years. I don't see that going away. I think that you're still going to see that with a handful of players that are going to have the majority of the market.

Having said that, on a local or even in some cases regional basis, the barriers to entry are pretty small. If you can get a building and put some saws in it and get some craftsmen, you kind of be in the business. Now, you don't have the service reach, you don't some of other resources, financial resources and others, to service some of the large builders or some of the large accounts, whether it's new construction or remodeling. So, I would anticipate and again you are asking me to go out five years, that you're going to see something pretty similar to what it is today. You'll see a handful, maybe half a dozen companies that will dominate the overall volume in the industry, but you'll still see a large number of participants, particularly on a local and even regional basis.

Okay. Thanks very much for that color.

Sure.

I appreciate it.

Our next question comes from Joel Havard of Hilliard Lyons.

Good morning, everybody.

Good morning, Joel.

Good morning, Joel.

Jon, you made some comments on the raw materials part in your prepared segments and David's follow-up was helpful. But if I got this right, you referenced finishes and I put fabricated boards here, because I did not catch your comment, and imported components, was that your comment?

Yes, as well as cartons.

Packaging material, okay.

Yes, there are several areas that are starting to bubble up on us.

Not components, that's the hardware mostly, right?

It can be or it can be pieces of cabinets, too.

Okay. Gosh, what, imported from other than Kentucky or Virginia?

(laughter) It could be outside the United States. That is what imported generally mean, sure.

(laughter) I did not know that you all used any outsourced woods. That's interesting and may be worth exploring later. The common theme through all this to me looks like though it's all kind of a second derivative of fuel cost. Is that your read and I guess the underlying question there is, are the price increases that those vendors are experiencing being pushed to you very quickly, or is there also a lag in your contract basis within similar to yours with your customers?

Well first, we have hardwood cabinets. Okay, all the cabinets that we have, have hardwood bases, frames, doors, et cetera.

Yes.

And a lot of plywood, construction, et cetera. There's -- so, let's not make a mistake there, or let's not cast of the wrong impression. I don't think you are trying to.

I don't want to make you sound like an RTA manufacturer, but I know that you do use some fabricated materials as well.

Correct.

Yes, and all of our major raw materials, particularly as it relates to hardwood aren't domestically sourced. There are a couple things that the industry, drawer side and some other things, drawer parts, that some people get from other places. But the majority of our, particularly our hardwood inputs, our domestic.

Of course.

And in terms of the second part of your question, it's not just the second derivative of fuel, I think there's also an element of imported labor costs rising in general. Import costs -- the cost of imported materials is definitely on the rise. And to -- even though it effects us to a much smaller extent perhaps than some others, it's a significant impact, too.

Okay, the sort of backdrop to that then is the overall gross margin picture. Kent, correct me if I am wrong, but you are pushing into the low '80s on capacity utilization, is that reasonable?

No .

No.

No, okay, darn (laughter). That will change the conversation here and that concerns me a little bit that minus promotional activity to keep volumes elevated that we start to slide back down here from gross margin perspective. What thoughts can you offer me?

I am not sure I understood what you -- what you are getting at there.

It 's not a question. I am trying to draw you out.

Well I mean from a capacity standpoint, I don't know that if you are trying to get at the leverage on fixed and semi-fixed costs through capacity utilization. I guess is I am not sure that's -- that's what you were, the line of questioning that you were on. We, obviously, on a year-over-year basis had a big increase. There were a lots of things that went into that. But if you just look at our total output at this point, we still have significant available hard capacity, again, as we've talked about on prior calls. We're not -- certainly not maintaining crewing levels that are significantly above what our daily output is. But we still have hard capacity that is probably double output, maybe a little less at this point.

Oh.

Based on that, but we are certainly not at 80% utilization of our hard capacity as it relates to the potential output out of our facilities. Now again, as we've talked about before, we might have to have some machines that we would have to buy, we'd certainly have to crew up for that. But we don't have to -- we're not that close. We didn't close the gap 50% to 80% in terms of brick and mortar capacity utilization in the third quarter.

No, sorry, I wasn't referencing where you were, having scaled back over the last 18 months, so.

Okay. Yes, generally speaking we can -- of course, it would depend on the mix, on the product mix and a little bit of geography, but more product mix.We still have significant upside in our brick and mortar capacity. Has it closed the gap a little bit as we start to grow some, sure, but it certainly has not closed the gap like 50% to 80%.

No, it is more like in the 50%s, in the upper regions of the 50%s now, instead of 50% now let's say.

And that is presuming -- that is based on the capacity that exists in the shuttered operations right now?

That is based on the intended capacity of what we're operating today. And there is the possibility that we could open up a shuttered building that we still have in limbo.

Okay, All right.

Yes, we only have the three facilities that we ceased operation in, two of them are permanently shut down. As a matter of fact, both of them are sold. They've been disposed. We have one that we --

So Oklahoma is just suspended though, right?

That's correct. Right, that's correct. The other two are permanently shut. And actually, one of the two we still have the property, but we don't any intention on reopening.

Okay. All right, guys. Thanks, best of luck.

Okay, thanks.

Thanks.

(Operator Instructions)Our next question comes from Sam Darkatsh of Raymond James.

Good morning, gentlemen. This is actually Josh, filling in for Sam.

Hi, Josh.

Hi Josh.

I want to dig in a little bit more into sort of the competitive environment. It appears maybe that the lower-priced offerings are doing better than the higher priced. Would it be fair to say that maybe there's maybe a favoring of that in the retailer promotional calendar? And would you say that continues for a little while or can you give us a little bit more color on that?

It is tough for us to comment on that. Certainly, our sales increased year over year. They're still not where we want them to be, but they certainly did better sequentially and certainly year-over-year. But I'd say that the sales mix of what we are selling, if anything, has moved up a little bit compared to what it was a year ago. So, that is the vantage point that we were able to see.

Okay, and sort of a similar question along those lines, [ex] the promotions, is there any sort of narrowing of the quality gap or anything like that among the different price points that could be driving some of this, or is it mostly more promotion and price driven given current conditions for the consumer?

Help me with the narrowing of the quality gap. Is there a presumption there that the higher price is higher quality?

Sure and correct me on that if that's not accurate.

Yes, I don't think that is accurate. I think that certainly one of the things we put a lot of emphasis on over the last year is quality at any price point. That there should be a certain expectation of not just the product quality, but the quality of experience that you should get at any price point. That it's not necessarily one of those things that correlate with increasing price; you get increase in quality or better experience. So, I don't think that that landscape has changed or it's describing. I mean what we're actually -- as Jon kind of mentioned, now part of it is some of our new product introductions that we have done in the last year or so, some of them have been at higher price points. So, our experience and our sales mix may not necessarily reflect that of the overall industry.

But our mix between -- kind of spread across between say good, better, best, which is kind of a retail term, but if you kind of look at our total product line and try to put it may in those three buckets of good, better, best; our mix has been pretty stable over the last 12 months to 18 months. Now again, some of that is new product introductions and those types of things. We've really seen a stabilization of our overall mix, which is different than what we'd seen in the couple years prior to that. Where we did see the consumer rotating down in our mix. We may not be reflective of the overall industry again because of our product introductions, but in the last, certainly the last 12 months, four quarters, plus or minus, our mix has been pretty stable.

Okay. That helps very much. And then just looking at the cost inflation again, could you maybe give us a little bit of color on where it came in relative to your expectations going into the quarter. Was it a little higher than you expected? Or did you have any sort of visibility on that?

I think in terms of what we experienced during the quarter, it was reasonably consistent with what we expected. But in terms of what is being talked about or possible out there, that's the part that seems like it might be getting a little bit beyond our expectations.

Okay. hank you very much for those answers.

Thank you.

And we do have one question remaining that comes from David McGregor of Longbow Research.

I couldn't let you go that quickly.

(laughter) Welcome back.

Yes. Just with respect to the previous question, there's a point on mix. I know you rolled out the Waypoint offering, trying to go after kind of higher end dealers, and I am just wondering if while you're good, better, best mix hasn't changed much over the last 18 months, if the strategy really is to try to get that to improve a little more towards the upper end and target some higher end dealers. Can you just comment a little about sort of mix aspirations?

No, I mean I think that we kind of know who we are. And I think that's one of the strengths of the Company over the years is that we know who we are, and we know what role we fill in the marketplace, and we don't try to be something that we're not. So, there are different ways. You know again Jon mentioned in his comments in terms there are channels of distributions that we put more energy into in the last year or so than we had previously for a couple of different reasons. But, we're all kind of going after that end consumer that is either doing a remodel job or part of a new construction project. And we kind of know what we bring to the table.

And so we don't have aspirations, for example, to be a high-end custom and you look at the unit take that you get at a high-end custom, and that's fine, but that's just not who we are. That's not how our systems are built. That's not how we bring things to the marketplace. So to the extent that there are other avenues or channels of distribution to get our program into geographical areas or other places, other channels, other points of distribution that we haven't been in or haven't emphasized as much, we will continue to take advantage of that.

But, we'll go after that with the program that we bring to the marketplace. We're not going to lose sight of who we are and what we do and the offering that we bring to the marketplace and what our value proposition is to chase maybe a couple of rainbows or a pot of gold maybe at the end of the rainbow, because you think there's a better deal for you out there. We know who we are and we're going to continue to stick with that.

Yes, and just to add to that. As Kent says, we think we can offer great value and are offering great value to dealers with the Waypoint product line.

What is the mix right now between builder and remodel for you?

It remains roughly 70% to 30%, weighted toward remodel. And what do the home centers represent as a percentage of total revenues for you now? Very close to that 70%.

All right. So is there any thought about developing the dealer network? I realize there has been consolidation in that space as well, but --

Well yes, we have, we'll get into -- it depends. There's some definitional thing in terms of what's a dealer and you know, you'll have --what's really happened -- it was there a little bit before -- but, what has really happened in the multiple step distribution, something that's not factory direct if you will, either a straight to a large new construction, national builder or to one of the large big box retailers is, there's actually a whole lot of output from the industry goes through other than those. If you add that up, if you add both the big box retailers and the manufacturer direct to large construction, that's still well below half the total industry.

So, half the total industry output goes -- gets to the consumer through some other means. Whether it's a master distributor, whether it's a mom and pop shop whatever it is, whether it's a remodeler. You know somebody goes around doing business out of a pickup truck. It's a huge part of the overall industry that goes out there. And we have always participated in that. It's just a question of how much emphasis we put on that based on our capacity utilization, how much capacity we have had, how we've allocated that capacity to those various channels. So, there's a lot of that stuff out there.

So, we haven't really changed from that perspective. There's a lot of opportunity. There is a big piece of the industry out there. It's very difficult, again, I'm not sure what your actual definition of a dealer is, because what happens to a lot of these folks is as their new construction businesses dropped, a lot of them have opened up retail show rooms.

Right.

And so we have a builder distributor that might have traditionally done 80% or 90% of their business in new construction. Well that number might be 50/50, or they might even do more remodel business now than they do new construction, because as they've tried to survive through this cycle, they've kind of morphed into maybe some things that they weren't previously, as well, to try and keep the lights on, the doors open and the lights on. So, It's pretty difficult.

We've always had access -- some remodel customers through, if you will, a distribution, two or three step kind of distribution channel. Some of that's still going on. Some of that's still out there. So, it's a little bit difficult for us to kind of figure that out. But certainly, any way we can get to a consumer, again, within our value proposition and what we do, we're going to take advantage of that. And certainly at a time like this, where are -- the traditional drivers of our business are not quite as robust than they have been historically, we're certainly going to look for those opportunities in order to either expand reach into areas we have not been, historically, or where we are to gain the additional market penetration.

Well, good luck. Thanks, guys.

Okay, thank you.

Thank you.

And at this time there are no further questions in the que.

Since there are no a additional questions, this concludes the conference call it. Again, thank you for taking time to participate and speaking on behalf of the management of American Woodmark, we appreciate your continuing support. Thank you.

And this does conclude today at a conference call. We thank you for your participation and have a wonderful day.