Attached files
file | filename |
---|---|
EX-31.2 - CFO 302 CERTIFICATION - AMERICAN WOODMARK CORP | awcex31d2.htm |
EX-31.1 - CEO 302 CERTIFICATION - AMERICAN WOODMARK CORP | awcex31d1.htm |
EX-32.1 - CEO/CFO 1350 CERTIFICATONS - AMERICAN WOODMARK CORP | awcex32d1.htm |
EX-10.3 - REVOLVING LINE OF CREDIT - AMERICAN WOODMARK CORP | awccreditline.htm |
EX-10.2 - CONTROL AGREEMENT - AMERICAN WOODMARK CORP | awcontrolagree.htm |
EX-10.1 - CREDIT AGREEMENT - AMERICAN WOODMARK CORP | awccreditagree.htm |
EX-10.5 - SECURITY AGREEMENT - SECURITIES - AMERICAN WOODMARK CORP | awcsecurityagree2.htm |
EX-10.4 - SECURITY AGREEMENT - DEPOSIT - AMERICAN WOODMARK CORP | awcsecurityagree1.htm |
EX-10.6 - SECURITY AGREEMENT ADDENDUM - SECURITIES - AMERICAN WOODMARK CORP | awcsecurityaddendum.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[x] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended October 31, 2009
OR
[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from ______ to _______
Commission
file number 000-14798
American Woodmark
Corporation
(Exact
name of registrant as specified in its charter)
Virginia
|
54-1138147
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
3102 Shawnee Drive,
Winchester, Virginia
|
22601
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(540)
665-9100
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed
since
last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
___
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes ____ No
____
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer ____
|
Accelerated
filer
X
|
Non-accelerated
filer ____ (Do not check if
a smaller reporting company)
|
Smaller
reporting company ____
|
Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act). Yes ___ No X
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
As of
November 25, 2009, 14,148,921 shares of the Registrant’s Common Stock were
outstanding.
AMERICAN
WOODMARK CORPORATION
FORM
10-Q
INDEX
PAGE
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
NUMBER
|
Item
1.
|
Financial
Statements (unaudited)
|
|
Condensed
Consolidated Balance Sheets--October 31, 2009 and April 30,
2009
|
3
|
|
Condensed
Consolidated Statements of Operations--Three months ended October 31, 2009
and 2008; Six months ended October 31, 2009 and 2008
|
4
|
|
Condensed
Consolidated Statements of Cash Flows--Six months ended October 31, 2009
and 2008
|
5
|
|
Notes
to Condensed Consolidated Financial Statements--October 31,
2009
|
6-12
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
13-17
|
Item
3.
|
Quantitative
and Qualitative Disclosures of Market Risk
|
18
|
Item
4.
|
Controls
and Procedures
|
18
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
18
|
Item
1A.
|
Risk
Factors
|
18
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
Item 5. | Other Information |
18
|
Item
6.
|
Exhibits
|
19
|
SIGNATURES
|
20
|
|
2
PART
I. FINANCIAL INFORMATION
Item
1.
AMERICAN
WOODMARK CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data)
(Unaudited)
October
31,
|
April
30,
|
|||||||
2009
|
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash and cash
equivalents
|
$ | 69,391 | $ | 82,821 | ||||
Customer receivables,
net
|
31,003 | 26,944 | ||||||
Inventories
|
26,525 | 32,684 | ||||||
Income taxes receivable and
other
|
7,136 | 1,789 | ||||||
Deferred income
taxes
|
6,325 | 9,300 | ||||||
Total Current
Assets
|
140,380 | 153,538 | ||||||
Property,
plant, and equipment, net
|
122,695 | 132,928 | ||||||
Promotional
displays, net
|
10,735 | 12,793 | ||||||
Deferred
income taxes
|
7,617 | 1,393 | ||||||
Other
assets
|
5,417 | 3,085 | ||||||
$ | 286,844 | $ | 303,737 | |||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 14,881 | $ | 15,070 | ||||
Accrued compensation and
related expenses
|
17,888 | 24,909 | ||||||
Current maturities of long-term
debt
|
866 | 859 | ||||||
Accrued marketing
expenses
|
7,678 | 7,080 | ||||||
Other accrued
expenses
|
8,404 | 10,249 | ||||||
Total Current
Liabilities
|
49,717 | 58,167 | ||||||
Long-term
debt, less current maturities
|
26,175 | 26,475 | ||||||
Defined
benefit pension liabilities
|
14,766 | 12,900 | ||||||
Other
long-term liabilities
|
3,466 | 2,513 | ||||||
Shareholders’
Equity
|
||||||||
Preferred stock, $1.00 par
value; 2,000,000 shares authorized, none issued
|
-- | -- | ||||||
Common stock, no par value;
40,000,000 shares authorized; issued and outstanding 14,148,921 shares at
October 31, 2009; 14,094,449 shares at April 30,
2009
|
84,980 | 82,293 | ||||||
Retained
earnings
|
122,015 | 136,074 | ||||||
Accumulated other comprehensive
loss -
|
||||||||
Defined benefit pension
plans
|
(14,275 | ) | (14,685 | ) | ||||
Total Shareholders’
Equity
|
192,720 | 203,682 | ||||||
$ | 286,844 | $ | 303,737 |
See
accompanying notes to condensed consolidated financial
statements
3
AMERICAN
WOODMARK CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except share data)
(Unaudited)
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
October
31
|
October
31
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
$ | 104,068 | $ | 134,939 | $ | 204,903 | $ | 274,092 | ||||||||
Cost
of sales and distribution
|
91,399 | 115,471 | 180,400 | 232,564 | ||||||||||||
Gross Profit
|
12,669 | 19,468 | 24,503 | 41,528 | ||||||||||||
Selling
and marketing expenses
|
14,510 | 15,122 | 27,859 | 30,691 | ||||||||||||
General
and administrative expenses
|
6,380 | 5,435 | 12,607 | 11,976 | ||||||||||||
Restructuring
charges
|
233 | -- | 2,787 | -- | ||||||||||||
Operating Loss
|
(8,454 | ) | (1,089 | ) | (18,750 | ) | (1,139 | ) | ||||||||
Interest
expense
|
166 | 192 | 335 | 375 | ||||||||||||
Other
income
|
(173 | ) | (520 | ) | (388 | ) | (964 | ) | ||||||||
Loss Before Income
Taxes
|
(8,447 | ) | (761 | ) | (18,697 | ) | (550 | ) | ||||||||
Income
tax benefit
|
(3,168 | ) | (280 | ) | (7,012 | ) | (226 | ) | ||||||||
Net Loss
|
$ | (5,279 | ) | $ | (481 | ) | $ | (11,685 | ) | $ | (324 | ) | ||||
Net
Loss Per Share
|
||||||||||||||||
Weighted average shares
outstanding
|
||||||||||||||||
Basic
|
14,138,091 | 14,031,376 | 14,125,859 | 14,050,490 | ||||||||||||
Diluted
|
14,138,091 | 14,031,376 | 14,125,859 | 14,050,490 | ||||||||||||
Net loss per
share
|
||||||||||||||||
Basic
|
$ | (0.37 | ) | $ | (0.03 | ) | $ | (0.83 | ) | $ | (0.02 | ) | ||||
Diluted
|
$ | (0.37 | ) | $ | (0.03 | ) | $ | (0.83 | ) | $ | (0.02 | ) | ||||
Cash
dividends per share
|
$ | 0.09 | $ | 0.09 | $ | 0.18 | $ | 0.18 | ||||||||
See
accompanying notes to condensed consolidated financial
statements
|
4
AMERICAN
WOODMARK CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(Unaudited)
Six
Months Ended
|
||||||||
October
31
|
||||||||
2009
|
2008
|
|||||||
Operating
Activities
|
||||||||
Net loss
|
$ | (11,685 | ) | $ | (324 | ) | ||
Adjustments to reconcile net
loss to net cash provided (used) by operating activities:
|
||||||||
Depreciation and
amortization
|
16,154 | 17,129 | ||||||
Net loss on disposal of
property, plant, and equipment
|
35 | 116 | ||||||
Stock-based compensation expense
|
2,263 | 2,460 | ||||||
Deferred income taxes
|
(4,138 | ) | (1,970 | ) | ||||
Pension contributions (in
excess) less than expense
|
2,501 | (344 | ) | |||||
Tax (benefit) deficit from
stock-based compensation
|
(119 | ) | 151 | |||||
Other non-cash
items
|
(603 | ) | (1,289 | ) | ||||
Changes in operating assets
and liabilities:
|
||||||||
Customer
receivables
|
(4,000 | ) | (4,470 | ) | ||||
Inventories
|
6,398 | 5,546 | ||||||
Income taxes receivable and
other assets
|
(5,335 | ) | 713 | |||||
Accounts
payable
|
(189 | ) | (3,455 | ) | ||||
Accrued compensation and
related expenses
|
(7,045 | ) | (2,037 | ) | ||||
Other accrued
expenses
|
(675 | ) | 4,280 | |||||
Net Cash Provided (Used) by
Operating Activities
|
(6,438 | ) | 16,506 | |||||
Investing
Activities
|
||||||||
Payments to acquire property,
plant, and equipment
|
(1,590 | ) | (2,410 | ) | ||||
Proceeds from sales of
property, plant, and equipment
|
92 | 64 | ||||||
Investment in promotional
displays
|
(3,097 | ) | (4,644 | ) | ||||
Net Cash Used by Investing
Activities
|
(4,595 | ) | (6,990 | ) | ||||
Financing
Activities
|
||||||||
Payments of long-term
debt
|
(293 | ) | (316 | ) | ||||
Proceeds from issuance of
common stock
|
318 | 60 | ||||||
Repurchases of common
stock
|
-- | (2,457 | ) | |||||
Payment of
dividends
|
(2,541 | ) | (2,529 | ) | ||||
Tax benefit (deficit) from
stock-based compensation
|
119 | (151 | ) | |||||
Net Cash Used by Financing
Activities
|
(2,397 | ) | (5,393 | ) | ||||
Net
Increase (Decrease) In Cash And Cash Equivalents
|
(13,430 | ) | 4,123 | |||||
Cash
And Cash Equivalents, Beginning of Period
|
82,821 | 56,932 | ||||||
Cash
And Cash Equivalents, End of Period
|
$ | 69,391 | $ | 61,055 | ||||
See
accompanying notes to condensed consolidated financial
statements
|
5
AMERICAN
WOODMARK CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
A--BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete consolidated financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three and six month periods ended October 31, 2009 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 2010. The unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and footnotes thereto incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended April 30, 2009. The
Company has evaluated subsequent events for potential recognition and/or
disclosure through December 3, 2009, the date the condensed consolidated
financial statements included in this quarterly report on Form 10-Q were filed
with the SEC.
NOTE
B--NEW ACCOUNTING PRONOUNCEMENTS
In June
2009, the Company adopted the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 105, “Generally Accepted Accounting
Principles,” (ASC 105). ASC 105 establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles recognized by
the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with Generally Accepted Accounting Principles
(GAAP). References made to FASB guidance throughout this document
have been updated for the Codification.
In May
2009, the Company adopted the accounting principles established by FSP 157-2,
“Partial Deferral of the Effective Date of SFAS 157,” which is now part of ASC 820,
“Fair Value Measurements and Disclosures,” (ASC 820). This guidance
delayed the effective date of ASC 820 for all nonrecurring fair value
measurements of nonfinancial assets and nonfinancial
liabilities. Adoption of ASC 820 has had no impact upon the
Company’s results of operations or its financial position; however, the adoption
of ASC 820 resulted in expanded disclosure within the Notes to Condensed
Consolidated Financial Statements.
In
December 2007, the FASB issued guidance now codified as ASC 805, “Business
Combinations,” (ASC 805) and ASC 810, “Consolidation,” (ASC 810). ASC
805 modifies certain aspects of how the acquiring entity recognizes and measures
the identifiable assets, the liabilities assumed and the goodwill acquired in a
business combination. ASC 810 established new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. ASC 805 and ASC 810 were each
adopted by the Company on May 1, 2009. These adoptions have had no
impact upon the Company’s results of operations or financial
position.
In March
2008, the FASB issued guidance now codified as ASC 815, “Derivatives and
Hedging,” (ASC 815). ASC 815 is intended to improve financial
reporting by requiring enhanced disclosures for derivative instruments and
hedging activities to enable investors to better understand how derivative
instruments are accounted for under ASC 815 and their effects on an entity’s
financial position, financial performance and cash flows. ASC 815 was
adopted by the Company on May 1, 2009. This adoption did not impact
the Company’s results of operations or financial position.
In
December 2008, the FASB issued FSP 132R-1, “Employers’ Disclosure
about Postretirement Benefit Plan Assets,” which is now part of ASC 715,
“Compensation-Retirement Plans,” (ASC 715). This guidance is
effective for financial statements issued for fiscal years ending after December
15, 2009. ASC 715 requires companies to disclose how pension plan
asset investment allocations are made, the major categories of the plan assets,
the inputs and valuation techniques used to measure the fair value of plan
assets and significant concentrations of risk within plan assets. The
adoption of the transition guidance in ASC 715 is not expected to have a
significant impact on the Company’s results of operations or financial
position.
6
NOTE
C--COMPREHENSIVE LOSS
The
Company’s comprehensive loss was $5.5 million and $12.1 million for the three
months and six months ended October 31, 2009, respectively, and $0.4 million and
$0.1 million for the three months and six months ended October 31, 2008,
respectively. Comprehensive loss differs from net loss due to the
changes in the pension and postretirement benefits liability. See
Note J “Pension Benefits” for more information regarding the Company’s pension
and post-retirement benefits costs.
NOTE
D--EARNINGS PER SHARE
The
following table sets forth the computation of basic and diluted earnings per
share:
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
October
31
|
October
31
|
|||||||||||||||
(in
thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Numerator
used for both basic and diluted earnings per share:
|
||||||||||||||||
Net loss
|
$ | (5,279 | ) | $ | (481 | ) | $ | (11,685 | ) | $ | (324 | ) | ||||
Denominator:
|
||||||||||||||||
Denominator for basic earnings per
share-weighted average shares
|
14,138 | 14,031 | 14,126 | 14,050 | ||||||||||||
Effect of dilutive
securities:
|
||||||||||||||||
Stock options and restricted
stock units
|
-- | -- | -- | -- | ||||||||||||
Denominator
for diluted earnings per share-weighted average shares and assumed
conversions
|
14,138 | 14,031 | 14,126 | 14,050 | ||||||||||||
Net loss per share
|
||||||||||||||||
Basic
|
$ | (0.37 | ) | $ | (0.03 | ) | $ | (0.83 | ) | $ | (0.02 | ) | ||||
Diluted
|
$ | (0.37 | ) | $ | (0.03 | ) | $ | (0.83 | ) | $ | (0.02 | ) |
Dilutive
securities have not been considered in the calculation of net loss per share for
the three months and six months ended October 31, 2009 and 2008, as the effect
would be anti-dilutive.
NOTE
E--STOCK-BASED COMPENSATION
The
Company has various stock compensation plans. During the quarter
ended October 31, 2009, the Board of directors of the Company granted a total
17,500 service-based restricted stock units to non-employee
directors. These awards entitle the recipient to receive one share of
the Company’s common stock per unit granted if he or she remains on the board
through August 15, 2011. During the six months ended October 31,
2009, the Board of Directors of the Company also approved grants of
non-statutory stock options and performance and service-based restricted stock
units to key employees. The employee non-statutory stock options totaled 120,000
shares of the Company’s common stock with a weighted average exercise price of
$24.73 per share. The options vest evenly over a three-year period and have
ten-year contractual terms. The employee performance-based restricted stock
units totaled 128,325 units and the employee and non-employee directors
service-based restricted stock units totaled 64,425 units. The
performance-based restricted stock units entitle the recipients to receive one
share of the Company’s common stock per unit granted if certain performance
conditions are met and the recipient remains employed with the Company until the
units vest. The service-based units entitle the recipient to receive
one share of the Company’s common stock per unit granted if they remain employed
with the Company until the units vest.
7
Total
compensation expense related to stock-based awards during the three-month
periods ended October 31, 2009 and 2008 was $1.1 million and $1.3 million,
respectively, and for the six-month periods ended October 31, 2009 and 2008 was
$2.3 million and $2.5 million, respectively. For the three-month
and six-month periods ended October 31, 2009 and 2008, stock-based compensation
expense was allocated as follows:
Three
Months Ended
October
31,
|
Six
Months Ended
October
31,
|
|||||||||||||||
(in
thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Cost
of sales and distribution
|
$ | 247 | $ | 293 | $ | 458 | $ | 569 | ||||||||
Selling
and marketing expenses
|
286 | 318 | 527 | 617 | ||||||||||||
General
and administrative expenses
|
614 | 651 | 1,278 | 1,274 | ||||||||||||
Stock-based
compensation expense
|
$ | 1,147 | $ | 1,262 | $ | 2,263 | $ | 2,460 |
NOTE
F--CUSTOMER RECEIVABLES
The
components of customer receivables were:
October 31, | April 30, | |||||||
(in thousands) | 2009 | 2009 | ||||||
Gross
customer receivables
|
$ | 33,392 | $ | 29,672 | ||||
Less:
|
||||||||
Allowance for doubtful
accounts
|
(516 | ) | (536 | ) | ||||
Allowance for returns and
discounts
|
(1,873 | ) | (2,192 | ) | ||||
Net
customer receivables
|
$ | 31,003 | $ | 26,944 |
NOTE
G--INVENTORIES
The
components of inventories were:
October 31, | April 30, | |||||||
(in thousands) | 2009 | 2009 | ||||||
Raw
materials
|
$ | 8,105 | $ | 11,012 | ||||
Work-in-process
|
19,572 | 22,961 | ||||||
Finished
goods
|
8,768 | 8,853 | ||||||
Total
FIFO inventories
|
$ | 36,445 | $ | 42,826 | ||||
Reserve
to adjust inventories to LIFO value
|
(9,920 | ) | (10,142 | ) | ||||
Total
LIFO inventories
|
$ | 26,525 | $ | 32,684 |
For the
six-month periods ended October 31, 2009 and 2008, the gain recognized by the
Company related to the liquidation of LIFO based inventories was not
material. Interim LIFO calculations are based on management’s
estimates of expected year-end inventory levels and costs. Since these items are
estimated, interim results are subject to the final year-end LIFO inventory
valuation.
8
NOTE
H--PRODUCT WARRANTY
The
Company estimates outstanding warranty costs based on the historical
relationship between warranty claims and revenues. The warranty
accrual is reviewed monthly to verify that it properly reflects the remaining
obligation based on the anticipated expenditures over the balance of the
obligation period. Adjustments are made when actual warranty claim
experience differs from estimates. Warranty claims are generally made
within three months of the original shipment date.
The
following is a reconciliation of the Company’s warranty liability:
Six
Months Ended
|
||||||||
October
31
|
||||||||
(in thousands) | 2009 | 2008 | ||||||
Beginning
balance at May 1
|
$ | 2,048 | $ | 2,428 | ||||
Accrual
|
2,607 | 4,381 | ||||||
Settlements
|
(3,248 | ) | (4,587 | ) | ||||
Ending
balance at October 31
|
$ | 1,407 | $ | 2,222 |
NOTE
I--CASH FLOW
Supplemental
disclosures of cash flow information:
Six
Months Ended
|
||||||||
October
31
|
||||||||
(in thousands) | 2009 | 2008 | ||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 239 | $ | 324 | ||||
Income taxes
|
$ | 2,300 | $ | 306 |
NOTE
J--PENSION BENEFITS
Net
periodic pension cost consisted of the following for the three months and six
months ended October 31, 2009 and 2008.
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
October
31
|
October
31
|
|||||||||||||||
(in
thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Service
cost
|
$ | 830 | $ | 1,107 | $ | 1,660 | $ | 2,214 | ||||||||
Interest
cost
|
1,405 | 1,333 | 2,810 | 2,665 | ||||||||||||
Expected
return on plan assets
|
(1,320 | ) | (1,531 | ) | (2,641 | ) | (3,062 | ) | ||||||||
Amortization
of net loss
|
314 | 78 | 628 | 157 | ||||||||||||
Amortization
of prior service cost
|
22 | 32 | 44 | 65 | ||||||||||||
Net
periodic pension cost
|
$ | 1,251 | $ | 1,019 | $ | 2,501 | $ | 2,039 |
Employer
Contributions
Under the
requirements of the Pension Protection Act of 2006, the Company is not required
to make a mandatory contribution to the pension plans during fiscal
2010. Accordingly, no contributions were made to these plans during
the six months ended October 31, 2009.
During
the quarter ended October 31, 2008, the Company terminated its retiree
medical benefits plan and recognized a $608,000 gain on settlement of the
plan. The gain was recorded as a reduction of general and
administrative expenses.
9
NOTE K –
RESTRUCTURING CHARGES
In the
fourth quarter of fiscal 2009, the Company announced a restructuring plan that
committed to the closing of two of the Company’s manufacturing plants, which are
located in Berryville, Virginia, and Moorefield, West Virginia, and suspending
operations in a third manufacturing plant located in Tahlequah, Oklahoma. These
actions were completed during the first quarter of fiscal 2010. This
initiative impacted approximately 600 employees. The continuing housing slump
led to the decision to reduce production capacity. These initiatives
were intended to increase the Company’s utilization rates and decrease overhead
costs within the Company’s manufacturing operations. In addition to
these initiatives, the Company made other staffing reductions during the fourth
quarter of fiscal 2009. The Company expects to incur total pre-tax exit costs of
$16.1 million related to this shut-down initiative and staffing reductions,
including severance and separation costs of $8.0 million, pension curtailments
of $0.1 million, and $8.0 million for equipment, inventory, and
facilities-related expenses. During fiscal 2009, the Company
recognized $9.7 million of these costs in restructuring charges. During the six
months ended October 31, 2009, the Company recognized $2.2 million of severance
and separation costs and $0.6 million relating to equipment, inventory, and
facilities-related expenses in restructuring charges. Most of the
remaining estimated costs to be incurred relate to Management’s estimate of the
shortfall in fair value of the idled Tahlequah plant for which future
utilization plans have not yet been determined.
A reserve
for restructuring charges in the amount of $760 thousand is included in the
Company’s consolidated balance sheet as of October 31, 2009, which relates to
employee termination costs.
The
following is a summary of the restructuring reserve balance as of October 31,
2009:
2009 RESTRUCTURING
PLAN
(in
thousands)
Restructuring
reserve balance as of April 30, 2009
|
$ | 5,140 | ||
Additions
|
1,657 | |||
Payments
|
(6,037 | ) | ||
Reserve
balance as of October 31, 2009
|
$ | 760 |
The
Company has a total of four manufacturing plants that were idled in 2008 and
2009. Three of these plants have been classified as held for
sale. The Company believes that the $2.3 million net book value of
these three plants is fully recoverable. These assets are included in
Other Assets on the Company’s balance sheet at October 31, 2009. The
Company has not yet determined how its idled manufacturing plant in Tahlequah,
Oklahoma will be utilized in the future. Accordingly, this asset
continues to be classified as Property, Plant and Equipment on the Company’s
balance sheet, and continues to be depreciated at a rate of $120 thousand per
quarter.
NOTE
L—FAIR VALUE MEASUREMENTS
The
Company’s hierarchy of fair value measurement of its assets is as
follows:
Level 1-
This level is defined as quoted prices in active markets for identical assets or
liabilities. The Company’s cash equivalents are invested in money
market funds that are either insured by the US Treasury or invested in United
States Treasury instruments. The Company’s mutual fund investment assets
represent contributions made and invested on behalf of the Company’s named
executive officers in a supplementary employee retirement plan.
Level 2 —
This level is defined as observable inputs other than Level 1 prices such as
quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities. The Company has no level 2 assets or liabilities.
Level 3 —
This level is defined as unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the assets or
liabilities. The Company has no level 3 assets or liabilities.
10
The
following table summarizes the fair values of assets that are recorded in the
Company’s condensed consolidated financial statements as of October 31, 2009 at
fair value on a recurring basis (in thousands):
Fair
Value Measurements
|
||||||||||||
As
of October 31, 2009
|
||||||||||||
Level
1
|
Level
2
|
Level
3
|
||||||||||
ASSETS:
|
||||||||||||
Money
market funds
|
$ | 36,174 | ||||||||||
Mutual
funds
|
1,324 | $ | -- | $ | -- | |||||||
Total
assets at fair value
|
$ | 37,498 | $ | -- | $ | -- | ||||||
The
carrying amounts of the Company’s cash and cash equivalents, customer
receivables, accounts payable, and long-term debt approximate fair
value.
NOTE M
--DEBT
On
December 2, 2009, the Company terminated its primary credit facility with Bank
of America, N.A. and entered into a $35 million secured revolving line of credit
agreement with Wells Fargo Bank, N.A.
The Bank
of America facility was secured by the Company’s accounts receivable and
inventory and included a $10 million term note due December 13, 2012 and a $25
million revolving line of credit with a maturity date of December 13,
2011.
The new
credit agreement with Wells Fargo Bank is secured by cash and other specified
investments held in certain of the Company’s accounts with Wells Fargo
Bank. The Company can borrow up to $35 million under the new
agreement; however, the Company’s aggregate debt with Wells Fargo Bank cannot
exceed the collateral value of the Company’s cash and specified investments held
in the pledged accounts with Wells Fargo Bank. The Company used the
Wells Fargo credit line to pay off the $10 million term loan with Bank of
America. The new line of credit expires December 31,
2012. Under this agreement, the Company must maintain a prescribed
ratio of total liabilities to tangible net worth and comply with other customary
affirmative and negative covenants. The new credit agreement does not
limit the Company’s ability to pay cash dividends or repurchase its common stock
as long as the Company maintains the required ratio of total liabilities to
tangible net worth.
There was
no gain or loss realized in terminating the Company’s credit agreement with Bank
of America, N.A. or with entering into the new agreement with Wells Fargo, Bank,
N.A.
NOTE
N--OTHER INFORMATION
The
Company is involved in suits and claims in the normal course of business,
including product liability and general liability claims, in addition to claims
pending before the EEOC. On at least a quarterly basis, the Company
consults with its legal counsel to ascertain the reasonable likelihood that such
claims may result in a loss. As required by the provisions of ASC
450, “Contingencies,” the Company categorizes the various suits and
claims into three categories according to their likelihood for resulting in
potential loss; those that are probable (i.e., more likely than not), those that
are reasonably possible, and those that are deemed to be
remote. Where losses are deemed to be probable and estimable,
accruals are made. Where losses are deemed to be reasonably possible or remote,
a range of loss estimates is determined. Where no loss estimate range
can be made, the Company and its counsel perform a worst case estimate. In
determining these loss range estimates, the Company considers known values of
similar claims and consultation with independent counsel.
The
Company believes that the aggregate range of loss stemming from the various
suits and asserted and unasserted claims which were deemed to be either probable
or reasonably possible were not material as of October 31,
2009.
11
NOTE
O--SUBSEQUENT EVENTS
On
November 19, 2009, the Board of Directors approved a $.09 per share cash
dividend on its common stock. The cash dividend will be paid on
December 21, 2009, to shareholders of record on December 7, 2009.
On
December 2, 2009, the Company terminated its secured $35 million credit facility
with Bank of America, N.A. and entered into a new secured $35 million revolving
credit agreement with Wells Fargo Bank, N.A. (see Note M).
12
Item
2.
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations
The
following discussion should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes to the condensed
consolidated financial statements, both of which are included in Part I, Item 1
of this report. The Company’s critical accounting policies are
included in the Company’s 2009 Annual Report, which was filed as an exhibit to
the Company’s Annual Report on Form 10-K for the year ended April 30,
2009.
Forward-Looking
Statements
This
report contains statements concerning the Company’s expectations, plans,
objectives, future financial performance, and other statements that are not
historical facts. These statements are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of
1995. In most cases, the reader can identify these forward-looking
statements by words such as “anticipate,” “estimate,” “forecast,” “expect,”
“believe,” “should,” “would,” “could,” “plan,” “may” or other similar
words. Forward-looking statements contained in this report, including
in Management’s Discussion and Analysis are based on current expectations and
our actual results may differ materially from those projected in any
forward-looking statements. In addition, the Company participates in
an industry that is subject to rapidly changing conditions and there are
numerous factors that could cause the Company to experience a decline in sales
and/or earnings or deterioration in financial condition. These
include (1) overall industry demand at reduced levels, (2) economic weakness in
a specific channel of distribution, (3) the loss of sales from specific
customers due to their loss of market share, bankruptcy or switching to a
competitor, (4) a sudden and significant rise in basic raw material costs, (5) a
dramatic increase to the cost of diesel fuel and/or transportation related
services, (6) the need to respond to price or product initiatives launched by a
competitor, (7) the Company’s ability to successfully implement initiatives
related to increasing market share, new products, maintaining and increasing its
sales force and new product displays, and (8) sales growth at a rate that
outpaces the Company’s ability to install new capacity. Additional
information concerning the factors that could cause actual results to differ
materially from those in forward-looking statements is contained in this report
and also in the Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 2009, including Item 1A, "Risk Factors" and Item 7A, "Quantitative and
Qualitative Disclosures about Market Risk," as well as the Company’s 2009 Annual
Report, including under the headings "Forward-Looking Statements," "Market
Risks," and "Outlook for Fiscal 2010" in Management's Discussion and
Analysis. While the Company believes that these risks are manageable
and will not adversely impact the long-term performance of the Company, these
risks could, under certain circumstances, have a materially adverse impact on
its operating results and financial condition.
Any
forward-looking statement that the Company makes, speaks only as of the date of
this report. The Company undertakes no obligation to publicly update
or revise any forward-looking statements or cautionary factors, as a result of
new information, future events or otherwise, except as required by
law.
Overview
American
Woodmark Corporation manufactures and distributes kitchen cabinets and vanities
for the remodeling and new home construction markets. Its products
are sold on a national basis directly to home centers, major builders and home
manufacturers, and through a network of independent dealers and
distributors. At October 31, 2009, the Company operated 11
manufacturing facilities and 9 service centers across the country.
The
three-month period ending October 31, 2009 was the Company’s second quarter of
its fiscal year that ends on April 30, 2010 (fiscal 2010). During the
second quarter of fiscal 2010, the Company experienced a continuation of
difficult housing market conditions that began during the Company’s 2007 fiscal
year. In new construction, housing starts were down 44%
on a calendar year-to-date basis, while in the remodeling market, year-to-date
sales of existing homes were slightly ahead of the prior year’s low levels
through October 2009. Although existing home sales have begun to rise, the
combination of weak consumer confidence and continuing job losses in the US
economy have contributed to a decline of more than 20% in large ticket
remodeling projects such as cabinetry during calendar year 2009.
The
Company believes that it continued to gain market share throughout fiscal 2009
and during the first half of fiscal 2010. The Company experienced
sales declines in each of its sales channels that approximated its overall sales
decline of 25% during the first six months of fiscal 2010 compared with the
corresponding period of fiscal 2009, driven entirely by reduced market
performance. The Company believes that its sales decline in new
construction was less than that of the overall construction market, and that its
drop in remodeling sales was in line with the remodeling market’s
decline.
13
The
Company believes the current housing environment continues to be adversely
impacted by the combined impacts of economic uncertainty, home prices that
continue to be lower than one year ago and the continued credit
crunch. The Company believes these factors, and their associated
media coverage, have contributed to a reduced ability and desire for buyers to
obtain mortgage financing. The Company expects the short-term outlook
for the housing economy will remain uncertain until the credit crunch is
resolved and housing prices have stabilized.
Despite
the present housing market downturn, the Company believes that the long-term
fundamentals for the American housing industry continue to remain positive,
based upon continued population growth and new household formation, low interest
rates, and other favorable demographic trends. Based upon this belief, the
Company has continued to invest in improving its operations and its capabilities
to best service its customers. The Company remains focused on gaining market
share and has continued to invest in developing and launching new products while
maintaining its product displays and related marketing collateral deployed with
its customers.
During
fiscal 2009, the Company announced its intention to realign its manufacturing
network by closing two of its oldest manufacturing plants and suspending
operations in a third. These initiatives were achieved during the first quarter
of fiscal 2010.
The
Company’s gross margin rate for the second quarter of fiscal 2010 was 12.2%,
down from 14.4% in the second quarter of fiscal 2009. The Company’s
gross margin rate for the first six months of fiscal 2010 was 12.0%, down from
15.2% in the comparable period of the prior fiscal year. The reductions in the
Company’s gross margin rate during the three and six month periods ended October
31, 2009, as compared with prior year, were primarily driven by inefficiencies
in overhead and labor costs that were driven by lower sales volumes, offset in
part by lower fuel costs and materials costs, and by reduced overhead costs
generated by the plant closures.
The
Company regularly assesses its long-lived assets to determine if any impairment
has occurred. Although the direction of the housing market and its
resultant impact upon the Company’s performance is not presently positive, the
Company continues to believe that the long-term fundamentals for the American
housing industry, as discussed above, will support a growing and vibrant housing
economy in the future. The Company does not believe that its long-lived assets
pertaining to its 11 manufacturing plants or any of its other long-lived assets
were impaired as of October 31, 2009.
In
connection with its aforementioned manufacturing realignment, the Company has
listed for sale two of the three manufacturing plants that ceased production in
2009. The aggregate net book value of these assets, along with assets pertaining
to a plant which ceased operation in fiscal year 2008, was $2.3 million at
October 31, 2009. These assets are classified as held for sale and included in
the Company’s “Other Assets” in its October 31, 2009 balance
sheet. The Company’s facility in which production was suspended
had a net book value of $5.4 million at October 31, 2009 and is not for
sale. If this facility were to become held for sale, it is possible
that an asset impairment charge could be recorded at that time if the facility’s
estimated fair value was determined to be less than its net book
value.
The
Company recorded restructuring charges during the second quarter of fiscal 2010
in connection with its plant closure activity. The net of tax impact of these
charges was a loss of $0.1 million. Exclusive of these charges, the
Company’s net loss from operations totaled $5.1 million for the second quarter
of fiscal 2010, compared with net loss during the prior fiscal year’s second
quarter of $0.5 million. During the first half of fiscal 2010 the net
of tax impact of the restructuring charges was a loss of $1.7
million. Exclusive of these charges, the Company’s net loss from
operations totaled $9.9 million for the first half of fiscal 2010.
The
Company generated a net loss inclusive of restructuring charges for the second
quarter of fiscal 2010 of $5.3 million, compared to net loss of $0.5 million
during the second quarter of fiscal 2009. The Company generated a net
loss inclusive of restructuring charges of $11.7 million for the first six
months of fiscal 2009, compared with net loss of $0.3 million in the first six
months of fiscal 2009.
14
Results of
Operations
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||
October
31
|
October
31
|
|||||||||||||||||||||||
Percent
|
Percent
|
|||||||||||||||||||||||
(in
thousands)
|
2009
|
2008
|
Change
|
2009
|
2008
|
Change
|
||||||||||||||||||
Net
Sales
|
$ | 104,068 | $ | 134,939 | (23 | %) | $ | 204,903 | $ | 274,092 | (25 | %) | ||||||||||||
Gross
Profit
|
12,669 | 19,468 | (35 | %) | 24,503 | 41,528 | (41 | %) | ||||||||||||||||
Selling
and Marketing Expenses
|
14,510 | 15,122 | (4 | %) | 27,859 | 30,691 | (9 | %) | ||||||||||||||||
General
and Administrative Expenses
|
6,380 | 5,435 | 17 | % | 12,607 | 11,976 | 5 | % |
Net Sales. Net sales were
$104.1 million for the second quarter of fiscal 2010, a decrease of 23% as
compared with the second quarter of fiscal 2009. For the first six
months of fiscal 2010, net sales were $204.9 million, reflecting a decrease of
25% compared with the same period of fiscal 2009. Unit volume
decreased by 21% and 23% compared with the second quarter and first half of
fiscal 2009, respectively. Average revenue per unit also decreased by
3% during the three and six-month periods ended October 31, 2009 compared with
prior year, driven primarily by changes in sales mix.
Gross Profit. Gross profit
margin for the second quarter of fiscal 2010 was 12.2%, compared with 14.4% for
the same period of fiscal 2009. Gross profit margin was 12.0% for the
first half of fiscal 2010, compared with 15.2% in the first half of fiscal
2009. Labor and manufacturing overhead costs increased as a
percentage of net sales by a combined 4.5% of sales in the second quarter and
5.2% of sales in the first half of fiscal 2010 compared with the comparable
prior year periods, driven by the unfavorable impact of lower sales volumes upon
labor productivity and overhead absorption. These increases were partially
offset by the impact of reductions in freight and materials costs as a
percentage of net sales by a combined 2.2% in the second quarter and 2.1% of net
sales in the first half of fiscal 2010 compared with the comparable prior year
periods. The Company’s restructuring initiatives and lower sales
volume caused manufacturing overhead costs to be reduced by $4.7 million and
$8.8 million compared with the prior year’s second quarter and first half,
respectively.
Selling and Marketing Expenses. Selling
and marketing expenses for the second quarter of fiscal 2010 were $14.5 million
or 13.9% of sales, compared with $15.1 million or 11.2% of sales for the same
period in fiscal 2009. For the first six months of fiscal 2010,
selling and marketing costs were $27.9 million, or 13.6% of net sales, compared
with $30.7 million, or 11.2% of net sales for the same period of fiscal 2009.
Sales and marketing costs increased in relation to sales because the percentage
decline in the Company’s sales exceeded that of the Company’s cost
reductions.
General and Administrative Expenses. General
and administrative expenses for the second quarter of fiscal 2010 were $6.4
million or 6.1% of sales, compared with $5.4 million or 4.0% of sales for the
same period in fiscal 2009. For the first six months of fiscal 2010,
general and administrative costs were $12.6 million, or 6.2% of net sales,
compared with $12.0 million, or 4.4% of net sales for the same period of fiscal
2009. The increase in general and administrative expenses during the
second quarter was driven by the absence of a one-time credit realized during
the prior year’s second quarter associated with the elimination of a retiree
healthcare program and, to a lesser extent, by an increase in costs relating to
the Company’s pay-for-performance program. As of October 31, 2009,
the Company had aggregate receivables from customers with a higher perceived
level of risk of $1.3 million, of which $0.5 million had been reserved for
potential uncollectibility.
Effective Income Tax
Rates. The
Company’s effective income tax rate for both the second quarter and first six
months of fiscal year 2010 was 37.5% as compared with 36.8% and 41.0% in the
comparable periods of fiscal 2009, respectively.
Outlook. The Company
expects the continuing negative impact of tighter credit conditions, falling
real estate prices, job losses and economic uncertainty will cause the
remodeling and new construction markets to remain subdued until these conditions
are resolved. The Company continues to expect that it will gain
market share in fiscal 2010, causing its sales to decline at a lower rate than
that of the overall market.
15
LIQUIDITY
AND CAPITAL RESOURCES
The
Company’s cash and cash equivalents totaled $69.4 million at October 31, 2009,
down from $82.8 million at April 30, 2009. At October 31, 2009, total
short-term and long-term debt was $27.0 million, down slightly from $27.3
million at April 30, 2009. The Company’s ratio of long-term debt to
total capital was 12.0% at October 31, 2009 compared with 11.5% at April 30,
2009.
The
Company’s main source of liquidity is cash and cash equivalents on hand and cash
generated from operating activities.
Cash used
by operating activities in the first half of fiscal 2010 was $6.4 million,
compared with cash provided by operating activities of $16.5 million in the
comparable period of fiscal 2009. The $22.9 million reduction in cash
provided from operations during the first half of fiscal 2010 compared with the
first half of fiscal 2009 was primarily attributable to an $11 million increase
in the Company’s net loss, as well as payments made for severance, income taxes,
and performance-based bonuses that were almost entirely accrued in the prior
fiscal year totaling $12 million.
The
Company’s primary investing activities are capital expenditures and investments
in promotional displays. Net cash used for investing activities in
the first half of fiscal 2010 was $4.6 million, or $2.4 million less than in the
comparable period of the prior fiscal year. The Company’s investments
in both capital expenditures and promotional displays were reduced during fiscal
2010. Capital expenditures made in both six-month periods of fiscal
2009 and 2010 did not include any new plant construction
activities. The Company expects its investments in capital
expenditures and promotional displays for fiscal 2010 will approximate the total
invested in fiscal 2009.
During
the first half of fiscal 2010, net cash used by financing activities was $2.4
million, compared with net cash used in the comparable period of fiscal 2009 of
$5.4 million. The primary use of cash during the first half of fiscal
2010 was to return cash to the Company’s shareholders in the form of dividends
in the amount of $2.5 million. The use of cash during the comparable period of
fiscal 2009 related primarily to stock repurchases of $2.5 million and dividend
payments of $2.5 million.
The
Company’s cash position, coupled with expected cash flow and available borrowing
capacity on the Company’s $35 million line of credit is expected to be more than
sufficient to meet forecasted working capital requirements, service existing
debt obligations, and fund capital expenditures for the remainder of fiscal
2010.
On
December 2, 2009, the Company terminated its primary credit facility with Bank
of America, N.A. and entered into a $35 million secured revolving line of credit
agreement with Wells Fargo Bank, N.A.
The Bank
of America facility was secured by the Company’s accounts receivable and
inventory and included a $10 million term note due December 13, 2012 and a $25
million revolving line of credit with a maturity date of December 13,
2011.
The new
credit agreement with Wells Fargo Bank is secured by cash and other specified
investments held in certain of the Company’s accounts with Wells Fargo
Bank. The Company can borrow up to $35 million under the new
agreement; however, the Company’s aggregate debt with Wells Fargo Bank cannot
exceed the collateral value of the Company’s cash and specified investments held
in the pledged accounts with Wells Fargo Bank. The Company used the
Wells Fargo credit line to pay off the $10 million term loan with Bank of
America. The new line of credit expires December 31,
2012. Under this agreement, the Company must maintain a prescribed
ratio of total liabilities to tangible net worth and comply with other customary
affirmative and negative covenants. The new credit agreement does not
limit the Company’s ability to pay cash dividends or repurchase its common stock
as long as the Company maintains the required ratio of total liabilities to
tangible net worth.
There was
no gain or loss realized in terminating the Company’s credit agreement with Bank
of America, N.A. or with entering into the new agreement with Wells Fargo, Bank,
N.A.
16
The
timing of the Company’s contractual obligations as of April 30, 2009 is
summarized in the table below.
FISCAL
YEARS ENDED APRIL 30
|
||||||||||||||||||||
(in
thousands)
|
Total
Amounts
|
2010
|
2011 – 2012 | 2013 – 2014 |
2015
and Thereafter
|
|||||||||||||||
Term
credit facility
|
$ | 10,000 | $ | -- | $ | -- | $ | 10,000 | $ | -- | ||||||||||
Economic
development loans
|
3,524 | -- | -- | -- | 3,524 | |||||||||||||||
Term
loans
|
5,114 | 366 | 805 | 761 | 3,182 | |||||||||||||||
Capital
lease obligations
|
8,696 | 493 | 1,015 | 1,057 | 6,131 | |||||||||||||||
Interest
on long-term debt(a)
|
3,708 | 586 | 1,108 | 751 | 1,263 | |||||||||||||||
Operating
lease obligations
|
18,177 | 4,495 | 5,820 | 3,512 | 4,350 | |||||||||||||||
Pension
contributions(b)
|
25,117 | -- | 7,346 | 17,771 | -- | |||||||||||||||
Total
|
$ | 74,336 | $ | 5,940 | $ | 16,094 | $ | 33,852 | $ | 18,450 |
|
(a)
|
Interest
commitments under interest bearing debt consists of interest under the
Company’s primary loan agreement and other term loans and capitalized
lease agreements. The Company’s current credit facility
includes a $35 million revolving line of credit that bears an interest
rate determined by the London Interbank Offered Rate (LIBOR) plus
1.25%. At April 30, 2009, that spread was between 0.50% and
0.675%. Interest under other term loans and
capitalized lease agreements is fixed at rates between 2% and
6%. Interest commitments under interest bearing debt for the
Company’s term credit facility is at LIBOR plus the spread as of April 30,
2009, throughout the remaining term of the
agreement.
|
(b)
|
The
estimated cost of the Company’s two defined benefit pension plans are
determined annually based upon the discount rate and other assumptions at
fiscal year end. Future pension funding contributions beyond 2014 have not
been determined at this time.
|
Dividends
Declared
On
November 19, 2009, the Board of Directors approved a $.09 per share cash
dividend on its common stock. The cash dividend will be paid on
December 21, 2009, to shareholders of record on December 7, 2009.
Seasonal and Inflationary
Factors
The
Company’s business has historically been subject to seasonal influences, with
higher sales typically realized in the second and fourth fiscal
quarters.
The costs
of the Company’s products are subject to inflationary pressures and commodity
price fluctuations. The Company has generally been able over time to
recover the effects of inflation and commodity price fluctuations through sales
price increases.
Critical Accounting
Policies
The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions. There have been no significant
changes to the Company’s critical accounting policies as disclosed in the
Company’s 2009 Annual Report, which was filed as an exhibit to the Company’s
Annual Report on Form 10-K for the fiscal year ended April 30,
2009.
17
Item 3.
|
Quantitative and
Qualitative Disclosures of Market
Risk
|
As of
December 2, 2009, the Company had a $35 million revolving line of credit which
bears interest at the London InterBank Offered Rate (LIBOR) plus
1.25%. All other borrowings of the Company carry a fixed interest
rate between 2% and 6%. See additional disclosures regarding market
risk under Item 7A “Quantitative and Qualitative Disclosures of Market Risk” in
the Company’s Annual Report on Form 10-K for the fiscal year ended April 30,
2009.
Item
4.
|
Controls and
Procedures
|
Senior
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of October 31, 2009. Based on
this evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are
effective. In addition, there have been no changes in the Company's
internal control over financial reporting that occurred during the quarter ended
October 31, 2009 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
1.
|
Legal
Proceedings
|
The
Company is involved in various suits and claims in the normal course of business
all of which constitute ordinary, routine litigation incidental to the
business. The Company does not have any litigation that does not
constitute ordinary, routine litigation to its business.
Item
1A.
|
Risk
Factors
|
There
have been no material changes in the risk factors disclosed in the Company’s
10-K for the year ended April 30, 2009.
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds
|
The
Company has $93.2 million remaining authorized by its Board of Directors to
repurchase shares of its common stock. The Company did not repurchase
its common stock during the second quarter of fiscal 2010.
Item
5.
|
Other
Information
|
On
December 2, 2009, the Company terminated its primary credit facility with Bank
of America, N.A. and entered into a $35 million secured revolving line of credit
agreement with Wells Fargo Bank, N.A.
The Bank
of America facility was secured by the Company’s accounts receivable and
inventory and included a $10 million term note due December 13, 2012 and a $25
million revolving line of credit with a maturity date of December 13,
2011.
The new
credit agreement with Wells Fargo Bank is secured by cash and other specified
investments held in certain of the Company’s accounts with Wells Fargo
Bank. The Company can borrow up to $35 million under the new
agreement; however, the Company’s aggregate debt with Wells Fargo Bank cannot
exceed the collateral value of the Company’s cash and specified investments held
in the pledged accounts with Wells Fargo Bank. The Company used the
Wells Fargo credit line to pay off the $10 million term loan with Bank of
America. The new line of credit expires December 31,
2012. Under this agreement, the Company must maintain a prescribed
ratio of total liabilities to tangible net worth and comply with other customary
affirmative and negative covenants. The new credit agreement does not
limit the Company’s ability to pay cash dividends or repurchase its common stock
as long as the Company maintains the required ratio of total liabilities to
tangible net worth.
There was
no gain or loss realized in terminating the Company’s credit agreement with Bank
of America, N.A. or with entering into the new agreement with Wells Fargo, Bank,
N.A.
18
Item
6. Exhibits
Exhibit
Number
|
Description
|
3.1
(a)
|
Articles
of Incorporation as amended effective August 12, 1987 (incorporated by
reference to Exhibit 3.1 to the Registrant’s Form 10-Q for quarter ended
January 31, 2003; Commission File No. 000-14798).
|
3.1
(b)
|
Articles
of Amendment to the Articles of Incorporation effective September 10, 2004
(incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K as
filed on August 31, 2004; Commission File No.
000-14798).
|
3.2
|
Bylaws
– as amended and restated August 27, 2009 (incorporated by reference to
Exhibit 3.2 to the Registrant’s Form 10-Q as filed on September 1, 2009;
Commission File No. 000-14798).
|
10.1
|
Credit
Agreement dated of December 2, 2009, between the Company and Wells Fargo
Bank, N.A. (Filed Herewith).
|
10.2
|
Securities
Account Control Agreement dated of December 2, 2009, among the
Company, Wells Fargo Brokerage Services, LLC and Wells Fargo Bank, N.A.
(Filed Herewith).
|
10.3
|
Revolving
Line of Credit Note dated of December 2, 2009, made by the Company in
favor of Wells Fargo Bank, N.A. (Filed Herewith).
|
10.4
|
Security
Agreement: Specific Rights to Payment dated as of December 2,
2009, between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
10.5
|
Security
Agreement: Securities Account dated of December 2, 2009,
between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
10.6
|
Addendum
to Security Agreement Securities Account dated as of December 2, 2009,
between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
31.1
|
Certification
of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange
Act (Filed Herewith).
|
31.2
|
Certification
of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange
Act (Filed Herewith).
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer Pursuant to
Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
Herewith).
|
19
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
AMERICAN WOODMARK
CORPORATION
(Registrant)
/s/Jonathan H. Wolk
|
||
Jonathan
H. Wolk
|
||
Vice
President and Chief Financial Officer
|
||
Date: December
3, 2009
|
||
Signing
on behalf of the
|
||
registrant
and as principal
|
||
financial
and accounting officer
|
20
EXHIBIT
INDEX
Exhibit
Number
|
Description
|
3.1
(a)
|
Articles
of Incorporation as amended effective August 12, 1987 (incorporated by
reference to Exhibit 3.1 to the Registrant’s Form 10-Q for quarter ended
January 31, 2003; Commission File No. 000-14798).
|
3.1
(b)
|
Articles
of Amendment to the Articles of Incorporation effective September 10, 2004
(incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K as
filed on August 31, 2004; Commission File No.
000-14798).
|
3.2
|
Bylaws
– as amended and restated August 27, 2009 (incorporated by reference to
Exhibit 3.2 to the Registrant’s Form 10-Q as filed on September 1, 2009;
Commission File No. 000-14798).
|
10.1
|
Credit
Agreement dated of December 2, 2009, between the Company and Wells Fargo
Bank, N.A. (Filed Herewith).
|
10.2
|
Securities
Account Control Agreement dated of December 2, 2009, among the Company,
Wells Fargo Brokerage Services, LLC and Wells Fargo Bank, N.A. (Filed
Herewith).
|
10.3
|
Revolving
Line of Credit Note dated of December 2, 2009, made by the Company in
favor of Wells Fargo Bank, N.A. (Filed Herewith).
|
10.4
|
Security
Agreement: Specific Rights to Payment dated as of December 2,
2009, between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
10.5
|
Security
Agreement: Securities Account dated of December 2, 2009,
between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
10.6
|
Addendum
to Security Agreement Securities Account dated as of December 2, 2009,
between the Company and Wells Fargo Bank, N.A. (Filed
Herewith).
|
31.1
|
Certification
of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange
Act (Filed Herewith).
|
31.2
|
Certification
of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange
Act (Filed Herewith).
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer Pursuant to
Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
Herewith).
|
21