American Woodmark Corp (AMWD) 2011 Q4 法說會逐字稿

Good day, and welcome to the American Woodmark Corporation conference call. Today's call is being recorded. The Company has asked 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 statements. Such factors include, but are not limited to, those described in the Company's filings with Securities and Exchange Commission and the annual report to shareholders. The Company does not undertake the 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.

At this time, I would like to turn the call over to Mr. Glenn Eanes, Vice President and Treasurer. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and welcome to the American Woodmark conference call to review the financial results for our fiscal fourth quarter and year ending April 30, 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, Senior Vice President and Chief Financial Officer. Jon will begin with a review of the quarter and fiscal year and an outlook for the future. After Jon's comments, Kent and Jon will be happy to answer your questions. Jon?

Thank you, Glenn. This morning, we released the results of our fourth quarter of fiscal year 2011, ended April 30, 2011. Our earnings release contained the following highlights for the fourth quarter and fiscal year. Net sales for the quarter were $124.2 million, representing a 10% increase from the prior year's fourth quarter. Net loss was $3.4 million, or $0.24 per diluted share, including the impact of 2 items and adverse tax basis adjustment of $1.4 million, and a net uptax gain of $0.6 million from the sale of a previously closed manufacturing plant.

Comparatively, the Company's net loss in the fourth quarter of its prior fiscal year was $1.5 million, or $0.11 per diluted share, including the impact from 2 favorable items. One, favorable income tax adjustments of $0.9 million, and second, net of tax insurance recovery of $0.8 million. Excluding special items in the fourth quarters of both fiscal years, the Company's net loss improved to $2.6 million, or $0.18 per diluted share, from $3.2 million, or $0.22 per diluted share. The Company generated positive $4.3 million of free cash flow during the fourth quarter of fiscal year 2011, compared with negative $2.1 million of free cash flow in the prior year's fourth quarter.

For the entire fiscal year ended April 30, 2011, net sales were $452.6 million, up 11% over prior year. Net loss was $20 million, or $1.40 per diluted share, including the impact of the 2 fourth quarter adjustments.

Comparatively, the Company's net loss in the prior fiscal year was $22.3 million, or $1.58 per diluted share, including the favorable impact from the 2 prior year fourth quarter items, offset by the unfavorable impact of restructuring charges of $1.7 million related to previous cost reduction initiatives. Excluding these special items in both fiscal years, the Company's net loss improved to $19.2 million, or $1.35 per diluted share, from $22.3 million, or $1.58 per diluted share. The Company generated positive $7.7 million of free cash flow in fiscal year 2011, a significant improvement from the negative $10.2 million of free cash flow generated in the prior fiscal year.

Regarding our fourth quarter sales performance, net sales for the fourth quarter of fiscal 2011 were 10% higher than in the prior fiscal year, in what continues to be a challenging market. Last year's expiration of the second Federal Housing Stimulus Program caused the remodeling and new construction markets to briefly improve at the end of the Company's prior fiscal year that ended April 30, 2010. However, both markets declined when the stimulus ended, causing industry-wide sales comps to be negative during fiscal year 2011. Several emerging positive factors continue to be overshadowed by lingering negatives.

On the positive side, private sector job creation has continued to be positive, with approximately 1.3 million jobs created in the last 12 months. Existing home sales have averaged an annualized level of over $5 million for the last 4 months. Mortgage delinquencies, as tracked by the mortgage banking association, continued to decline and have reached their lowest levels in 2 years. And consumer confidence indices reported by the conference board and the University of Michigan have been edging higher, although May's reading came in lower than expected.

On the negative side, gross private residential fixed investment, as supplied by the US Department of Commerce, suffered a third consecutive quarterly decline compared with 1 year ago. Median prices of existing homes sold from September through April were approximately 4% lower than in the year-prior period, and are expected to continue to be down for the next several months. Housing starts during the Company's fiscal year 2011 approximated 554,000, down 5% compared with the Company's prior fiscal year. And cabinetry sales reported by members of the Kitchen Cabinet Manufacturer's Association, were down by mid-single digits in recent months and for the Company's fiscal year 2011.

Recognizing these challenging market conditions, the Company's largest remodeling customers employed aggressive sales promotions for the fall and spring selling seasons, which took the form of free products and additional discounts based upon the amount of sale. Price-conscious consumers continued to respond to the elevated level of promotions, causing the Company's remodeling sales to grow by approximately 20%, compared with the prior year's fourth quarter and by more than 20% for the second half of the fiscal year. Remodeling sales finished the fiscal year with an increase in the low teens.

The Company's new construction sales declined at a high single-digit rate during the fourth quarter, in a market where total residential housing starts were down by 17%. For the entire fiscal year, the Company's new construction sales increased by mid single digits in a market where housing starts declined by 5%.

Overall, the Company experienced its first year of sales growth in 5 years. Sales grew by 11% in a market that appears to have declined by mid single digits, and meaningful market share gains were achieved in both its remodeling and new construction channels.

Regarding gross profit, the Company's gross profit margin for the fourth quarter of fiscal year 2011 was 13.2% of net sales, which matched its best level of the fiscal year that was achieved in the first quarter. The Company's gross profit margin of 16.5% in the prior year's fourth quarter included the favorable impact of the insurance recovery that boosted results by 1.0% of net sales. Gross profit for the entire fiscal year 2011 was 11.7%, compared with 12.0% in the prior fiscal year. The prior year's insurance recovery boosted fiscal year 2010 gross margin by 0.3% of net sales.

The addition to the absence of the insurance recovery proceeds in fiscal year 2011, the fourth quarter gross margin rate was lower than in the prior year, due primarily to 2 factors. First, sales promotion levels rose because the Company chose to maintain competitive parity during the last 9 months of fiscal year 2011 in a challenging market. Because most of these sales promotions involved 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 as operating expense. Second, the impact of rising materials cost, including paint, cartons, particle board, and imported components, as well as diesel fuel, were also a drag on fourth quarter margins compared with 1 year ago.

For the entire fiscal year, the same factors came into play, but in different magnitudes. Materials and freight costs became more challenging as the fiscal year progressed, while promotional costs declined slightly as a percentage of sales during the fourth quarter on a sequential basis. Regarding operating expenses, total SG&A expense was 16.5% of net sales in the fourth quarter of fiscal year 2011, improved from 19.9% of sales in the fourth quarter of the prior fiscal year. Total SG&A expense was 18.5% of net sales for the entire fiscal year of 2011, improved from 20.5% of net sales in the prior fiscal year.

Selling and marketing expenses were 12.1% of net sales in the fourth quarter of fiscal year 2011, improved from 13.2% of net sales in the prior year's fourth quarter. Selling and marketing expenses were 13.5% of net sales for the entire fiscal year 2011, improved from 14.0% of net sales in the prior fiscal year. Selling and marketing costs increased by 1% in the fourth quarter and by 7% in the entire fiscal year, compared with prior year, on sales increases of 10% and 11% respectively. The favorable leverage was driven by relatively flat sales, overhead, and display costs, that offset faster growth in sales promotional costs and sales commissions.

General and administrative expenses were 4.4% of net sales in the fourth quarter of fiscal year 2011, compared with 6.6% in the prior year's fourth quarter. G&A costs were 5.0% of net sales for the entire fiscal year 2011, improved from 6.5% in the prior fiscal year. G&A costs declined by 27% in the fourth quarter and by 18% in the entire fiscal year, compared with prior year, even as sales increased at a double-digit rate in both periods. This favorability was driven by reduced incentive-based compensation cost and lower bad debts and related costs stemming from customer payment delinquencies.

As previously mentioned, the Company completed its restructuring activities at the beginning of fiscal year 2010. These activities consisted of closing 2 of its manufacturing plants and suspending operations at a third plant, as well as a reduction in force of salary and 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 did not incur any significant costs related to these activities during fiscal year 2011.

Regarding capital spending, the Company's total outflow for capital expenditures and promotional displays deployed during the first quarter of fiscal 2011 was $2.6 million, down from $4.1 million deployed in the prior year's fourth quarter. The Company also realized proceeds of $1.5 million from the sale of a previously closed manufacturing plant, reducing the net cash outflow from investing activities down to $1.1 million, and creating a net savings of $3 million, compared with the prior year's fourth quarter. The Company's total outflow for capital expenditures and promotional displays deployed during the entire fiscal year 2011 was $8.4 million, down from $11.5 million in the prior fiscal year. Inclusive of net proceeds of $2.9 million from the sale of 2 former manufacturing plants, the Company's net cash outflow from investing activities was $5.5 million in fiscal year 2011, which represented a savings of $6 million compared with the prior fiscal year. The company's reduction in capital spending is reflective of utilizing fewer manufacturing plants in an environment where volume is still at relatively low levels of production, as well as the decline in the number of new stores in which the Company's products were displayed.

The Company generated operating cash flow of $5.5 million during its fourth quarter of fiscal year 2011, compared with $2.1 million in the fourth quarter of the prior fiscal year, and $13.2 million during its entire fiscal year 2011, compared with $1.3 million in the prior fiscal year. The $3.4 million improvement during the fourth quarter resulted primarily from the timing of receipts from customers. $11.9 million improvement during the fiscal year resulted primarily from the receipt of income tax refunds, the absence of payments made in the prior fiscal year related to cost reduction initiatives, and the reduction in net loss. 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 $69.8 million in cash, cash equivalents, and restricted cash on hand, compared with long-term debt of $24.7 million. Debt to capital on a book-value basis was 13.7% at April 30, 2011.

During the fourth quarter, the Company had positive free cash flow of $4.3 million, compared with negative free cash flow of $2.1 million in the prior year's fourth quarter. The $6.4 million improvement in the fourth quarter's free cash flow was due primarily to the timing of collections, to reduced capital expenditures and to proceeds received from the sale of a former manufacturing plant. The Company generated positive free cash flow of $7.7 million for the entire fiscal year 2011, as compared with negative $10.2 million in the prior fiscal year, an improvement of nearly $18 million.

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 and enhance promotional activities to drive market share gains, despite challenging market conditions, and expanding channels of distribution that we have not previously emphasized, and in maintaining the capability for a significant amount of future growth as 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 remodeling activity. Management remains focused on maintaining the strength of its industry-leading balance sheet, despite experiencing net losses, the Company has operated at near break-even free cash flow levels for 7 consecutive quarters and generated positive free cash flow in fiscal year 2011.

The Company's fourth quarter sales increase marked the fourth consecutive quarter of year-over-year sales growth, the first time this has happened since 2006. Although the market remains difficult to predict in the short-term, management remains confident in the Company's ability to continue 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 the lack of credit availability.

The Company recently commenced its fiscal year 2012 that ends on April 30, 2012. For fiscal year 2012, the Company expects that the economic recovery will continue at roughly its current pace. The Company expects that new job creation will approximate 200,000 jobs per month, and that consumer confidence will continue its slow improvement. These factors should enable the remodeling market to be roughly neutral to slightly positive, compared with prior year levels, as the impact of uncertainty as to home prices and credit availability continue to offset the positives that come from an improving employment outlook.

The Company further expects that its remodeling customers will experience sales comps that are roughly in line with the remodeling market's slightly positive performance. The Company believes momentum from improving employment and the resulting improvement in new household formation from recent all-time low levels will help to improve housing starts by approximately 10% to a range of 600,000 to 625,000 during its new fiscal year. The Company expects that it will maintain the market share gains that it has made, enabling it to generate overall sales growth of approximately 5% to 8%.

The Company further expects that it will increase its total capital expenditures from $8.5 million in fiscal year 2011 to approximately $15 million in fiscal year 2012, driven by increasing the number of sales display units deployed with customers, and deploying machinery and equipment to enable production volume to efficiently increase.

Finally, the Company expects that its operating cash flow may decline, driven by a decline in the amount of expected income tax refunds and expanded working capital requirements as the Company's sales grow. This concludes our prepared remarks. We would be happy to answer any questions you have at this time.

(Operator Instructions). Jared Rapalje from Longbow Research.

Hi, good morning, everyone.

Good morning.

On the gross margin, can you guys break out the compression year over year between raw materials and promotional costs? Looks like about 230 [bps] on a comparable basis.

We'll have that information in our Q, but the bigger impact was promotional costs.

Okay.

Year over year, and materials and freight was a lesser of the 2 impacts, but still meaningful.

Okay. On the materials, are you guys anniversarying the rise in lumber costs, so that head wind's moderating a bit?

We really haven't experienced a significant increase in lumber costs. It's really the other inputs of material costs that are more petroleum-based. Lumber costs have risen and ebbed and flowed a little bit, but they haven't really moved the needle in any particular period over the last year.

Okay. Secondly, on demand, can you guys quantify how May is trending so far to start the year?

We don't break it down that -- in terms of May. What I'll do is I'll tell you what we're experiencing. I'll start with the caveat I've used for some period of time, and that is that it's difficult, particularly on the remodel side, to really develop trend lines because it's so promotionally driven at this point, that you really can only do it over longer periods of time, 90 to 180-day trends, just because of the way promotional calendars line up and the amount of activity that it drives around the closeout of the promotional dates.

Having said that, we've continued to see, quite frankly, pretty good activity. There's -- from our experience, our direct experience, even accounting for what we believe to be our share gains, we're really experiencing a disconnect between the headlines in the last several months, and the activity that we're seeing on both sides, both the new construction and remodel side. We're seeing activity maintain and even on a sequential basis, tick up just a tad. We're not seeing big drops.

So I'm not sure whether it's temporary. I'm not sure whether the headlines are lagging behind in terms of the statistics that they are, in some cases, tapping into. But we've gone through the spring here and, again, it's not back by any means, to a normal market, but we really haven't seen a decline that some of the big headlines would suggest. We've seen activity being -- be pretty stable and even ticking up a little bit.

Okay, thanks for that. And then lastly, on -- your competitors seem to be rolling out more value, more lower priced offerings that are encroaching on your traditional price point. I guess including Martha Stewart, and then also Masco is rolling out their new value lineup this quarter. Can you talk about the impact or maybe the expected impact on this, on your market share, and then what your strategy is to combat that downward mix shift? Thanks.

Sure. I won't comment specifically about any individual competitor or what they are doing for a lot of obvious reasons. We have our total package, which is both the product, the price point, the value price point, as well as the service, our customer care, the way we call on the stores on the big-box side and the relationships we have. So it's not just a question of price and product. There are many other things that go into the selection.

The other thing I would say, which I've said before, is that this is a pretty crowded field. And there have been a lot of participants, local, regional, and national players, across a lot of the price points. So we have had a lot of competition at our price points. It's not like we had a particular area alone, and now we're getting competition in. We've always had a lot of competition at our price points from a variety of players. And we'll just continue to compete using the strategy that we've had for a long period of time now. And we think that's effective in terms of the total package that it gives the consumer.

So the market share within the home centers, that -- you wouldn't say that's under pressure recently?

Well, I'm not sure what you mean by under pressure. I mean, everything's under pressure in this environment. What I would say is that the total package that we go to market with, it certainly includes the product, it includes the price points, it includes the feature, but it also has the service platform. That's been effective in terms of us being able to maintain and over time, grow market share in a very competitive industry.

Okay, thanks very much, guys. Good luck.

Sure. Thank you.

(Operator Instructions). Sam Darkatsh with Raymond James.

Good morning, Kent, John. How are you?

Fine, thank you.

Good morning, Sam.

Couple questions. First off, housekeeping, John, the gain on sale, what line item was that accounted for, and what was the pretax amount?

Sam, that's in our other income and expense. And the pretax amount was about $900,000 some odd dollars. Yes. For the fourth quarter.

For the fourth quarter. For the quarter just reported.

Yes.

Second question, the sales and marketing expense, how should we look at that from a variable versus fixed standpoint going forward? I understand it's probably mostly variable, but there was some leverage in the quarter from volume. I'm just trying to get a sense of how that might leverage going forward.

Well, I guess my quibble with your connotation is mostly variable. If anything, it's probably more fixed than variable, just because we have a pretty fixed number of reps that call on our retail, large big-box customers. We try to keep certain service metrics in place. So we try to keep a steady number of reps based on the size of the store counts and geographies that they cover. Of course, their compensation varies, depending upon how we're doing in sales. But a substantial portion of that cost is fixed.

In terms of going forward and leverage, I think that our expectations will continue to have some pretty positive leverage as we move forward. Certainly costs are -- transportation and commissions and so forth vary as market conditions and our sales performance dictates, but I think that we'll gain some leverage there going forward.

Last question, if I might. You touched on it briefly, Kent, for the last questioner. You're seeing -- is there a sense of the promotional calendar, at what point do you begin to lap up against the comparisons? Do the promotional, do the promotional environment continue, and also, with that, at what point do you begin to comp positively on the builder side?

Okay, there was a lot in there. The first part of your question, if I heard it, was the rise that we've seen in promotional activity required to be competitive in the marketplace. When do we start to anniversary that on a year over year basis?

Yes.

Yes. It's really -- it will be the second quarter. It was the second quarter of the fiscal year just completed. So it was really the fall of calendar 2010 when we really saw an increase, a significant increase in the promotional costs, and it really peaked for us in the third quarter of last fiscal year. It's backed off a bit, but not much. So we'll anniversary the new landscape in terms of promotional costs in the second quarter.

The second part of your question, I didn't quite get. It was related to the builder activity?

Yes. You said you were down high single in the quarter, based on order patterns and what you're seeing on your customer base. When do you see that reaching back to parity and growing again?

Well, I think at this time, if you look at our fourth quarter, and it will lap over into the first quarter of the fiscal year just started, is this time last year was the last big tax credit on the home center side. So there was a pretty significant bubble that came through the system in terms of demand last April and May, when a lot of the home builders, in anticipation of the closeout of that tax credit, put some more specs in the ground and increased their activity. That was followed on the back end by a low summer, because it just pulled a lot of that business forward.

So, again, I think on these year over year basis things, you can get some weird numbers when these artificial demand structures come through the system. So we had a pretty tough comp certainly at the end of the fourth quarter, and will have here at the beginning of the first quarter of fiscal 2012. But as we get into the summer, we are going to get the back side of that tax credit last year, and our comps are going to become a little bit easier.

So I think if you look at that pattern, it certainly impacted us in the fourth quarter. It will impact us again, to some degree, in the first quarter, and then we'll have the lower comps on a year over year basis. So from that perspective, we would expect to see that grow as we went forward.

What I mentioned a little bit earlier about we're experiencing disconnect between the headlines and what we see is our order rates as we went through that period in April and May. Our order rates, inbound order rates on the new construction side were down over the prior year, but they weren't down as drastically as you would expect them to be based on the impact of the tax credit. And so, again, that gives us a little bit of comfort level that there's a base level of activity out there on the new construction side. And in fact, once we get that year-over-year comp on the tax out of the system, that we're going to see return back to growth on our new construction business.

As a follow-up to the first part, Kent, if I could. The promotional calendar at retail, you say you're going to lap up against it in the second quarter. Is this the new normal, from a promotional activity standpoint, until the industry begins to recover and more discretionary big ticket spending occurs? Or do you think this promotional activity goes back to where it was prior to the promotional environment in the fall of last year?

Well, yes, I guess that's -- who knows. I wish I had a crystal ball. I would say it's the new normal until we prove otherwise.

Maybe the additional thing I would say is, again, similar to what I mentioned on the comment I made on the new construction side, we're seeing activity on the remodel side. Now, it comes in these fits and starts because of the promotional calendars and the closeout of promotions on certain dates, which has a tendency to drive some urgency, and people get in and they complete the transaction. But when you run promotions and you run them every-- closeouts every 4, 6, maybe 8 weeks, what we're seeing as opposed to the new construction side, where it just pulls business forward, the tax credit did last year. On the new construction side, those order files are being refilled before the next closeout of the next round of promotions.

So, my opinion is over time we'll see is that particularly as we look at the high percentage of home transactions, existing home sales, that are distressed properties, that the people that are buying those properties are getting a nice deal on them. They have some financial capacity because of that deal they have got on them, and quite frankly, they haven't been terribly well maintained. In fact, the continued high degree of foreclosures, or distressed properties in the housing turnover, is feeding a much stronger big ticket, big ticket kind of remodeling market than maybe there's been a lot of conversation about.

So certainly I think the promos are here. Until we see them back off, I would say it's the new norm. But I would also say that there are some other underlying factors that we're starting to see that you could extrapolate that out and say that we're going to have here forward, that, there is going to be some underlying base demand. And as that demand comes back, you -- part of at least my view of the world is that would take some pressure off everybody in terms of promotional dollars to bring customers in because they are going to be coming in anyway.

Very helpful, thank you.

Sure.

(Operator Instructions). Joel Havard from Hilliard Lyons.

Thank you. Good morning, everybody.

Good morning, Joel.

Guys, I know the data will be in the K, but I wonder if you've got a sense that you could share with us of what the volume versus pricing trends were in Q4 relative to, say, Q3 or on a year over year basis.

Yes, Joel, it was really volume-driven. There's a small amount of price, which is really mixed. It's not price increase in this market. But it was really volume-driven.

Jon, is that to say that it was positive on the price side as well, that it did not slip back to a negative comp?

Yes, it was positive due to mix.

Okay, and maybe this is a related question, or maybe it's totally unrelated, but your CapEx comments, you're taking it up. You referenced a mix of displays and traditional brick -- well, not brick and mortar, but let's say equipment, but manufacturing capacity. Does the display side of that indicate that maybe there's a broader product revamp or renewal under way?

No, I think it just is more indicative, Joel, that we're reaching out to a broader customer set perhaps, and that's really more the case there.

Is that then broadening the existing product line, not changing the existing product line?

Well, we've been broadening the line quite a bit. Kent can elaborate on that.

Please.

Yes, it's a little bit of both, Joel. Certainly part of it is if you go back historically versus the numbers, if you go back many years, obviously our 2 largest remodel customers are not opening stores, or certainly not opening stores at the same rate. But quite frankly, in this environment, the new store openings have been relatively small. If you look back historically at what really drove our display investment, it was really to keep up with the big-box new store openings. And we haven't had that for several years.

So now, what we're really down to is, on the big-box side, there's really a maintenance aspect to it. Part of it is that the stuff just wears out and that environment after years, it can get dings and dents, and you need to replace it and just update it, refresh it.

We've also launched a lot of new product. That has a tendency not to be full displays. It has a tendency to be other types of materials, door samples and those types of things that are not obviously as expensive as doing a full store reset. So there's a lot going on there, but there certainly is the expansion of outlets outside of the big-box, whether they be model home on the new construction or in our other channels of distribution.

There's also been quite a bit driven by new products. In the last 5 years, really if you put a stake in the ground in 2006, which was the peak before we started the down cycle, in the last 5 years, we've introduced more products than we had in the 25-year previous history of the Company. So we haven't been shy about introducing new products to be competitive, to give the consumer more choice, to expand, again, some of the channels of distribution that we have access to. So we've made a significant investment in product over the last 5 years, and some of that is going to show up in the display investment.

Thanks for that color, Kent. One last question, guys. Probably more for you, Kent. I keep beating on capacity utilization. Could you give us an updated sense of where you are at year end?

Yes. It's -- as we've talked about before, Joel, it's a complicated question, because as John mentioned, we've had some mix shift. And part of the mix shift has put a couple pieces of our sub capacities under a little bit of pressure within the overall (inaudible) mix. And that's why we're talking about increasing CapEx for next year. Get out there and get some machining capability and some other types of things and a few of those bottlenecks.

From a brick-and-mortar standpoint, which is one of the ways we've talked about it in the past, we're still fine. We can still double our capacity, maybe a little bit less from a brick-and-mortar standpoint. So we don't have to build any new factories. Underneath that, we've got these things that move around on specific product lines. For example, solid doors versus veneer doors and those types of things.

But generally speaking, within CapEx budgets that Jon's talked about that are reasonable, we still have plenty of room to go. Pick a number. It's -- we probably bottomed out at 50% utilization. We're above that now. But we're not into a number that's going to cause us to be in any trouble in terms of not being able to meet the demands of the customer.

Very good. Guys, thanks for the update. Best of luck.

Thank you.

There are no other questions in queue. I'll go ahead and turn the call back over to Mr. Eanes for any additional or closing remarks.

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

And that does conclude today's conference. We thank you for your participation.