AMERICAN WOODMARK CORP - Quarter Report: 2012 January (Form 10-Q)

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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)

Large accelerated filer    o	Accelerated filer                  x
Non-accelerated filer      o  (Do not check if a smaller reporting company)	Smaller reporting company o

 

		PAGE
PART I.	FINANCIAL INFORMATION	NUMBER
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets--January 31, 2012 and April 30, 2011	3
	Condensed Consolidated Statements of Operations--Three months ended January 31, 2012 and 2011; Nine months ended January 31, 2012 and 2011	4
	Condensed Consolidated Statements of Cash Flows--Nine months ended January 31, 2012 and 2011	5
	Notes to Condensed Consolidated Financial Statements--January 31, 2012	6-11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12-17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18-19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 6.	Exhibits	21
SIGNATURES		22

		January 31,				April 30,
		2012				2011
ASSETS
Current Assets
Cash and cash equivalents		$	59,227			$	55,420
Customer receivables, net			25,011				31,067
Inventories			22,138				24,471
Income taxes receivable and other			2,114				3,799
Deferred income taxes			7,367				5,659
Total Current Assets			115,857				120,416
Property, plant, and equipment, net			78,602				100,628
Restricted cash			14,403				14,419
Promotional displays, net			5,403				7,330
Deferred income taxes			32,415				21,178
Other assets			14,412				4,399
		$	261,092			$	268,370
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	15,171			$	18,569
Accrued compensation and related expenses			19,683				15,607
Current maturities of long-term debt			972				928
Accrued marketing expenses			5,731				7,408
Other accrued expenses			7,307				8,332
Total Current Liabilities			48,864				50,844
Long-term debt, less current maturities			23,887				24,655
Defined benefit pension liabilities			51,964				36,726
Other long-term liabilities			1,801				2,180
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 14,379,875 shares at January 31, 2012; 14,295,540 shares at April 30, 2011			95,722				92,408
Retained earnings			67,402				83,495
Accumulated other comprehensive loss -
Defined benefit pension plans			(28,548	)			(21,938	)
Total Shareholders’ Equity			134,576				153,965
		$	261,092			$	268,370
See accompanying notes to condensed consolidated financial statements

		Three Months Ended								Nine Months Ended
		January 31								January 31
		2012				2011				2012				2011
Net sales		$	119,976			$	111,443			$	379,593			$	328,359
Cost of sales and distribution			105,388				99,279				330,484				291,992
Gross Profit			14,588				12,164				49,109				36,367
Selling and marketing expenses			13,671				16,069				44,155				45,977
General and administrative expenses			6,273				5,421				18,780				17,283
Restructuring charges			10,347				16				10,362				55
Operating Loss			(15,703	)			(9,342	)			(24,188	)			(26,948	)
Interest expense			132				141				406				433
Other income			(182	)			(174	)			(510	)			(579	)
Loss Before Income Taxes			(15,653	)			(9,309	)			(24,084	)			(26,802	)
Income tax benefit			(6,539	)			(3,481	)			(9,278	)			(10,172	)
Net Loss		$	(9,114	)		$	(5,828	)		$	(14,806	)		$	(16,630	)
Net Loss Per Share
Weighted average shares outstanding
Basic			14,361,953				14,263,320				14,330,863				14,241,883
Diluted			14,361,953				14,263,320				14,330,863				14,241,883
Net loss per share
Basic		$	(0.63	)		$	(0.41	)		$	(1.03	)		$	(1.17	)
Diluted		$	(0.63	)		$	(0.41	)		$	(1.03	)		$	(1.17	)
Cash dividends per share		$	0.00			$	0.09			$	0.09			$	0.27
See accompanying notes to condensed consolidated financial statements

		Nine Months Ended
		January 31
		2012				2011
Operating Activities
Net loss		$	(14,806	)		$	(16,630	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization			17,204				20,358
Net loss on disposal of property, plant, and equipment			109				130
Impairment loss related to restructuring activities			5,413				--
Gain on sale of assets held for sale			--				(60	)
Stock-based compensation expense			2,606				2,849
Deferred income taxes			(8,812	)			(8,648	)
Pension contributions less than expense			4,403				5,180
Tax benefit from stock-based compensation			--				(80	)
Other non-cash items			(212	)			(711	)
Changes in operating assets and liabilities:
Customer receivables			6,265				(319	)
Inventories			1,266				1,485
Income taxes receivable and other assets			272				5,548
Accounts payable			(3,398	)			1,985
Accrued compensation and related expenses			4,076				(5,358	)
Other accrued expenses			(964	)			1,984
Net Cash Provided by Operating Activities			13,422				7,713
Investing Activities
Payments to acquire property, plant, and equipment			(5,215	)			(3,623	)
Proceeds from sales of property, plant, and equipment			15				3
Proceeds from sale of assets held for sale			--				1,474
Investment in promotional displays			(2,388	)			(2,154	)
Net Cash Used by Investing Activities			(7,588	)			(4,300	)
Financing Activities
Payments of long-term debt			(774	)			(739	)
Restricted cash			16				--
Proceeds from issuance of common stock			18				400
Payment of dividends			(1,287	)			(3,845	)
Tax benefit from stock-based compensation			--				80
Net Cash Used by Financing Activities			(2,027	)			(4,104	)
Net Increase/(Decrease) In Cash And Cash Equivalents			3,807				(691	)
Cash And Cash Equivalents, Beginning of Period			55,420				53,233
Cash And Cash Equivalents, End of Period		$	59,227			$	52,542
See accompanying notes to condensed consolidated financial statements

		Three Months Ended								Nine Months Ended
		January 31								January 31
(in thousands, except per share amounts)		2012				2011				2012				2011
Numerator used for both basic and diluted earnings (net loss) per share:
Net loss		$	(9,114	)		$	(5,828	)		$	(14,806	)		$	(16,630	)
Denominator:
Denominator for basic earnings (net loss) per share-weighted average shares			14,362				14,263				14,331				14,242
Effect of dilutive securities:
Stock options and restricted stock units			--				--				--				--
Denominator for diluted earnings (net loss) per share-weighted average shares and assumed conversions			14,362				14,263				14,331				14,242
Net loss per share
Basic		$	(0.63	)		$	(0.41	)		$	(1.03	)		$	(1.17	)
Diluted		$	(0.63	)		$	(0.41	)		$	(1.03	)		$	(1.17	)

		Three Months Ended								Nine Months Ended
		January 31,								January 31,
(in thousands)		2012				2011				2012				2011
Cost of sales and distribution		$	117			$	186			$	415			$	516
Selling and marketing expenses			162				180				551				580
General and administrative expenses			494				683				1,640				1,753
Stock-based compensation expense		$	773			$	1,049			$	2,606			$	2,849

		January 31,				April 30,
(in thousands)		2012				2011
Gross customer receivables		$	26,774			$	33,039
Less:
Allowance for doubtful accounts			(142	)			(67	)
Allowance for returns and discounts			(1,621	)			(1,905	)
Net customer receivables		$	25,011			$	31,067

		January 31,				April 30,
(in thousands)		2012				2011
Raw materials		$	9,627			$	9,275
Work-in-process			14,276				16,597
Finished goods			8,042				8,679
Total FIFO inventories			31,945				34,551
Reserve to adjust inventories to LIFO value			(9,807	)			(10,080	)
Total LIFO inventories		$	22,138			$	24,471

		Nine Months Ended
		January 31
(in thousands)		2012				2011
Beginning balance at May 1		$	1,738			$	1,582
Accrual			6,337				5,035
Settlements			(6,384	)			(5,072	)
Ending balance at January 31		$	1,691			$	1,545

		Nine Months Ended
		January 31
(in thousands)		2012				2011
Cash paid during the period for:
Interest		$	362			$	373
Income taxes		$	206			$	216

		Three Months Ended								Nine Months Ended
		January 31								January 31
(in thousands)		2012				2011				2012				2011
Service cost		$	1,326			$	1,179			$	3,892			$	3,538
Interest cost			1,633				1,567				4,986				4,701
Expected return on plan assets			(1,633	)			(1,540	)			(4,945	)			(4,620	)
Amortization of net loss			428				499				1,472				1,497
Amortization of prior service cost			13				21				53				64
Curtailment expense			331				--				331				--
Net periodic pension cost		$	2,098			$	1,726			$	5,789			$	5,180

Restructuring reserve balance as of April 30, 2011		$	--
Additions			2,401
Payments			(140	)
Reserve balance as of January 31, 2012		$	2,261

 

Level 1- Investments with quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents are invested in money market funds, mutual funds and 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- Investments with 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- Investments with 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.

 

		Fair Value Measurements
		As of January 31, 2012
		Level 1				Level 2				Level 3
ASSETS:
Money market funds		$	46,212			$	--			$	--
Mutual funds			1,481				--				--
Total assets at fair value		$	47,693			$	--			$	--
		As of April 30, 2011
		Level 1				Level 2				Level 3
ASSETS:
Money market funds		$	61,226			$	--			$	--
Mutual funds			1,574				--				--
Total assets at fair value		$	62,800			$	--			$	--

·

general economic or business conditions and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing, (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;

·	the cyclical nature of the Company’s industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit;

·	economic weakness in a specific channel of distribution;

·	the loss of sales from specific customers due to their loss of market share, bankruptcy or switching to a competitor;

·	risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials as well as fuel, transportation, warehousing and labor costs and environmental compliance and remediation costs;

·	the need to respond to price or product initiatives launched by a competitor;

·	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

·	sales growth at a rate that outpaces the Company’s ability to install new capacity or a sales decline that requires reduction or realignment of the Company’s manufacturing capacity.

		Three Months Ended												Nine Months Ended
		January 31												January 31
										Percent												Percent
(in thousands)		2012				2011				Change				2012				2011				Change
Net Sales		$	119,976			$	111,443				8	%		$	379,593			$	328,359				16	%
Gross Profit			14,588				12,164				20	%			49,109				36,367				35	%
Selling and Marketing Expenses			13,671				16,069				(15	%)			44,155				45,977				(4	%)
General and Administrative Expenses			6,273				5,421				16	%			18,780				17,283				9	%

		FISCAL YEARS ENDED APRIL 30
(in thousands)		Total Amounts				2012					2013 – 2014				2015 – 2016			2017 and Thereafter
Revolving credit facility		$	10,000			$	--			$	10,000			$	--			$	--
Economic development loans			3,524				--				--				--				3,524
Term loans			4,359				416				761				763				2,419
Capital lease obligations			7,700				512				1,057				1,099				5,032
Interest on long-term debt(a)			2,494				500				731				556				707
Operating lease obligations			15,772				3,707				5,909				5,079				1,077
Pension contributions(b)			35,936				2,871				18,565				14,500				--
Total		$	79,785			$	8,006			$	37,023			$	21,997			$	12,759

(a)

Interest commitments under interest bearing debt consist of interest under the Company’s primary loan agreement, term loans and capitalized lease agreements. Amounts outstanding under the Company’s revolving credit facility, $10 million at April 30, 2011, bear a variable interest rate determined by the London Interbank Offered Rate (LIBOR) plus 1.25%. Interest under the Company’s 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 are at LIBOR plus the spread in effect as of April 30, 2011, throughout the remaining term of the facility.  During the quarter ended January 31, 2012, the Company’s revolving credit facility was amended and the maturity date was extended to December 31, 2015.

(b)

The estimated cost of the Company’s two defined benefit pension plans is determined annually based upon the discount rate and other assumptions at fiscal year end.  During the quarter ended January 31, 2012, the Company announced the decision to freeze both pension plans as of April 30, 2012.  As a result, aggregate future pension funding contributions are estimated to be made as follows: 2013-2014, $13.6 million; 2015-2016, $11.3 million; 2017, $5.2 million.  The remaining future pension funding contributions beyond 2017 have not been determined at this time.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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 the 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 the fiscal 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 the fiscal 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	Amendment to Revolving Line of Credit Note and Credit Agreement, dated as of January 3, 2012, between the Company and Wells Fargo Bank, National Association. (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).
101	Interactive Data File for the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements (Filed Herewith).#

	/s/Jonathan H. Wolk
	Jonathan H. Wolk
	Senior Vice President and Chief Financial Officer
	Date:  March 1, 2012
	Signing on behalf of the
	registrant and as principal
	financial and accounting officer