AMERICAN WOODMARK CORP - Quarter Report: 2010 July (Form 10-Q)

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of	54-1138147 (I.R.S. Employer Identification No.)
incorporation or organizatiaon)

 

3102 Shawnee Drive, Winchester Virginia  (Address of principal executive offices)	22601 (Zip Code)

 

		PAGE
PART I.	FINANCIAL INFORMATION	NUMBER
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets--July 31, 2010 and April 30, 2010	3
	Condensed Consolidated Statements of Operations--Three months ended July 31, 2010 and 2009	4
	Condensed Consolidated Statements of Cash Flows--Three months ended July 31, 2010 and 2009	5
	Notes to Condensed Consolidated Financial Statements--July 31, 2010	6-10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11-14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 5.	Other Information	14-15
Item 6.	Exhibits	16
SIGNATURES		17

		July 31,				April 30,
		2010				2010
ASSETS
Current Assets
Cash and cash equivalents		$	51,758			$	53,233
Customer receivables, net			23,218				27,524
Inventories			23,648				25,239
Income taxes receivable and other			10,831				10,693
Deferred income taxes			6,186				6,355
Total Current Assets			115,641				123,044
Property, plant, and equipment, net			110,333				114,107
Restricted cash			14,419				14,419
Promotional displays, net			10,647				11,738
Deferred income taxes			15,391				13,440
Other assets			5,752				5,685
		$	272,183			$	282,433
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	13,415			$	14,035
Accrued compensation and related expenses			13,632				20,409
Current maturities of long-term debt			897				893
Accrued marketing expenses			4,911				4,903
Other accrued expenses			8,656				9,339
Total Current Liabilities			41,511				49,579
Long-term debt, less current maturities			25,429				25,582
Defined benefit pension liabilities			30,328				29,065
Other long-term liabilities			2,745				2,889
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 14,239,665 shares at July 31, 2010; 14,205,462 shares at April 30, 2010			89,390				88,153
Retained earnings			103,941				108,643
Accumulated other comprehensive loss
Defined benefit pension plans			(21,161	)			(21,478	)
Total Shareholders’ Equity			172,170				175,318
		$	272,183			$	282,433

		Quarter Ended
		July 31
		2010				2009
Net sales		$	109,303			$	100,835
Cost of sales and distribution			94,916				89,001
Gross Profit			14,387				11,834
Selling and marketing expenses			14,103				13,349
General and administrative expenses			5,822				6,227
Restructuring charges			23				2,554
Operating Loss			(5,561	)			(10,296	)
Interest expense			148				169
Other income			(174	)			(215	)
Loss Before Income Taxes			(5,535	)			(10,250	)
Income tax benefit			(2,117	)			(3,844	)
Net Loss		$	(3,418	)		$	(6,406	)
Net Loss Per Share
Weighted average shares outstanding
Basic			14,222,151				14,113,627
Diluted			14,222,151				14,113,627
Net loss per share
Basic		$	( 0.24	)		$	( 0.45	)
Diluted		$	( 0.24	)		$	( 0.45	)
Cash dividends per share		$	0.09			$	0.09
See accompanying notes to condensed consolidated financial statements

		Quarter Ended
		July 31
		2010				2009
Operating Activities
Net loss		$	(3,418	)		$	(6,406	)
Adjustments to reconcile net loss to net cash provided/(used) by operating activities:
Depreciation and amortization			7,061				8,728
Net loss on disposal of property, plant, and equipment			3				72
Stock-based compensation expense			847				1,116
Deferred income taxes			(2,204	)			(2,606	)
Pension contributions less than expense			1,727				1,251
Tax benefit from stock-based compensation			(57	)			(118	)
Other non-cash items			(515	)			(806	)
Changes in operating assets and liabilities:
Customer receivables			4,636				887
Inventories			1,499				5,524
Income tax receivable and other assets			(309	)			(3,672	)
Accounts payable			(620	)			(3,889	)
Accrued compensation and related expenses			(6,777	)			(8,732	)
Other accrued expenses			(187	)			1,933
Net Cash Provided/(Used) by Operating Activities			1,686				(6,718	)
Investing Activities
Payments to acquire property, plant, and equipment			(936	)			(1,002	)
Proceeds from sales of property, plant, and equipment			--				30
Investment in promotional displays			(1,099	)			(1,389	)
Net Cash Used by Investing Activities			(2,035	)			(2,361	)
Financing Activities
Payments of long-term debt			(150	)			(146	)
Proceeds from issuance of common stock			247				310
Payment of dividends			(1,280	)			(1,270	)
Tax benefit from stock-based compensation			57				118
Net Cash Used by Financing Activities			(1,126	)			(988	)
Net Decrease In Cash And Cash Equivalents			(1,475	)			(10,067	)
Cash And Cash Equivalents, Beginning of Period			53,233				82,821
Cash And Cash Equivalents, End of Period		$	51,758			$	72,754
See accompanying notes to condensed consolidated financial statements

 

The following table sets forth the computation of basic and diluted earnings (net loss) per share:

		Quarter Ended
		July 31
(in thousands, except per share amounts)		2010				2009
Numerator used for both basic and diluted earnings (net loss) per share:
Net loss		$	(3,418	)		$	(6,406	)
Denominator:
Denominator for basic earnings (net loss) per share-weighted average shares			14,222				14,114
Effect of dilutive securities:
Stock options			--				--
Denominator for diluted earnings (net loss) per share-weighted average shares and assumed conversions			14,222				14,114
Net loss per share
Basic		$	(0.24	)		$	(0.45	)
Diluted		$	(0.24	)		$	(0.45	)

The Company has various stock compensation plans.  During the quarter ended July 31, 2010, the Board of Directors of the Company approved grants of non-statutory stock options and service-based and performance-based restricted stock units to key employees.  The non-statutory stock option grants totaled 115,000 shares of the Company’s common stock with an exercise price of $20.87 per share.  The options vest evenly over a three-year period and have a ten-year contractual term.  The service-based and performance-based restricted stock units totaled 167,300 units which entitle the recipients to receive up to one share of the Company’s common stock per unit granted if certain service and performance conditions are met.

		Quarter Ended
		July 31
(in thousands)		2010				2009
Cost of sales and distribution		$	144			$	211
Selling and marketing expenses			177				241
General and administrative expenses			526				664
Stock-based compensation expense		$	847			$	1,116

 

 

The following is a reconciliation of the Company’s warranty liability:

		Quarter Ended
		July 31
(in thousands)		2010				2009
Beginning balance at May 1		$	1,582			$	2,048
Accrual			1,475				896
Settlements			(1,569	)			(1,655	)
Ending balance at July 31		$	1,488			$	1,289

 

Supplemental disclosures of cash flow information:

		Quarter Ended
		July 31
(in thousands)		2010				2009
Cash paid during the period for:
Interest		$	86			$	117
Income taxes		$	121			$	2,281

		Quarter Ended
		July 31
(in thousands)		2010				2009
Service cost		$	1,180			$	830
Interest cost			1,567				1,405
Expected return on plan assets			(1,540	)			(1,320	)
Amortization of net loss			499				314
Amortization of prior service cost			21				22
Net pension cost		$	1,727			$	1,251

 

 

The following tables summarize the fair values of assets that are recorded in the Company’s condensed consolidated financial statements as of July 31, 2010 and April 30, 2010 at fair value on a recurring basis (in thousands):

 

		As of April 30, 2010
		Level 1				Level 2				Level 3
ASSETS:
Money market  funds		$	32,119			$	--			$	--
Mutual funds			1,470				--				--
Total assets at fair value		$	33,589			$	--			$	--

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 fiscal 2010. The vast majority of the charges related to these activities were reflected in the Company’s results during fiscal 2009 and fiscal 2010.

The Company’s net sales rose by 8% during the first quarter of fiscal 2011. The Company’s 13.2% gross margin rate for the first quarter of fiscal 2011 exceeded the 11.7% gross margin generated in the first quarter of fiscal 2010.  The improvement in the Company’s gross margin was driven by the beneficial impact of increased sales volume upon direct labor and manufacturing overhead costs, as well as from cost reductions stemming from the previously described initiatives. Partly offsetting these beneficial factors were unfavorable impacts from rising material and fuel costs.

		Three Months Ended
		July 31
										Percent
		2010				2009				Change
(in thousands)
Net Sales		$	109,303			$	100,835				8.4	%
Gross Profit			14,387				11,834				21.6	%
Selling and Marketing Expenses			14,103				13,349				5.6	%
General and Administrative Expenses			5,822				6,227				(6.5	%)

 

Cash provided by operating activities in the first three months of fiscal 2011 was $1.7 million, compared with a use of cash of $6.7 million in the comparable period of fiscal 2010.  The improvement in cash provided by operations was primarily attributable to the $3.0 million reduction in net loss, combined with the absence of payments made in relation to the Company’s cost reduction initiatives in the prior fiscal year.

 
 

		FISCAL YEARS ENDED APRIL 30
(in thousands)		Total Amounts				2011					2012 – 2013				2014 – 2015			2016 and Thereafter
Revolving credit facility		$	10,000			$	--			$	10,000			$	--			$	--
Economic development loans			3,524				--				--				--				3,524
Term loans			4,748				390				828				718				2,812
Capital lease obligations			8,203				503				1,035				1,078				5,587
Interest on long-term debt(a)			3,050				534				948				592				976
Operating lease obligations			15,084				4,036				4,618				3,704				2,726
Pension contributions(b)			33,440				--				16,552				16,888				--
Total		$	78,049			$	5,463			$	33,981			$	22,980			$	15,625

(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. Amounts outstanding under the Company’s revolving credit facility bear a variable interest rate determined by the London Interbank Offered Rate (LIBOR) plus 1.25%. 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 revolving credit facility were at LIBOR plus the spread as of April 30, 2010.

(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.

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.

Item 4.

Controls and Procedures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 December 14, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K for year ended April 30, 2010; Commission File No. 000-14798).
4.1	The Articles of Incorporation and Bylaws of the Registrant as currently in effect (incorporated by reference to Exhibits 3.1 and 3.2).
4.2	Amended and restated Stockholder’s Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-1 for year ended April 30, 1986; Commission File No. 33-6245).
	Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders of the Registrant’s long-term debt securities, where the long-term debt securities authorized under each such instrument do not exceed 10 percent of the Registrant’s total assets, have been omitted and will be furnished to the Securities and Exchange Commission on request.
10.1	Second Amendment to Amended and Restated 2004 Stock Incentive Plan for Employees (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).

	/s/ Jonathan H. Wolk
	Jonathan H. Wolk
	Vice President and Chief Financial Officer
	Date:  August 31, 2010
	Signing on behalf of the
	registrant and as principal
	financial and accounting officer

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 December 14, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K for year ended April 30, 2010; Commission File No. 000-14798).
4.1	The Articles of Incorporation and Bylaws of the Registrant as currently in effect (incorporated by reference to Exhibits 3.1 and 3.2).
4.2	Amended and restated Stockholder’s Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-1 for year ended April 30, 1986; Commission File No. 33-6245).
	Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders of the Registrant’s long-term debt securities, where the long-term debt securities authorized under each such instrument do not exceed 10 percent of the Registrant’s total assets, have been omitted and will be furnished to the Securities and Exchange Commission on request.
10.1	Second Amendment to Amended and Restated 2004 Stock Incentive Plan for Employees (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).

 

 

 

1.

I have reviewed this report on Form 10-Q of American Woodmark Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting  (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

		/s/ Kent B. Guichard
		Kent B. Guichard
		President and Chief Executive Officer
		(Principal Executive Officer)
		Date:  August 31, 2010

 

 

 

1.

I have reviewed this report on Form 10-Q of American Woodmark Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting  (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

		/s/  Jonathan H. Wolk
		Jonathan H. Wolk
		Vice President and Chief Financial Officer
		(Principal Financial Officer)
		Date:   August 31, 2010

 

                     

1.

The Quarterly Report on Form 10-Q of American Woodmark Corporation for the quarter ended July 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”)  fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 31, 2010		/s/ Kent B. Guichard
		Kent B. Guichard
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: August 31, 2010		/s/ Jonathan H. Wolk
		Jonathan H. Wolk
		Vice President and Chief Financial Officer
		(Principal Financial Officer)