AMERICAN WOODMARK
C O R P O R A T I O N
®
2016 Annual Report
VALUE
THROUGH
PEOPLE
Creating Value
Through People
who we are
American Woodmark is an organization of employees and shareholders who have combined
their resources to pursue a common goal.
what we do
Our common goal is to create value by providing kitchens and baths “of pride” for the
American family.
why we do it
We pursue this goal to earn a profit, which allows us to reward our shareholders and
employees and to make a contribution to our society.
how we do it
Four principles guide our actions:
CUSTOMER SATISFACTION Providing the best possible quality, service and value to the
greatest number of people. Doing whatever is reasonable, and sometimes unreasonable,
to make certain that each customer’s needs are met each and every day.
INTEGRITY Doing what is right. Caring about the dignity and rights of each individual.
Acting fairly and responsibly with all parties. Being a good citizen in the communities in
which we operate.
TEAMWORK Understanding that we must all work together if we are to be successful.
Realizing that each individual must contribute to the team to remain a member of the team.
EXCELLENCE Striving to perform every job or action in a superior way. Being innovative,
seeking new and better ways to get things done. Helping all individuals to become the
best that they can be in their jobs and careers.
once we’ve done it
When we achieve our goal, good things happen: sales increase, profits are made,
shareholders and employees are rewarded, jobs are created, our communities benefit,
we have fun and our customers are happy and proud — with a new kitchen or bath from
American Woodmark.
1
AMERICAN WOODMARK CORPORATION® 2016 ANNUAL REPORT Company
Profile
American Woodmark Corporation manufactures and
distributes kitchen cabinets and vanities for the
remodeling and new home construction markets.
The Company operates 9 manufacturing facilities
located in Arizona, Georgia, Indiana, Kentucky,
Maryland, Tennessee, Virginia and West Virginia and
7 service centers across the country.
American Woodmark Corporation was incorporated in
1980 and became a public company through a common
stock offering in 1986.
The Company offers approximately 500 cabinet lines
in a wide variety of designs, materials and finishes.
Products are sold across the United States through a
network of independent dealers and distributors and
directly to home centers and major builders. The
Company’s remodeling sales comprised 51% of sales
during fiscal 2016, with the remaining 49% sold to the
new home market. References in this annual report to
fiscal years mean the Company’s fiscal year, which
ends on April 30.
The Company believes it is one of the three largest
manufacturers of kitchen cabinets in the United States.
Financial Highlights
(In thousands, except per share data)
2016
20151
20141
fiscal years ended april 30
operations
Net sales
Operating income
Net income
Earnings per share
Basic
Diluted
Average shares outstanding
Basic
Diluted
financial position
Working capital
Total assets
Long-term debt, less current maturities
Shareholders’ equity
Long-term debt to capital ratio2
$ 947,045
93,160
58,723
$
3.61
3.57
16,256
16,442
$ 209,896
466,693
22,478
280,761
7.4%
$ 825,465
54,695
35,499
$
2.25
2.21
15,764
16,037
$ 187,139
398,904
21,498
229,842
8.6%
$ 726,515
34,088
20,461
$
1.34
1.31
15,299
15,653
$ 141,141
330,064
20,453
190,545
9.7%
1 The Company announced plans to realign its manufacturing network during fiscal 2012. The Company recorded
restructuring charges related to these initiatives in fiscal 2014 that increased operating income, net income and
income per share by $234,000, $142,000 and $0.01, respectively. During fiscal 2015, the charges related to these
initiatives increased operating income, net income and income per share by $240,000, $147,000 and $0.01,
respectively.
2 Defined as long-term debt, less current maturities, divided by the sum of long-term debt and shareholders’ equity.
3
AMERICAN WOODMARK CORPORATION® 2016 ANNUAL REPORT
To Our
Shareholders
Our fiscal year 2016 proved to be an outstanding year for the Company on many fronts.
Despite an uncertain economy and an industry full of challenges, we experienced very
impressive growth, once again over-indexing our competitors and the industry as a
whole. We continued to invest in our business and strengthen our core competitive
advantage in the market. Just as exciting, in alignment with our 2019 Vision, we are truly
thinking differently about all we do, identifying innovative opportunities and solutions
for both our business and our culture.
Financially, the year provided many firsts for the Company. We achieved net sales of
$947 million, the highest level in the history of the Company. Our new construction
business under our Timberlake brand grew over 20% versus a single-family start growth
rate closer to 10%. Not only did we once again expand our market share, we also
enhanced our positioning through the market share improvements of our industry-
leading builder partners. Our strategic choice of continuing to invest in our direct model
provided for a clear competitive advantage due to our ability to provide superior levels
of service throughout the entire process. This competitive advantage has resulted in our
Timberlake business more than tripling our market share from pre-recessionary levels,
positioning us as the largest cabinet supplier to the single-family housing market.
On the remodel front, the industry continued to grow but at a more modest level
in the mid to high single digits. As with the past few years, we are seeing a clear
segmentation in the market with the more affluent consumer returning at a
more aggressive rate, particularly within the dealer channel. Our dealer
business, served by our Waypoint brand, continued to grow aggressively
through market share gain, increasing over 30% from prior year. Accounting
for nearly 10% of our business, it has quickly become a very relevant channel
in our mix. The winning formula to our success is based on our ability to
provide a superior customer experience throughout the entire remodel
process, for both our dealers and the end consumer. We remain very
optimistic on the dealer channel as we head into fiscal year 2017.
4
Within the home center channel, the dynamics remained
to our strong market growth. Cash, cash equivalents and
challenging. Growth rates were in the low to mid-single digits,
investments in certificates of deposit ended the year at $218
primarily due to the slower return of the middle-income
million. We have reported in the past that we have undertaken a
consumer to the market. We also experienced an increase in
very thorough strategic analysis of the industry to develop our
competitor promotional activity within the home centers.
future investment strategy. This process has proved invaluable, as
Unfortunately the outcome has had limited success in bringing
we have learned a great deal about our markets, the changing
additional consumers in the door. The good news is that as the
consumer, and opportunities to add top line and margin
housing market continues to recover and first-time homebuyers
enhancing business well into the future.
return to the market, we expect to see a correlating improvement
in remodel investment in existing homes. We are working closely
with our retail partners on strategic opportunities to ensure we
are best positioned for this future growth.
Summarizing our financials, it was an incredible year by an
incredible team of men and women. American Woodmark is
achieving record results that we only envisioned in the past, all
while staying true to who we are. One of the most important and
Looking further into our financial results for the fiscal year, our
lasting advantages we have as a Company is our cultural
team did an outstanding job of leveraging our increase in
revenue on both our gross margin and operating margin levels.
foundation. When I joined the American Woodmark team nearly
ten years ago, I knew this company was different. Oftentimes as
With an incremental gross margin of 39%, we were able to
companies grow, they evolve and drift away from the ideals of
improve our gross margin rate to 21.1%. We also leveraged our
the original founder. In our case, the core values that made this
selling, general and administrative expenses throughout the year
company what it was under our founder, Mr. Bill Brandt, still hold
and improved our operating margin to 9.8%, generating $93.2
true today.
million of operating income. This is an improvement of 70% over
prior year. We finished the year with $58.7 million of net income,
up 65% from prior year. Both operating and net income were at
the highest levels in the history of the Company. And for the
fourth straight year, we improved our return on average equity,
finishing the year at a very strong 23%.
Cash flow from operations for the year totaled $72 million. We
Bill’s recent decision to step down from the Company’s board of
directors was met with mixed emotions. I am very saddened to
see Bill complete this last leg of his journey with American
Woodmark. At the same time, I feel truly blessed to lead this
incredible Company he founded 36 years ago. I have had the
privilege of getting to know Bill and all he stands for, which will
forever influence me, both personally and professionally. I am
successfully completed the $30 million expansion of our South
extremely happy for Bill as he continues his own personal journey
Branch facility and are beginning to leverage this investment due
in his life. The adventures that lie ahead for Bill are endless as he
5
AMERICAN WOODMARK CORPORATION® 2016 ANNUAL REPORT will forever be an entrepreneur and a positive influence on any
political landscape surrounds us all, the underlying fundamentals
individual or organization that he meets. Bill will permanently be
of our industry remain very positive. With single-family starts
part of this Company and every one of us that has had the good
remaining 35% below normalized levels, we still have significant
fortune to get to know him.
As it was when Bill founded the Company, and as it is today, we
truly care just as much about how we get things done as we do
about what we get done. Personally, I feel this sets us apart, not
only internally with our culture, but how we treat our customers
and our supplier partners. One thing you can always count on
with American Woodmark is that when we make a promise, we
keep that promise! At the heart of it all are our employees, each
one holding true to our core values. And although we are
continuing to grow and develop as a Company, we are resolved
to ensure we only further strengthen these core values.
This past year, we undertook an initiative with a very personal
vision, a vision that stands tall among all employees; “To create
an environment where we are devoted toward ensuring that our
core value of Caring truly touches the lives of each and every
employee.” We have rolled out eighteen diversified teams, one
at every one of our physical locations, as well as within our sales
organization, with one intention, to bring this vision to life. I have
personally witnessed the passion of our employees and can easily
envision just how powerful this initiative will be over the coming
years. And what better way to focus our efforts and energy than
on the greatest and most important resource of all, our people.
With the right people and a self-sustaining culture founded on
our core value of Caring, all of our shared goals will be realized.
I cannot begin to say how privileged and honored I am to be able
to serve as the fourth CEO of this amazing company. As we look
to the future, although the uncertainty of the economic and
6
growth ahead of us in new construction. Our dealers remain very
optimistic about the growth of the channel as a whole, and we
expect our Waypoint brand to once again gain share and outpace
the industry. And as the younger generation in America continues
to rise in both numbers and spending power, the question to me
is not if they will drive our industry well into the future, the
question is how do companies ensure they are part of it. We are
very focused on innovating, applying new technologies
throughout the Company, and learning to further engage and
interface with our end consumers much earlier in the ideation
process. When combined with our winning superior customer
experience, we are poised to profitably grow our business well
into the future. And with the proud men and women that make
this Company so strong, we stand behind what we do, and just as
importantly, how we do it!
On behalf of the Board of Directors, the leadership team, and the
entire Company, we thank you for your continued support.
S. Cary Dunston
President and Chief Executive Officer
THINGS
GOOD
HAPPEN
“Loved the color and quality, exactly what we wanted thank you!” MICHAEL D., FLORIDA
“We have been enjoying our cabinets now for over six months and absolutely love them. Thanks for your
quality products and fantastic customer service.” CYNTHIA N., TEXAS
“My wife and I are ecstatic with our new kitchen! From the initial cabinet and accessory selection process
through the last nail, everything provided by your company was outstanding.” JIM G., VIRGINIA
Photos of completed projects courtesy of satisfied customers.
7
AMERICAN WOODMARK CORPORATION® 2016 ANNUAL REPORT Stock
Performance
Set forth below is a graph comparing the five-year cumulative total shareholder
return, including reinvestment of dividends, from investing $100 on May 1, 2011
through April 30, 2016 in American Woodmark Corporation common stock, the
Russell 2000 Index and the S&P Household Durables Index:
$400
$350
$300
$250
$200
$150
$100
$50
$400
$350
$300
$250
$200
$150
$100
$50
8
2011
2012
2013
2014
2015
2016
comparative five-year cumulative total share shareholder returns
American Woodmark Corporation
Russell 2000 Index
S&P Household Durables Index
2011
2012
2013
2014
2015
2016
fiscal years ended april 30
American Woodmark Corporation
Russell 2000 Index
S&P Household Durables Index
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
April 30, 2016
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)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Virginia
54-1138147
3102 Shawnee Drive, Winchester, Virginia
(Address of principal executive offices)
(Registrant's telephone number, including area code)
22601
(Zip Code)
(540) 665-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock (no par value)
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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
Non-accelerated filer
[X]
[ ]
(Do not check if a smaller reporting company)
Smaller reporting company
Accelerated filer
[ ]
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
The aggregate market value of the registrant's Common Stock, no par value, held by non-affiliates of the registrant as of October
30, 2015, the last business day of the Company’s most recent second quarter was $1,005,121,774.
As of June 17, 2016, 16,294,171 shares of the Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on August 25, 2016
(“Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.
American Woodmark Corporation
2016 Annual Report on Form 10-K
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
SIGNATURES
2
3
4
5
6
6
6
7
8
9
18
19
45
45
45
45
46
46
46
46
46
51
1
PART I
Item 1.
BUSINESS
American Woodmark Corporation (“American Woodmark” or the “Company”) manufactures and distributes kitchen cabinets and
vanities for the remodeling and new home construction markets. American Woodmark was incorporated in 1980 by the four
principal managers of the Boise Cascade Cabinet Division through a leveraged buyout of that division. American Woodmark was
operated privately until 1986 when it became a public company through a registered public offering of its common stock.
American Woodmark currently offers framed stock cabinets in approximately 500 different cabinet lines, ranging in price from
relatively inexpensive to medium-priced styles. Styles vary by design and color from natural wood finishes to low-pressure laminate
surfaces. The product offering of stock cabinets includes 85 door designs in 21 colors. Stock cabinets consist of cabinet interiors
of varying dimensions and construction options and a maple, oak, cherry, or hickory front frame, door and/or drawer front.
Products are sold under the brand names of American Woodmark®, Simply WoodmarkTM, Timberlake®, Shenandoah Cabinetry®,
Shenandoah Value Series®, and Waypoint Living Spaces®.
American Woodmark’s products are sold on a national basis across the United States to the remodeling and new home construction
markets. The Company services these markets through three primary channels: home centers, builders, and independent dealers
and distributors. The Company provides complete turnkey installation services to its direct builder customers via its network of
seven service centers that are strategically located throughout the United States. The Company distributes its products to each
market channel directly from four assembly plants through a third party logistics network.
The primary raw materials used include hard maple, soft maple, oak, cherry, and hickory lumber and plywood. Additional raw
materials include paint, particleboard, medium density fiberboard, high density fiberboard, manufactured components, and
hardware. The Company currently purchases paint from one supplier; however, other sources are available. Other raw materials
are purchased from more than one source and are readily available.
American Woodmark operates in a highly fragmented industry that is composed of several thousand local, regional, and national
manufacturers. The Company’s principal means for competition is its breadth and variety of product offering, expanded service
capabilities, geographic reach and affordable quality. The Company believes it is one of the three largest manufacturers of kitchen
cabinets in the United States.
The Company’s business has historically been subject to seasonal influences, with higher sales typically realized in the second
and fourth fiscal quarters. General economic forces and changes in the Company’s customer mix have reduced seasonal fluctuations
in revenue over the past few years. The Company does not consider its level of order backlog to be material.
In recognition of the cyclicality of the housing industry, the Company’s policy is to operate with a minimal amount of financial
leverage. The Company regularly maintains a debt to capital ratio of well below 20%, and working capital exclusive of cash of
less than 6% of net sales. At April 30, 2016, debt to capital was 7.4%, and working capital net of cash was 3.7% of net sales.
During the fiscal year ended April 30, 2016 (fiscal 2016), American Woodmark had two primary customers, The Home Depot and
Lowe’s Companies, Inc., which together accounted for approximately 41% of the Company’s sales. The loss of either customer
would have a material adverse effect on the Company.
The Company holds patents, patent applications, licenses, trademarks, trade names, trade secrets and proprietary manufacturing
processes. The Company views its trademarks and other intellectual property rights as important to its business.
As of May 31, 2016, the Company had 5,600 employees. None of the Company’s employees are represented by labor unions. The
Company believes that its employee relations are good.
American Woodmark’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
statements, and all amendments to those reports are available free of charge on the Company’s web site at
www.americanwoodmark.com as soon as reasonably practicable after such material is electronically filed with, or furnished to,
the Securities and Exchange Commission. The contents of the Company’s web site are not, however, part of, or incorporated by
reference into, this report.
2
Item 1A.
RISK FACTORS
There are a number of business risks and uncertainties that may affect the Company’s business, results of operations and financial
condition. These risks and uncertainties could cause future results to differ from past performance or expected results, including
results described in statements elsewhere in this report that constitute "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. Additional risks and uncertainties not presently known to the Company or currently believed to
be immaterial also may adversely impact the Company’s business. Should any risks or uncertainties develop into actual events,
these developments could have material adverse effects on the Company’s business, financial condition, and results of operations.
These risks and uncertainties, which the Company considers to be most relevant to specific business activities, include, but are
not limited to, the following, as well as additional risk factors included in Item 7A, "Quantitative and Qualitative Disclosures
about Market Risk." Additional risks and uncertainties that may affect the Company’s business, results of operations and financial
condition are discussed elsewhere in this report, including in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” under the headings “Forward-Looking Statements,” “Seasonality,” and “Outlook for Fiscal 2017.”
The Company’s business is dependent upon remodeling activity and residential construction. The Company’s results of operations
are affected by levels of home improvement and residential construction activity, including repair and remodeling and new
construction. Job creation levels, interest rates, availability of credit, energy costs, consumer confidence, national and regional
economic conditions, and weather conditions and natural disasters can significantly impact levels of home improvement and
residential construction activity and therefore significantly impact the Company's operations.
Prolonged economic downturns may adversely impact the Company’s sales, earnings and liquidity. The Company’s industry
historically has been cyclical in nature and has fluctuated with economic cycles. During economic downturns, the Company’s
industry could experience longer periods of recession and greater declines than the general economy. The Company believes that
its industry is significantly influenced by economic conditions generally and particularly by housing activity, consumer confidence,
the level of personal discretionary spending, demographics and credit availability. These factors not only may affect the ultimate
consumer of the Company’s products, but also may impact home centers, builders and the Company’s other primary customers.
As a result, a worsening of economic conditions could adversely affect the Company’s sales and earnings as well as its cash flow
and liquidity.
The Company’s future financial performance depends in part on the success of its new product development and other growth
strategies. The Company has increased its emphasis on new product development in recent years and continues to focus on organic
growth. Consequently, the Company’s financial performance will, in part, reflect its success in implementing its growth strategies
in its existing markets and in introducing new products.
The loss of, or a reduction in business from, either of the Company’s key customers would have a material adverse effect upon its
business. The size and importance to the Company of its two largest customers are significant. These customers could make
significant changes in their volume of purchases and could otherwise significantly affect the terms and conditions on which the
Company does business. Sales to The Home Depot and Lowe’s Companies, Inc. were approximately 41% of total company sales
for fiscal 2016. Although builders, dealers, and other retailers represent other channels of distribution for the Company's products,
an unplanned loss of a substantial portion of sales to The Home Depot or Lowe’s Companies, Inc. would have a material adverse
impact on the Company. A significant change in the terms and conditions on which the Company does business with The Home
Depot or Lowe's Companies, Inc. could also have a material adverse impact on the Company.
Manufacturing expansion to add capacity could result in a decrease in the Company’s near-term earnings. The Company
continually reviews its manufacturing operations. These reviews could result in the expansion of capacity, functions, systems, or
procedures, which in turn could result in inefficiencies for a period that would decrease near-term earnings until the additional
capacity is in place and fully operating. In addition, downturns in the economy could potentially have a larger impact on the
Company as a result of this added capacity.
Impairment charges could reduce the Company’s profitability. The Company has significant long-lived assets, including deferred
tax assets, recorded on its balance sheets. If operating results decline or if the Company decides to restructure its operations as it
did with the 2012 Restructuring Plan, the Company could incur impairment charges, which could have a material impact on its
financial results. The Company evaluates the recoverability of the carrying amount of its long-lived assets on an ongoing basis.
The outcome of future reviews could result in substantial impairment charges. Impairment assessments inherently involve
judgments as to assumptions about market conditions and the Company’s ability to generate future cash flows and profitability,
given those assumptions. Future events and changing market conditions may impact the Company’s assumptions as to prices,
costs or other factors that may result in changes in the Company’s estimates.
3
The Company’s operating results are affected by the cost and availability of raw materials. Because the Company is dependent
on outside suppliers for raw material needs, it must obtain sufficient quantities of quality raw materials from its suppliers at
acceptable prices and in a timely manner. The Company has no long-term supply contracts with its key suppliers. A substantial
decrease in the availability of products from the Company’s suppliers, the loss of key supplier arrangements, or a substantial
increase in the cost of its raw materials could adversely impact the Company’s results of operations.
The Company may not be able to maintain or raise the prices of its products in response to inflation and increasing costs. Short-
term market and competitive pressures may prohibit the Company from raising prices to offset inflationary or otherwise increasing
raw material and freight costs, which would adversely impact profit margins.
The Company's operations may be adversely affected by information systems interruptions or intrusions. The Company relies on
a number of information technology systems to process, transmit, store and manage information to support its business activities.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted attacks pose a risk to its information
technology systems. The Company has established security policies, processes and layers of defense designed to help identify and
protect against intentional and unintentional misappropriation or corruption of its systems and information and disruption of its
operations. Despite these efforts, systems may be damaged, disrupted, or shut down due to attacks by unauthorized access, malicious
software, undetected intrusion, hardware failures, or other events, and in these circumstances the Company's disaster recovery
planning may be ineffective or inadequate. These breaches or intrusions could lead to business interruption, exposure of proprietary
or confidential information, data corruption, damage to the Company's reputation, exposure to litigation, and increased operational
costs. Such events could have a material adverse impact on the Company's business, financial condition and results of operation.
In addition, the Company could be adversely affected if any of its significant customers or suppliers experience any similar events
that disrupt their business operations or damage their reputation.
The Company is subject to environmental regulation and potential exposure to environmental liabilities. The Company is subject
to various federal, state and local environmental laws, ordinances and regulations, including those relating to the discharge of
materials into the environment. Although the Company believes that its facilities and operations are in material compliance with
such laws, ordinances and regulations, it could incur substantial costs, including legal expenses, as a result of noncompliance with,
or liability for cleanup or other costs or damages under, such laws, ordinances and regulations. As the owner and lessee of real
property, the Company can be held liable for the investigation or remediation of contamination on such properties, in some
circumstances, without regard to whether the Company knew of or was responsible for such contamination. No assurance can be
provided that remediation may not be required in the future as a result of spills or releases of hazardous substances, the discovery
of unknown environmental conditions, more stringent standards regarding existing residual contamination, or changes in
legislation, laws, rules or regulations. More burdensome environmental regulatory requirements may increase our general and
administrative costs and adversely affect our financial condition, operating results and cash flows.
Unauthorized disclosure of confidential information provided to the Company by customers, employees or third parties could
harm its business. The Company relies on the internet and other electronic methods to transmit confidential information and stores
confidential information on its networks. If there was a disclosure of confidential information provided by, or concerning, our
employees, customers or other third parties, including through inadvertent disclosure, unapproved dissemination, or unauthorized
access, the Company’s reputation could be harmed and the Company could be subject to civil or criminal liability and regulatory
actions.
Future costs of complying with various laws and regulations may adversely impact future operating results. The Company’s
business is subject to various laws and regulations which could have a significant impact on the Company’s operations and the
cost to comply with such laws and regulations could adversely impact the Company’s financial position, results of operations and
liquidity. In addition, failure to comply with such laws and regulations, even inadvertently, could produce negative consequences
which could adversely impact the Company’s operations.
The Company’s success depends, in part, on its ability to recruit and retain key employees. The Company’s success depends, in
part, on its ability to recruit and retain certain key employees. If the Company is not successful in recruiting and retaining key
employees or experienced the unexpected loss of key employees, its operations could be negatively impacted.
Item 1B.
UNRESOLVED STAFF COMMENTS
None.
4
Item 2.
PROPERTIES
American Woodmark leases its Corporate Office located in Winchester, Virginia. In addition, the Company leases 1 manufacturing
facility in Hardy County, West Virginia and owns 8 manufacturing facilities located primarily in the eastern United States. The
Company also leases 7 primary service centers, 10 satellite service centers, and 3 additional office centers located throughout the
United States that support the sale and distribution of products to each market channel. The Company considers its properties
suitable for the business and adequate for its needs.
Primary properties as of April 30, 2016 include:
LOCATION
Allegany County, MD
Austin, TX
Berryville, VA
Commerce City, CO
Coppell, TX
Fort Myers, FL
Gas City, IN
Hardy County, WV
Houston, TX
Humboldt, TN
Huntersville, NC
Jackson, GA
Kingman, AZ
Kennesaw, GA
Las Vegas, NV
Montgomeryville, PA
Monticello, KY
Orange, VA
Orlando, FL
Phoenix, AZ
Raleigh, NC
Rancho Cordova, CA
San Antonio, TX
Tampa, FL
Toccoa, GA
Tucson, AZ
Winchester, VA
Winchester, VA
Winchester, VA
Winchester, VA
*Leased facility.
DESCRIPTION
Manufacturing Facility
Satellite Service Center*
Service Center*
Satellite Service Center*
Service Center*
Satellite Service Center*
Manufacturing Facility
Manufacturing Facility*
Satellite Service Center*
Manufacturing Facility
Service Center*
Manufacturing Facility
Manufacturing Facility
Service Center*
Satellite Service Center*
Satellite Service Center*
Manufacturing Facility
Manufacturing Facility
Service Center*
Service Center*
Satellite Service Center*
Service Center*
Satellite Service Center*
Satellite Service Center*
Manufacturing Facility
Satellite Service Center*
Corporate Office*
Office (Customer Service)*
Office (IT)*
Office (Product Development/Logistics)*
5
Item 3.
LEGAL PROCEEDINGS
The Company is involved in suits and claims in the normal course of business, including, without limitation, product liability and
general liability claims and claims pending before the Equal Employment Opportunity Commission. 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 ASC Topic 450, “Contingencies” (ASC 450), the Company categorizes the various suits and claims into three categories
according to their likelihood for resulting in potential loss: those that are probable, those that are reasonably possible and those
that are deemed to be remote. The Company accounts for these loss contingencies in accordance with ASC 450. Where losses are
deemed to be probable and estimable, accruals are made. Where losses are deemed to be reasonably possible, a range of loss
estimate is determined and considered for disclosure. In determining these loss range estimates, the Company considers known
values of similar claims and consults with independent counsel.
The Company believes that the aggregate range of estimated loss stemming from the various suits and asserted and unasserted
claims which were deemed to be either probable or reasonably possible was not material as of April 30, 2016.
Also see the information under “Legal Matters” under “Note K – Commitments and Contingencies” to the Consolidated Financial
Statements included in this report under Item 8. “Financial Statements and Supplementary Data.”
Item 4.
MINE SAFETY DISCLOSURES
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company are elected by the Board of Directors and generally hold office until the next annual election
of officers. There are no family relationships between any executive officer and any other officer or director of the Company or
any arrangement or understanding between any executive officer and any other person pursuant to which such officer was elected.
The executive officers of the Company as of April 30, 2016 are as follows:
Name
S. Cary Dunston
Age
51
M. Scott Culbreth
R. Perry Campbell
Robert J. Adams, Jr.
45
51
50
Position(s) Held During Past Five Years
Company President and Chief Executive Officer from August 2015 to present;
Company President and Chief Operating Officer from August 2014 to August 2015;
Company Executive Vice President and Chief Operating Officer from August 2013 to
August 2014; Company Executive Vice President, Operations from September 2012
to August 2013; Company Senior Vice President, Manufacturing and Supply Chain
Services from October 2006 to September 2012.
Company Senior Vice President and Chief Financial Officer from February 2014 to
present; Chief Financial Officer of Piedmont Hardware Brands from September 2013
to February 2014; Vice President, Finance – Various Segments from 2011 to September
2013 for Newell Rubbermaid; Vice President – Hardware from 2009 to 2011 for Newell
Rubbermaid.
Company Senior Vice President of Sales and Marketing from March 2016 to present;
Company Senior Vice President and General Manager, New Construction from August
2013 to March 2016; Company Vice President and General Manager, New
Construction from May 2011 to August 2013; Company Vice President of Quality
from February 2006 to April 2011.
Company Senior Vice President of Value Stream Operations from August 2015 to
present; Company Vice President of Value Stream Operations from September 2012
to August 2015; Company Vice President of Manufacturing and Engineering from
April 2012 to September 2012; Company Vice President of Engineering from July
2008 to April 2012.
6
PART II
Item 5.
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
MARKET INFORMATION
American Woodmark Corporation common stock is listed on The NASDAQ Global Select Market under the “AMWD” symbol.
Common stock per share market prices and cash dividends declared during the last two fiscal years were as follows:
(in dollars)
FISCAL 2016
First quarter
Second quarter
Third quarter
Fourth quarter
FISCAL 2015
First quarter
Second quarter
Third quarter
Fourth quarter
MARKET PRICE
Low
$48.34
59.23
62.77
57.03
$25.10
29.37
37.02
40.97
High
$67.82
74.28
89.89
80.00
$33.11
41.85
43.20
56.44
DIVIDENDS
DECLARED
$0.00
0.00
0.00
0.00
$0.00
0.00
0.00
0.00
As of May 23, 2016, there were approximately 15,500 total shareholders of the Company's common stock, including 4,700
shareholders of record and 10,800 beneficial owners whose shares are held in "street" name by securities broker-dealers or other
nominees. Included are approximately 80% of the Company's employees, who are shareholders through the American Woodmark
Stock Ownership Plan. The Company suspended its quarterly dividend during fiscal 2012. The determination as to the payment
of future dividends will be made by the Board of Directors from time to time and will depend on the Company's then current
financial condition, capital requirements, results of operations and any other factors then deemed relevant by the Board of Directors.
The following table details share repurchases by the Company during the fourth quarter of fiscal 2016:
Share Repurchases
Total Number of
Shares Purchased
Average Price Paid
Total Number of
Shares Purchased as
Part of Publicly
Announced
(1)
Per Share
Programs
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the
Programs (000)
(1)
February 1 - 29, 2016
March 1 - 31, 2016
April 1 - 30, 2016
Quarter ended April 30, 2016
24,300 $
22,700 $
19,800 $
66,800 $
62.47
69.32
76.06
68.83
24,300 $
22,700 $
19,800 $
66,800 $
31,486
29,913
28,407
28,407
(1) On November 20, 2014, the Board of Directors of the Company authorized a repurchase of up to $25 million of the Company's
common shares. On November 19, 2015, the Board of Directors of the Company authorized an additional stock repurchase
program of up to $20 million of the Company's common shares. This authorization is in addition to the stock repurchase program
authorized on November 20, 2014. Repurchases may be made from time to time in the open market, or through privately negotiated
transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems
appropriate and subject to the Company's cash requirements for other purposes, compliance with the covenants under the Company's
revolving credit facility, and other factors management deems relevant. The authorization does not obligate the Company to
acquire a specific number of shares during any period, and the authorization may be modified, suspended or discontinued at any
time at the discretion of the Board. Management expects to fund share repurchases using available cash and cash generated from
7
operations. Repurchased shares will become authorized but unissued common shares. In the fourth quarter of fiscal 2016, the
Company repurchased 66,800 common shares for an aggregate purchase price of $4.6 million under the authorization, pursuant
to a repurchase plan intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange
Act of 1934, as amended. At April 30, 2016, $28.4 million remained authorized by the Company's Board of Directors to repurchase
the Company's common shares.
Item 6.
SELECTED FINANCIAL DATA
(in millions except per share data)
2016
20151
20141
20131
20121,2
FISCAL YEARS ENDED APRIL 30
FINANCIAL STATEMENT DATA
Net sales
Operating income (loss)
Net income (loss)
Earnings (loss) per share:
Basic
Diluted
Depreciation and amortization expense
Total assets
Long-term debt, less current maturities
Total shareholders' equity
Cash dividends declared per share
Average shares outstanding
Basic
Diluted
PERCENT OF SALES
Gross profit
Selling, general and administrative expenses
Income (loss) before income taxes
Net income (loss)
RATIO ANALYSIS
Current ratio3
Inventory turnover4
Collection period - days5
$ 947.0
$
825.5
$
726.5
$
630.4
$
93.2
58.7
3.61
3.57
16.5
466.7
22.5
280.8
—
16.3
16.4
21.1%
11.3
9.7
6.2
3.3
19.8
35.6
54.7
35.5
2.25
2.21
14.5
398.9
21.5
229.8
—
15.8
16.0
18.5%
11.9
6.6
4.3
3.2
19.9
31.6
34.1
20.5
1.34
1.31
14.5
330.1
20.5
190.5
—
15.3
15.7
17.1%
12.5
4.5
2.7
2.8
19.8
32.8
17.2
9.8
0.67
0.66
14.4
294.0
23.6
146.2
—
14.6
14.8
16.3%
13.5
2.7
1.5
2.4
20.4
31.4
515.8
(33.4)
(20.8)
(1.45)
(1.45)
23.4
265.1
23.8
130.0
0.09
14.3
14.3
12.9%
16.2
(6.4)
(4.0)
2.1
19.2
30.0
Percentage of capital (long-term debt plus equity):
Long-term debt, less current maturities
7.4%
8.6%
9.7%
13.9%
15.5%
Equity
Return on equity (average %)
92.6
23.0
91.4
16.9
90.3
12.2
86.1
7.1
84.5
(14.6)
1
2
The Company announced plans to realign its manufacturing network during fiscal 2012. The impact of these initiatives in
fiscal 2012 increased operating loss, net loss and loss per share by $15,917,000, $9,710,000 and $0.68, respectively. During
fiscal 2013, the charges related to these initiatives decreased operating income, net income and earnings per share by
$1,433,000, $874,000 and $0.06, respectively. During fiscal 2014, the credits related to these initiatives increased operating
income, net income and earnings per share by $234,000, $142,000 and $0.01, respectively. During fiscal 2015, the credits
related to these initiatives increased operating income, net income and earnings per share by $240,000, $147,000 and $0.01,
respectively.
The Company performed a reduction-in-force of salaried personnel and announced plans to realign its manufacturing network
during fiscal 2009. During fiscal 2012, these initiatives increased operating loss, net loss and loss per share by $404,000,
$246,000 and $0.01, respectively.
8
3
4
5
Current assets for fiscal 2015, 2014, 2013 and 2012 have been retrospectively revised to reflect the early adoption of FASB
ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)."
Based on average beginning and ending inventory.
Based on the ratio of average monthly customer receivables to average sales per day.
Item 7.
OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Results of Operations
The following table sets forth certain income and expense items as a percentage of net sales:
Net sales
Cost of sales and distribution
Gross profit
Selling and marketing expenses
General and administrative expenses
Operating income
Interest expense/other (income) expense
Income before income taxes
Income tax expense
Net income
PERCENTAGE OF NET SALES
Fiscal Years Ended April 30
2016
2015
2014
100.0%
100.0%
100.0%
78.9
21.1
7.0
4.3
9.8
0.1
9.7
3.5
6.2
81.5
18.5
7.8
4.1
6.6
—
6.6
2.3
4.3
82.9
17.1
8.2
4.3
4.6
0.1
4.5
1.8
2.7
The following discussion should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements
and the related notes contained elsewhere in this report.
Forward-Looking Statements
This annual report contains statements concerning the Company’s expectations, plans, objectives, future financial performance
and other statements that are not historical facts. These statements may be “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify forward-looking statements by words
such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “would,” “plan,” “may,” "intend," "estimate,"
"prospect," "goal," "will," "predict," "potential" or other similar words. Forward-looking statements contained in this annual
report, including elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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. Factors that could cause actual results to differ materially from those in forward-looking statements made in this report
include but are not limited to:
• general economic or business conditions and instability in the financial and credit markets, including their potential impact on
the Company's (i) sales and operating costs and access to financing; and (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 and suppliers, 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;
9
• 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 manufacturing capacity or a sales decline that requires
reduction or realignment of the Company’s manufacturing capacity.
Additional information concerning the factors that could cause actual results to differ materially from those in forward-looking
statements is contained in this annual report, including elsewhere in “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and under Item 1A. “Risk Factors,” and Item 7A. “Quantitative and Qualitative Disclosures about
Market Risk.” 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 material 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 annual 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 April 30, 2016, the Company operated 9 manufacturing facilities
and 7 service centers across the country.
During the Company’s fiscal year that ended on April 30, 2016 (fiscal 2016), the Company continued to experience improving
housing market conditions from the housing market downturn that began in 2007.
A number of general market factors impacted the Company's business in fiscal 2016, including:
• The unemployment rate improved by 7% compared to April 2015, falling to 5.0% as of April 2016 according to data provided
by the U.S. Department of Labor;
• A 10% improvement in Gross Private Residential Fixed Investment reported by the U.S. Department of Commerce during the
most recent four quarters through the first quarter of calendar 2016, as compared with the same period one year ago;
• Increases in single family housing starts during the Company’s fiscal 2016 of 10%, as compared to the Company’s fiscal 2015,
according to the U.S. Department of Commerce;
• Mortgage interest rates decreased with a 30-year fixed mortgage rate of 3.61% in April 2016, an improvement of approximately
6 basis points compared to April 2015;
• The median price of existing homes sold in the U.S. rose by 6% during the Company’s fiscal 2016, according to data provided
by the National Association of Realtors;
• Consumer sentiment, as reported by the University of Michigan, averaged 3% higher during the Company’s fiscal 2015 than in
its prior fiscal year; and
• Cabinet sales, as reported by members of the Kitchen Cabinet Manufacturers Association (KCMA), increased by 9% during
fiscal 2016, suggesting an increase in both new construction and remodeling sales of cabinets.
The Company’s largest remodeling customers and competitors continued to utilize sales promotions in the Company’s product
category during fiscal 2016 to boost sales. The Company strives to maintain its promotional levels in line with market activity,
with a goal of remaining competitive. The Company experienced promotional levels during fiscal 2016 that were higher than those
experienced in its prior fiscal year. The Company’s remodeling sales increased by high single digits during fiscal 2016, consistent
with the overall remodeling market.
The Company increased its net sales by 15% during fiscal 2016. The Company realized strong sales gains in its new construction
channel during fiscal 2016, where sales increased by more than 20%, significantly outpacing the improvement in single-family
housing starts for the same period. Management believes the Company over indexed the market due to share penetration with our
builder partners and the health of the markets where we concentrated our business during fiscal 2016.
10
During the third quarter of fiscal 2012, the Company announced several initiatives designed to reduce its cost base (the 2012
Restructuring), including the permanent closure of two manufacturing plants, the decision to sell a previously closed manufacturing
facility, and the realignment of its retirement program, including the freezing of its pension plans. All of these initiatives were
completed either prior to or just after the beginning of the Company’s fiscal 2013, and restructuring charges related to these actions
have been reflected in the Company’s results for fiscal years 2015 and 2014. There were no restructuring charges related to these
actions in fiscal 2016. For more information on the 2012 Restructuring, see Note N - Restructuring Charges in Item 8. Financial
Statements and Supplementary Data herein.
The Company recorded restructuring charges of $(0.2) million (pre-tax) and $(0.1) million (after-tax) during fiscal 2014 and $(0.2)
million (pre-tax) and $(0.1) million (after-tax) during fiscal 2015 in connection with these initiatives. The Company sold a
previously closed plant during fiscal 2014 and sold the remaining plant held for sale during fiscal 2015 that were included in the
2012 Restructuring.
Gross margin for fiscal 2016 was 21.1%, an improvement from 18.5% in fiscal 2015. The increase in the Company’s gross margin
rate was driven by the beneficial impact of increased sales volume, customer management, product mix, pricing and improved
operating efficiency, which more than offset the impact of additional depreciation costs related to the previously announced plant
expansion and costs associated with crewing and infrastructure to support higher levels of sales and installation activity.
The Company regularly considers the need for a valuation allowance against its deferred tax assets. The Company had a history
of profitable operations for 16 consecutive years, from 1994 to 2009, followed by losses that coincided with the industry downturn
from 2010 to 2012. As of April 30, 2016, the Company had total deferred tax assets of $41.3 million, up from $37.3 million at
April 30, 2015. Growth in the Company’s deferred tax assets in recent fiscal years resulted primarily from growth in its defined
benefit pension liabilities and the impact of its recent losses prior to fiscal 2013. To fully realize its remaining net deferred tax
assets, the Company will need to, among other things, substantially reduce its unfunded pension obligation of $67.1 million at
April 30, 2016. The Company took definitive actions when it froze its pension plans as part of the 2012 Restructuring to enhance
the probability that this objective is achieved in the future. The Company recorded a valuation allowance related to deferred tax
assets for certain state investment tax credit (ITC) carryforwards during fiscal 2016.
The Company resumed the funding of its pension plans during fiscal year 2012, and expects to continue funding these plans for
the foreseeable future, which will reduce both its unfunded pension plan obligation and its deferred tax asset. These actions,
coupled with the recent improvement in the U.S. housing market and the Company’s continued ability to grow its sales at a faster
rate than its competitors, have enabled the Company to generate net income during fiscal 2016. The Company's deferred tax assets
increased in fiscal 2016 and 2015 due to an increase in the unfunded pension obligation, as a result of a decrease in the discount
rate and the Company updating to the new RP-2014 mortality tables, with generational MP-2015 projections. The Company
believes that the positive evidence of the housing industry improvement, coupled with the benefits from the Company’s successful
restructuring and continued market share gains have already driven a return to profitability that is expected to continue, and that
the combined impact of these positive factors outweighs the negative factor of the Company’s previous losses. Accordingly,
Management has concluded it is more likely than not that the Company will realize its deferred tax assets.
The Company also regularly assesses its long-lived assets to determine if any impairment has occurred. The Company has
concluded that none of the long-lived assets pertaining to its nine manufacturing plants or any of its other long-lived assets were
impaired as of April 30, 2016.
Results of Operations
(in thousands)
Net sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Interest expense
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$ 947,045
$ 825,465
$ 726,515
199,694
152,532
124,177
64,304
33,773
515
59,536
30,881
728
66,489
40,045
378
11
2016 vs.
2015
PERCENT
CHANGE
2015 vs.
2014
PERCENT
CHANGE
15%
31
3
19
(27)
14%
23
8
9
(29)
Net Sales
Net sales were $947.0 million in fiscal 2016, an increase of $121.6 million, or 15%, compared with fiscal 2015. Overall unit
volume for fiscal 2016 was 12% higher than in fiscal 2015, which was driven primarily by the Company’s increased new construction
and dealer volume. Average revenue per unit increased 3% in fiscal 2016, driven by improvements in the Company’s product
mix and pricing.
Net sales for fiscal 2015 increased 14% to $825.5 million from $726.5 million in fiscal 2014. Overall unit volume for fiscal 2015
was 6% higher than in fiscal 2014, which was driven primarily by the Company’s increased new construction volume. Average
revenue per unit increased 7% during fiscal 2015, driven by improvements in the Company's product mix and pricing.
Gross Profit
Gross profit as a percentage of sales increased to 21.1% in fiscal 2016 as compared with 18.5% in fiscal 2015. The improvement
in gross profit margin was due primarily to the beneficial impact of increased sales volume, customer management, product mix,
pricing and improved operating efficiency. This favorability was partially offset by the impact of additional depreciation costs
related to the previously announced plant expansion and costs associated with crewing and infrastructure to support higher levels
of sales and installation activity.
During fiscal 2015, the Company’s gross profit increased as a percentage of net sales to 18.5% from 17.1% in fiscal 2014. The
improvement in gross profit margin was due primarily to the beneficial impact of higher sales volume and improved labor
efficiency. This favorability was partially offset by an increase in material costs, costs associated with crewing and infrastructure
to support higher levels of sales and installation activity and inventory costs associated with new product launches.
Selling and Marketing Expenses
Selling and marketing expenses in fiscal 2016 were 7.0% of net sales, compared with 7.8% of net sales in fiscal 2015. Selling
and marketing costs increased only by 3% despite a 15% increase in net sales. The improvement in the percentage of sales and
marketing costs in relation to net sales was due to favorable leverage from increased sales, on-going expense control and lower
display and product launch costs.
Selling and marketing expenses were 7.8% of net sales in fiscal 2015 compared with 8.2% in fiscal 2014. The improvement in
sales and marketing costs in relation to net sales was due to due to favorable leverage from increased sales and on-going expense
control.
General and Administrative Expenses
General and administrative expenses increased by $6.3 million or 18.6% during fiscal 2016. The increase in cost was related to
increased pay-for-performance compensation and staffing costs. General and administrative costs increased to 4.3% of net sales
in fiscal 2016 compared with 4.1% of net sales in fiscal 2015.
General and administrative expenses in fiscal 2015 increased by $2.9 million, or 9.4%, compared with fiscal 2014 and represented
4.1% of net sales, compared with 4.3% of net sales for fiscal 2014. The increase in cost was related to increased pay-for-performance
compensation and staffing costs.
Effective Income Tax Rates
The Company generated pre-tax income of $91.8 million during fiscal 2016. The Company’s effective tax rate increased from
34.7% in fiscal 2015 to 36.0% in fiscal 2016. The higher effective tax rate was the result of the Company operating at a higher
net income level than the prior year period and less favorable permanent tax differences. The Company finalized a federal research
and experimentation tax credit for fiscal years 2011 through 2014 of $1.2 million during fiscal 2015.
Outlook for Fiscal 2017
The Company tracks several metrics, including but not limited to housing starts, existing home sales, mortgage interest rates, new
jobs growth, GDP growth and consumer confidence, which it believes are leading indicators of overall demand for kitchen and
bath cabinetry. The Company believes that housing starts will continue to improve, driven by low unemployment rates and growth
in new household formation. However, the Company expects that while the cabinet remodeling market will show modest
improvement during fiscal 2017 it will continue to be below historical averages.
12
The Company expects that industry-wide cabinet remodeling sales will continue to be challenged until economic trends remain
consistently favorable. Growth is expected at roughly a mid-single digit rate during the Company’s fiscal 2017. The Company
expects that its home center market share will be relatively stable in fiscal 2017 and it will continue to gain market share in its
growing dealer business. This combination is expected to result in remodeling sales growth that exceeds the market rate.
Based on available information, it is expected that new residential construction starts will grow approximately 10% during its
fiscal year. The Company’s new residential construction sales growth outperformed the new residential construction market during
fiscal 2016, and management expects that it will again outperform the new residential construction market during fiscal 2017 but
by a lesser rate than fiscal 2016, as its comparable prior year sales levels become more challenging.
Inclusive of the potential for modest sales mix and pricing improvements, the Company expects that it will grow its total sales at
a low-teen rate in fiscal 2017. Despite anticipated material inflation, costs related to two product launches and impacts in the first
half of fiscal 2017 for the West Virginia plant expansion, the Company expects to maintain operating margins for fiscal 2017.
The Company had gross outlays for capital expenditures and customer display units of $33.1 million during fiscal 2016, and plans
to decrease its base spending level during fiscal 2017 now that has completed its facility expansion in West Virginia.
Additional risks and uncertainties that could affect the Company’s results of operations and financial condition are discussed
elsewhere in this annual report, including under “Forward-Looking Statements,” and elsewhere in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” as well as under Item 1A. “Risk Factors” and Item 7A. “Quantitative
and Qualitative Disclosures about Market Risk.”
Liquidity and Capital Resources
The Company’s cash, cash equivalents and investments in certificates of deposit totaled $218.5 million at April 30, 2016, which
represented an increase of $33.5 million from April 30, 2015. Total debt was $24.1 million at April 30, 2016, an increase of $1.1
million over the prior fiscal year and the ratio of long-term debt, excluding current maturities, to capital was 7.4% at April 30,
2016, down from 8.6% at April 30, 2015.
The Company’s main source of liquidity is its cash and cash equivalents on hand and cash generated from its operating activities.
The Company can borrow up to $35 million under its revolving credit facility with Wells Fargo Bank, N.A. (Wells Fargo), which
expires on December 31, 2018. This facility had an available borrowing base of $25 million at April 30, 2016.
The Company's outstanding indebtedness and other obligations to Wells Fargo are unsecured. Under the terms of its revolving
credit facility, the Company must: (1) maintain at the end of each fiscal quarter a ratio of total liabilities to tangible net worth of
not greater than 1.4 to 1.0; (2) maintain at the end of each fiscal quarter a ratio of cash flow to fixed charges of not less than 1.5
to 1.0 measured on a rolling four-quarter basis; and (3) comply with other customary affirmative and negative covenants. The
Company was in compliance with all covenants specified in the credit facility as of April 30, 2016, including as follows: (1) the
Company’s ratio of total liabilities to tangible net worth at April 30, 2016 was 0.67 to 1.0; and (2) cash flow to fixed charges for
its most recent four quarters was 3.41 to 1.0. The Company expects to be in compliance with these covenants for fiscal 2017.
The revolving credit facility does not limit the Company’s ability to pay dividends or repurchase its common stock as long as the
Company is in compliance with these covenants.
OPERATING ACTIVITIES
Cash provided by operating activities in fiscal 2016 was $71.8 million, compared with $58.7 million in fiscal 2015. The $13.1
million improvement was primarily attributable to the Company’s $23.2 million improvement in net income offset by an $8.9
million increase in cash used for the Company’s working capital investment in customer receivables.
Cash provided by operating activities in fiscal 2015 was $58.7 million, compared with $40.5 million in fiscal 2014. The $18.2
million improvement was primarily attributable to the Company’s $15.0 million improvement in net income and a $5.1 million
decrease in cash used for the Company's working capital investment in inventory and customer receivables.
13
INVESTING ACTIVITIES
The Company’s investing activities primarily consist of capital expenditures and investments in promotional displays. Net cash
used by investing activities in fiscal 2016 was $40.8 million, compared with $56.6 million in fiscal 2015 and $9.6 million in
fiscal 2014. Investments in property, plant and equipment for fiscal 2016 were $28.7 million, compared with $20.0 million in
fiscal 2015 and $7.9 million in fiscal 2014. Investments in promotional displays were $4.4 million in fiscal 2016, compared
with $2.4 million in fiscal 2015 and $3.5 million in fiscal 2014. On August 21, 2014, the Board of Directors of the Company
approved a $30 million capital expansion project at its West Virginia facility, which was completed during fiscal 2016.
During fiscal 2016, the Company’s decrease in net cash used for investing activities was driven by a $27.0 million decrease in
investment in certificates of deposit, offset by an $8.7 million increase in outflows for capital expenditures and a $2.1 million
increase in outflows for promotional displays and a $0.4 million decrease in proceeds from the sale of closed plants and
property, plant and equipment compared to the prior year.
FINANCING ACTIVITIES
The Company realized a net outflow of $6.1 million from financing activities in fiscal 2016, compared with a net inflow of
$11.7 million in fiscal 2015, and a net inflow of $7.8 million in fiscal 2014. Proceeds were generated from the exercise of
stock options of $8.1 million in fiscal 2016, $14.3 million in fiscal 2015 and $15.3 million in fiscal 2014. During fiscal 2016
$1.5 million was used to repay long-term debt, compared with approximately $1.3 million in fiscal 2015 and $4.5 million in
fiscal 2014.
The Company ended fiscal 2016 with $174.5 million in cash and cash equivalents. Under a stock repurchase authorization approved
by its Board of Directors on November 20, 2014, the Company was authorized to purchase up to $25 million of the Company’s
common shares. On November 19, 2015, the Board of Directors of the Company authorized an additional repurchase of up to
$20 million of the Company's common shares. This authorization is in addition to the stock repurchase program authorized on
November 20, 2014. Repurchases may be made from time to time in the open market, or through privately negotiated
transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems
appropriate and subject to the Company's cash requirements for other purposes, compliance with the covenants under the
Company’s revolving credit facility, and other factors management deems relevant. At April 30, 2016, $28.4 million
remained authorized by the Company’s Board of Directors to repurchase the Company’s common shares. The Company
purchased a total of 243,143 common shares, for an aggregate purchase price of $16.6 million, during fiscal 2016, under the
authorizations. The Company continues to evaluate its cash on hand and prospects for future cash generation, and compare these
against its plans for future capital expenditures. Although the evaluation of its future capital expenditures is ongoing, the
Company expects that it will make repurchases of its common shares from time to time during fiscal 2017 subject to the
Company’s financial condition, capital requirements, results of operations and any other factors then deemed relevant.
Cash flow from operations combined with accumulated cash and cash equivalents on hand are expected to be more than
sufficient to support forecasted working capital requirements, service existing debt obligations and fund capital expenditures
for fiscal 2017.
14
The timing of the Company’s contractual obligations as of April 30, 2016 is summarized in the table below:
FISCAL YEARS ENDED APRIL 30
(in thousands)
Total Amounts
2017
2018-2019
2020-2021
Revolving credit facility
$
10,000
$
— $
10,000
$
— $
Economic development loans
Capital lease obligations
Other long-term debt
Interest on long-term debt1
Operating lease obligations
Pension contributions2
3,689
7,165
3,198
3,273
10,671
42,334
—
1,574
—
602
3,143
7,304
2,189
2,182
—
931
4,863
15,150
—
1,327
—
366
2,649
13,600
2022 and
Thereafter
—
1,500
2,082
3,198
1,374
16
6,280
Total
$
80,330
$
12,623
$
35,315
$
17,942
$
14,450
1 Interest commitments under interest bearing debt consist of interest under the Company’s primary loan agreement and capitalized
lease agreements. Amounts outstanding under the Company’s revolving credit facility, $10 million at April 30, 2016, bear a
variable interest rate determined by the London Interbank Offered Rate (LIBOR) plus 1.5%. Interest under the Company’s
capitalized lease agreements is fixed at rates between 2% and 6.5%. Interest commitments under interest bearing debt for the
Company’s revolving credit facility are at LIBOR plus the spread as of April 30, 2016, throughout the remaining term of the
facility.
2 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. Future pension funding contributions beyond fiscal 2022 have not been determined at this
time.
SEASONALITY
The Company’s business has historically been subjected to seasonal influences, with higher sales typically realized in the second
and fourth fiscal quarters.
For additional discussion of risks that could affect the Company and its business, see “Forward-Looking Statements” above, as
well as Item 1A. “Risk Factors” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”
OFF-BALANCE SHEET ARRANGEMENTS
As of April 30, 2016 and 2015, the Company had no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Management has chosen accounting policies that are necessary to give reasonable assurance that the Company’s operational results
and financial position are accurately and fairly reported. The significant accounting policies of the Company are disclosed in Note
A to the Consolidated Financial Statements included in this annual report. The following discussion addresses the accounting
policies that management believes have the greatest potential impact on the presentation of the financial condition and operating
results of the Company for the periods being reported and that require the most judgment.
Management regularly reviews these critical accounting policies and estimates with the Audit Committee of the Board of Directors.
Revenue Recognition. The Company utilizes signed sales agreements that provide for transfer of title to the customer upon
delivery. The Company must estimate the amount of sales that have been transferred to third-party carriers but not delivered to
customers. The estimate is calculated using a lag factor determined by analyzing the actual difference between shipment date and
delivery date of orders over the past 12 months. Revenue is only recognized on those shipments which the Company believes have
been delivered to the customer.
15
The Company recognizes revenue based on the invoice price less allowances for sales returns, cash discounts and other deductions
as required under U.S. generally accepted accounting principles (GAAP). Collection is reasonably assured as determined through
an analysis of accounts receivable data, including historical product returns and the evaluation of each customer’s ability to pay.
Allowances for sales returns are based on the historical relationship between shipments and returns. The Company believes that
its historical experience is an accurate reflection of future returns.
Self Insurance. The Company is self-insured for certain costs related to employee medical coverage, workers’ compensation
liability, general liability, auto liability and property insurance. The Company maintains stop-loss coverage with third-party insurers
to limit total exposure. The Company establishes a liability at each balance sheet date based on estimates for a variety of factors
that influence the Company’s ultimate cost. In the event that actual experience is substantially different from the estimates, the
financial results for the period could be adversely affected. The Company believes that the methodologies used to estimate insurance
liabilities are an accurate reflection of the liabilities as of the date of the balance sheet.
Pensions. The Company has two non-contributory defined benefit pension plans covering many of the Company’s employees
hired prior to April 30, 2012.
Effective April 30, 2012, the Company froze all future benefit accruals under the Company’s hourly and salaried defined benefit
pension plans.
The estimated expense, benefits and pension obligations of these plans are determined using various assumptions. The most
significant assumptions are the long-term expected rate of return on plan assets and the discount rate used to determine the present
value of the pension obligations. The long-term expected rate of return on plan assets reflects the current mix of the plan assets
invested in equities and bonds.
Beginning with the April 30, 2016 measurement, the Company refined the method used to determine the service and interest cost
components of its net periodic benefit cost. Previously, the cost was determined using a single weighted-average discount rate
derived from the yield curve. Under the refined method, known as the spot rate approach, individual spot rates along the yield
curve that correspond with the timing of each benefit payment will be used. The Company believes this change provides a more
precise measurement of service and interest costs by improving the correlation between projected cash outflows and corresponding
spot rates on the yield curve. Compared to the previous method, the spot rate approach will decrease the service and interest
components of the benefit costs in fiscal 2017. There is no impact on the total benefit obligation.
The following is a summary of the potential impact of a hypothetical 1% change in actuarial assumptions for the discount rate,
expected return on plan assets and consumer price index:
(in millions)
(decrease) increase
Effect on annual pension expense
Effect on projected pension benefit obligation
IMPACT OF 1%
INCREASE
IMPACT OF 1%
DECREASE
$
$
(1.3) $
(24.3) $
1.2
31.5
Pension expense for fiscal 2016 and the assumptions used in that calculation are presented in Note H of the Consolidated Financial
Statements. At April 30, 2016, the discount rate was 4.06% compared with 4.19% at April 30, 2015. The expected return on plan
assets was 7.5% at both April 30, 2016, and April 30, 2015. The rate of compensation increase is not applicable for periods beyond
April 30, 2012 because the Company froze its pension plans as of that date.
The projected performance of the Company’s pension plans is largely dependent on the assumptions used to measure the obligations
of the plans and to estimate future performance of the plans’ invested assets. Over the past two measurement periods, the most
material deviations between results based on assumptions and the actual plan performance have resulted from changes to the
discount rate used to measure the plans’ benefit obligations and the actual return on plan assets. Accounting guidelines require
the discount rate to be set to a current market rate at each annual measurement date. From the fiscal 2014 to fiscal 2015 measurement
dates, the discount rate decreased from 4.56% at April 30, 2014 to 4.19% at April 30, 2015, which caused an actuarial loss of
$24.2 million. From the fiscal 2015 to fiscal 2016 measurement dates, the discount rate decreased from 4.19% to 4.06%, which
caused an actuarial loss of $1.9 million.
16
The Company strives to balance expected long-term returns and short-term volatility of pension plan assets. Favorable and
unfavorable differences between the assumed and actual returns on plan assets are generally amortized over a period no longer
than the average life expectancy of the plans’ active participants. The actual rates of return on plan assets realized, net of investment
manager fees, were (1.6)%, 6.6% and 9.4% for fiscal 2016, 2015 and 2014, respectively.
The fair value of plan assets at April 30, 2016 was $107.0 million compared with $108.7 million at April 30, 2015. The Company’s
projected benefit obligation exceeded plan assets by $67.1 million in fiscal 2016 and by $61.3 million in fiscal 2015. The $5.8
million increase in the Company’s net under-funded position during fiscal 2016 was primarily driven by the Company’s $1.9
million actuarial loss and asset returns that were less than expected, offset by increased Company contributions. The Company
expects its pension expense to decrease from $0.3 million in fiscal 2016 to $(0.5) million in fiscal 2017, due primarily to the
change to the new mortality tables, decrease in the discount rate and the spot rate approach. The Company expects to contribute
$7.3 million to its pension plans in fiscal 2017, which represents required and discretionary funding. The Company made
contributions of $5.0 million to its pension plans in fiscal 2016.
Valuation of Deferred Tax Assets. The Company regularly considers the need for a valuation allowance against its deferred tax
assets. Deferred tax assets are reduced by a valuation allowance when, after considering all positive and negative evidence, it is
determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
The Company has recorded a valuation allowance related to deferred tax assets for certain state investment tax credit (ITC)
carryforwards. Deferred tax assets are reduced by a valuation allowance when, after considering all positive and negative evidence,
it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
The gross amount of state tax credit carryforwards related to state ITCs as of April 30, 2016 was $5.8 million. These credits expire
in various years beginning in fiscal 2020. Net of the federal impact and related valuation allowance, the Company has recorded
$1.8 million of deferred tax assets related to these credits. The Company accounts for ITCs under the deferral method, under
which the tax benefit from the ITC is deferred and amortized into income tax expense over the book life of the related property.
As of April 30, 2016, a deferred credit balance of $1.8 million is included in other liabilities on the balance sheet.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,
“Revenue from Contracts with Customers: Topic 606.” ASU 2014-09 supersedes the revenue recognition requirements in
“Accounting Standard Codification 605 - Revenue Recognition” and most industry-specific guidance. The standard requires that
entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which a company expects to be entitled in exchange for those goods or services. ASU 2014-09 permits the use
of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, "Revenue
from Contracts with Customers (Topic 606): Deferral of the Effective Date." ASU 2015-14 defers the effective date of ASU
2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within
that period. The Company is currently assessing the impact ASU 2014-09 and ASU 2015-14 will have on its financial position
and results of operations.
In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)." ASU
2015-17 requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent
on the balance sheet. The Company retrospectively adopted this guidance on April 30, 2016. As a result of the retrospective
adoption of this ASU, current assets decreased and noncurrent assets increased by $9.6 million as of April 30, 2015. The adoption
of ASU 2015-17 did not impact net income or any other amounts previously reported on the consolidated statements of income
or comprehensive income or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." Among other things, ASU 2016-02 requires lessees
to recognize most leases on-balance sheet, which will increase reported assets and liabilities. Lessor accounting remains
substantially similar to current U.S. GAAP. ASU 2016-02 supersedes "Topic 840 - Leases." ASU 2016-02 is effective for public
companies for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified
retrospective transition method for all entities. The Company is currently assessing the impact that ASU 2016-02 will have on its
consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee
Shares-Based Payment Accounting." ASU 2016-09 is intended to improve the accounting for share-based payment transactions
as part of the FASB’s simplification initiative. ASU 2016-09 changes several aspects of the accounting for share-based payment
award transactions, including: (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash
17
flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the
statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for fiscal
years beginning after December 15, 2016, and interim periods within those years for public companies. Early adoption is permitted
in any interim or annual period provided that the entire ASU is adopted. Even if an entity early adopts the amendments after the
first interim period, the adoption date is as of the beginning of the year for the issues adopted by the cumulative-effect and
prospective methods. Any adjustments to previously reported interim periods of that fiscal year should be included in the year-
to-date results. If those previously reported interim results appear in any future filings, they are reported on the revised basis. The
Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.
On April 30, 2016, the Company had no material exposure to changes in interest rates for its debt agreements.
The Company does not currently use commodity or interest rate derivatives or similar financial instruments to manage its commodity
price or interest rate risks.
18
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current Assets
Cash and cash equivalents
Investments - certificates of deposit
Customer receivables, net
Inventories
Prepaid expenses and other
Total Current Assets
Property, plant and equipment, net
Investments - certificates of deposit
Promotional displays, net
Deferred income taxes
Other assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable
Current maturities of long-term debt
Accrued compensation and related expenses
Accrued marketing expenses
Other accrued expenses
Total Current Liabilities
Long-term debt, less current maturities
Defined benefit pension liabilities
Other long-term liabilities
Shareholders' Equity
APRIL 30
2016
2015
$
174,463
$
149,541
25,750
55,813
39,319
6,864
35,500
46,142
35,988
4,758
302,209
271,929
99,332
18,250
5,377
32,574
8,951
85,516
—
4,348
33,387
3,724
$
466,693
$
398,904
$
35,011
$
1,574
35,389
8,075
12,264
92,313
22,478
67,131
4,010
34,288
1,457
30,120
6,471
12,454
84,790
21,498
61,325
1,449
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
shares: at April 30, 2016: 16,244,041, at April 30, 2015: 16,079,671
Retained earnings
Accumulated other comprehensive loss -
Defined benefit pension plans
Total Shareholders' Equity
163,290
164,756
150,001
120,698
(47,285)
280,761
(40,857)
229,842
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
466,693
$
398,904
See notes to consolidated financial statements.
19
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Net sales
Cost of sales and distribution
Gross Profit
Selling and marketing expenses
General and administrative expenses
Restructuring charges, net
Insurance proceeds
Operating Income
Interest expense
Other (income) expense
Income Before Income Taxes
Income tax expense
Net Income
SHARE INFORMATION
Earnings per share
Basic
Diluted
FISCAL YEARS ENDED APRIL 30
2016
2014
2015
$
947,045
$
825,465
$
726,515
747,351
199,694
672,933
152,532
602,338
124,177
66,489
40,045
—
—
93,160
378
996
91,786
64,304
33,773
(240)
—
54,695
515
(207)
54,387
59,536
30,881
(234)
(94)
34,088
728
(310)
33,670
33,063
18,888
13,209
$
58,723
$
35,499
$
20,461
$
$
3.61
3.57
$
2.25
2.21
1.34
1.31
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss) net of tax:
Change in pension benefits, net of deferred taxes
of $4,110, $9,510 and ($3,944), respectively
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$
58,723
$
35,499
$
20,461
(6,428)
(14,877)
6,170
Total Comprehensive Income
$
52,295
$
20,622
$
26,631
See notes to consolidated financial statements.
20
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ACCUMULATED
OTHER
TOTAL
(in thousands, except share data)
SHARES
AMOUNT
EARNINGS
LOSS
EQUITY
COMMON STOCK
RETAINED
COMPREHENSIVE
SHAREHOLDERS'
Balance, May 1, 2013
14,822,580
$
107,165
$
71,180
$
(32,150) $
Net income
Other comprehensive loss,
net of tax
Stock-based compensation
Adjustments to excess tax
benefit from stock-based
compensation
Exercise of stock-based
20,461
6,170
3,295
600
compensation awards, net of amounts
withheld for taxes
Stock repurchases
Employee benefit plan
contributions
643,558
(100,000)
13,122
(654)
(2,487)
110,160
3,843
Balance, April 30, 2014
15,476,298
$
127,371
$
89,154
$
(25,980) $
Net income
Other comprehensive income,
net of tax
Stock-based compensation
Adjustments to excess tax
benefit from stock-based
compensation
Exercise of stock-based
35,499
(14,877)
3,497
1,172
compensation awards, net of amounts
withheld for taxes
Stock repurchases
Employee benefit plan
contributions
599,124
(163,326)
12,842
(1,098)
(3,955)
167,575
6,217
Balance, April 30, 2015
16,079,671
$
150,001
$
120,698
$
(40,857) $
Net income
Other comprehensive loss,
net of tax
Stock-based compensation
Adjustments to excess tax
benefit from stock-based
compensation
Exercise of stock-based
58,723
(6,428)
3,609
4,559
compensation awards, net of amounts
withheld for taxes
Stock repurchases
Employee benefit plan
contributions
375,928
(243,143)
5,288
(1,928)
(14,665)
31,585
1,761
Balance, April 30, 2016
16,244,041
$
163,290
$
164,756
$
(47,285) $
See notes to consolidated financial statements.
21
146,195
20,461
6,170
3,295
600
13,122
(3,141)
3,843
190,545
35,499
(14,877)
3,497
1,172
12,842
(5,053)
6,217
229,842
58,723
(6,428)
3,609
4,559
5,288
(16,593)
1,761
280,761
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Depreciation and amortization
Net loss on disposal of property, plant and equipment
Gain on sales of assets held for sale
Gain on insurance recoveries
Stock-based compensation expense
Deferred income taxes
Pension contributions in excess of expense
Excess tax benefit from stock-based compensation
Contributions of employer stock to employee benefit plan
Other non-cash items
Changes in operating assets and liabilities:
Customer receivables
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued compensation and related expenses
Income taxes payable
Marketing and other accrued expenses
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Payments to acquire property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from sales of assets held for sale
Proceeds from insurance recoveries
Purchases of certificates of deposit
Maturities of certificates of deposit
Investment in promotional displays
Net Cash Used by Investing Activities
FINANCING ACTIVITIES
Payments of long-term debt
Proceeds from long-term debt
Excess tax benefit from stock-based compensation
Proceeds from issuance of common stock and other
Repurchase of common stock
Notes receivable, net
Net Cash Provided (Used) by Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$
58,723
$
35,499
$
20,461
14,526
14,545
16,456
1,576
—
—
3,609
11,629
(4,732)
(4,968)
1,761
(3,489)
(9,938)
(4,276)
(4,585)
723
5,269
(1,791)
5,811
71,778
153
(250)
—
3,497
4,335
(4,604)
(1,887)
6,217
(1,211)
288
(5,605)
126
5,113
1,963
1,201
(624)
58,737
(28,685)
(20,015)
846
—
—
(46,750)
38,250
(4,434)
(40,773)
(1,547)
3,196
4,968
8,114
(16,593)
(4,221)
(6,083)
22
1,250
—
(40,750)
5,250
(2,363)
(56,606)
(1,309)
1,500
1,887
14,268
(5,053)
417
11,710
24,922
13,841
149,541
135,700
123
(323)
(94)
3,295
7,978
(2,039)
(854)
3,843
(2,634)
(7,546)
(2,875)
(1,236)
5,869
1,943
526
(447)
40,535
(7,903)
81
1,644
94
—
—
(3,499)
(9,583)
(4,516)
—
854
15,330
(3,141)
(750)
7,777
38,729
96,971
Cash and Cash Equivalents, End of Year
$
174,463
$
149,541
$
135,700
See notes to consolidated financial statements.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A -- Summary of Significant Accounting Policies
The Company manufactures and distributes kitchen cabinets and vanities for the remodeling and new home construction markets.
The Company's products are sold across the United States through a network of independent dealers and distributors and directly
to home centers and major builders.
The following is a description of the Company’s significant accounting policies:
Principles of Consolidation and Basis of Presentation: The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. Significant inter-company accounts and transactions have been eliminated in consolidation.
Revenue Recognition: The Company recognizes revenue when product is delivered to the customer and title has passed. Revenue
is based on invoice price less allowances for sales returns, cash discounts and other deductions.
Cost of Sales and Distribution: Cost of sales and distribution includes all costs associated with the manufacture and distribution
of the Company’s products including the costs of shipping and handling.
Advertising Costs: Advertising costs are expensed as incurred. Advertising expenses for fiscal years 2016, 2015 and 2014 were
$38.1 million, $34.3 million and $30.4 million, respectively.
Cash and Cash Equivalents: Cash in excess of operating requirements is invested in money market accounts which are carried
at cost (which approximates fair value). The Company considers all highly liquid short-term investments with an original maturity
of three months or less when purchased to be cash equivalents. Cash equivalents were $34.0 million and $33.0 million at April
30, 2016 and 2015, respectively.
Investments in Certificates of Deposit: The Company invests excess cash in certificates of deposit which are carried at cost (which
approximates fair value). Certificates of deposit with original maturities greater than three months and remaining maturities less
than one year are classified as current assets. Certificates of deposit with remaining maturities greater than one year are classified
as long-term assets.
Inventories: Inventories are stated at lower of cost or market. Inventory costs are determined by the last-in, first-out (LIFO)
method.
The LIFO cost reserve is determined in the aggregate for inventory and is applied as a reduction to inventories determined on the
first-in, first-out method (FIFO). FIFO inventory cost approximates replacement cost.
Property, Plant and Equipment: Property, plant and equipment is stated on the basis of cost less accumulated depreciation.
Depreciation is provided by the straight-line method over the estimated useful lives of the related assets, which range from 15 to
30 years for buildings and improvements and 3 to 10 years for machinery and equipment. Assets under capital leases are amortized
over the shorter of their estimated useful lives or the term of the related lease.
Impairment of Long-Lived Assets: The Company reviews its long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. During fiscal years 2016, 2015 and 2014, the
Company concluded no impairment existed, except for impairments related to restructuring activities.
Promotional Displays: The Company invests in promotional displays in retail stores to demonstrate product features, product and
quality specifications and serve as a training tool for retail kitchen designers. The Company invests in these long-lived productive
assets to provide the aforementioned benefits. The Company's investment in promotional displays is carried at cost less applicable
amortization. Amortization is provided by the straight-line method on an individual display basis over periods of 30 to 36 months
(the estimated period of benefit). Promotional display amortization expense for fiscal years 2016, 2015 and 2014 was $3.4 million,
$3.6 million and $3.7 million, respectively, and is included in selling and marketing expenses.
Income Taxes: The Company accounts for deferred income taxes utilizing the asset and liability method, whereby deferred tax
assets and liabilities are recognized based on the tax effects of temporary differences between the financial statement amounts and
the tax basis of assets and liabilities, using enacted tax rates in effect for the year in which these items are expected to reverse. At
each reporting date, the Company evaluates the need for a valuation allowance to adjust deferred tax assets and liabilities to an
amount that more likely than not will be realized.
23
Pensions: The Company has two non-contributory defined benefit pension plans covering many of the Company’s employees
hired before April 30, 2012. Both defined benefit pension plans were frozen effective April 30, 2012. The Company recognizes
the overfunded or underfunded status of its defined benefit pension plans, measured as the difference between the fair value of
plan assets and the benefit obligation, in its consolidated balance sheets. The Company also recognizes the actuarial gains and
losses and the prior service costs, credits and transition costs as a component of other comprehensive income (loss), net of tax.
Stock-Based Compensation: The Company recognizes stock-based compensation expense based on the grant date fair value over
the requisite service period.
Self Insurance: The Company is self-insured for certain costs related to employee medical coverage, workers’ compensation
liability, general liability, auto liability and property insurance. The Company maintains stop-loss coverage with third-party insurers
to limit total exposure. The Company establishes a liability at each balance sheet date based on estimates for a variety of factors
that influence the Company’s ultimate cost. In the event that actual experience is substantially different from the estimates, the
financial results for the period could be adversely affected. The Company believes that the methodologies used to estimate insurance
liabilities are an accurate reflection of the liabilities as of the date of the balance sheet.
Recent Accounting Pronouncements: In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” ASU 2014-09 supersedes the
revenue recognition requirements in “Accounting Standard Codification 605 - Revenue Recognition” and most industry-specific
guidance. The standard requires that entities recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services.
ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued
ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date." ASU 2015-14 defers
the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim
reporting periods within that period. The Company is currently assessing the impact ASU 2014-09 and ASU 2015-14 will have
on its financial position and results of operations.
In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)." ASU
2015-17 requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent
on the balance sheet. The Company retrospectively adopted this guidance on April 30, 2016. As a result of the retrospective
adoption of this ASU, current assets decreased and noncurrent assets increased by $9.6 million as of April 30, 2015. The adoption
of ASU 2015-17 did not impact net income or any other amounts previously reported on the consolidated statements of income
or comprehensive income or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." Among other things, ASU 2016-02 requires lessees
to recognize most leases on-balance sheet, which will increase reported assets and liabilities. Lessor accounting remains
substantially similar to current U.S. GAAP. ASU 2016-02 supersedes "Topic 840 - Leases." ASU 2016-02 is effective for public
companies for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified
retrospective transition method for all entities. The Company is currently assessing the impact that ASU 2016-02 will have on its
consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee
Shares-Based Payment Accounting." ASU 2016-09 is intended to improve the accounting for share-based payment transactions
as part of the FASB’s simplification initiative. ASU 2016-09 changes several aspects of the accounting for share-based payment
award transactions, including: (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash
flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the
statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for fiscal
years beginning after December 15, 2016, and interim periods within those years for public companies. Early adoption is permitted
in any interim or annual period provided that the entire ASU is adopted. Even if an entity early adopts the amendments after the
first interim period, the adoption date is as of the beginning of the year for the issues adopted by the cumulative-effect and
prospective methods. Any adjustments to previously reported interim periods of that fiscal year should be included in the year-
to-date results. If those previously reported interim results appear in any future filings, they are reported on the revised basis. The
Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.
Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during each reporting period. Actual results could differ from those estimates.
24
Reclassifications: Certain reclassifications have been made to prior period balances to conform to the current year presentation.
Note B -- Customer Receivables
The components of customer receivables were:
(in thousands)
Gross customer receivables
Less:
Allowance for doubtful accounts
Allowance for returns and discounts
Net customer receivables
Note C -- Inventories
The components of inventories were:
(in thousands)
Raw materials
Work-in-process
Finished goods
Total FIFO inventories
Reserve to adjust inventories to LIFO value
Total LIFO inventories
Note D -- Property, Plant and Equipment
The components of property, plant and equipment were:
(in thousands)
Land
Buildings and improvements
Buildings and improvements - capital leases
Machinery and equipment
Machinery and equipment - capital leases
Construction in progress
Less accumulated amortization and depreciation
Total
APRIL 30
2016
2015
58,593
$
48,655
(171)
(2,609)
55,813
$
(173)
(2,340)
46,142
APRIL 30
2016
2015
17,634
$
18,414
17,475
53,523
(14,204)
17,199
18,095
14,797
50,091
(14,103)
39,319
$
35,988
APRIL 30
2016
2015
2,311
$
80,042
11,202
182,937
29,357
2,556
308,405
(209,073)
5,929
69,412
11,202
159,680
29,052
12,581
287,856
(202,340)
99,332
$
85,516
$
$
$
$
$
$
Amortization and depreciation expense on property, plant and equipment amounted to $11.6 million, $9.5 million and $9.5 million
in fiscal years 2016, 2015 and 2014, respectively. Accumulated amortization on capital leases included in the above table amounted
to $29.6 million and $28.6 million as of April 30, 2016 and 2015, respectively.
25
Note E -- Loans Payable and Long-Term Debt
Maturities of long-term debt are as follows:
FISCAL YEARS ENDING APRIL 30
(in thousands)
2017
2018
2019
2020
2021
2022
AND
THERE-
AFTER
TOTAL
OUTSTANDING
Revolving credit facility
$
— $
— $ 10,000
$
— $
— $
— $
10,000
Economic development loans
—
—
2,189
—
—
1,500
Capital lease obligations
1,574
1,265
917
710
617
2,082
Other long-term debt
—
—
—
—
—
3,198
3,689
7,165
3,198
Total
$ 1,574
$ 1,265
$ 13,106
$
710
$
617
$ 6,780
$
24,052
Less current maturities
Total long-term debt
$
$
1,574
22,478
The Company’s primary loan agreement is a $35 million unsecured revolving credit facility which expires on December 31, 2018
with Wells Fargo Bank, N.A. (Wells Fargo). At April 30, 2016 and 2015, $10 million of loans were outstanding under this facility,
and the Company had additional borrowing base availability of $25 million. The Company incurs a fee for amounts not used
under the revolving credit facility. Fees paid by the Company related to non-usage of its current and former credit facilities have
been included in interest expense and were insignificant in each of fiscal years 2016, 2015 and 2014, respectively.
The Company can borrow under the revolving credit facility up to the lesser of $35 million or the maximum borrowing base (which
equals 75% of eligible accounts receivable, 50% of eligible pre bill reserves and up to $20 million for equipment value, each as
defined in the agreement) less any outstanding loan balance. Any outstanding loan balance bears interest at the London Interbank
Offered Rate (LIBOR) (0.495% at April 30, 2016) plus 1.5%. Under the terms of the revolving credit facility, the Company must:
(1) maintain at the end of each fiscal quarter a ratio of total liabilities to tangible net worth of not greater than 1.4 to 1.0; (2)
maintain at the end of each fiscal quarter a ratio of cash flow to fixed charges of not less than 1.5 to 1.0 measured on a rolling
four-quarter basis; and (3) comply with other customary affirmative and negative covenants.
The Company was in compliance with all covenants specified in the amended revolving credit facility as of April 30, 2016,
including as follows: (1) the Company’s ratio of total liabilities to tangible net worth at April 30, 2016 was 0.67 to 1.0; and (2)
cash flow to fixed charges for its most recent four quarters was 3.41 to 1.0.
The revolving credit facility does not limit the Company’s ability to pay dividends or repurchase its common stock as long as the
Company is in compliance with these covenants.
In 2009, the Company entered into a loan agreement with the Board of County Commissioners of Garrett County as part of the
Company’s capital investment in land located in Garrett County, Maryland. This loan agreement was secured by a Deed of Trust
on the property and bears interest at a fixed rate of 3%. The agreement deferred principal and interest during the term of the
obligation and forgives any outstanding balance at December 31, 2019, if the Company complied with certain employment
levels. The value of the land and associated site improvements totaled $3.5 million. During the fourth quarter of fiscal 2016, the
Company conveyed the property for full settlement of the loan and accrued interest totaling $1.6 million. The Company recorded
a loss on the transaction of $1.9 million. The loss was included in other (income) expense on the Company’s statements of income.
The outstanding balance as of April 30, 2016 and 2015 was $0 and $1.3 million, respectively.
26
In 2005, the Company entered into two separate loan agreements with the Maryland Economic Development Corporation and the
County Commissioners of Allegany County as part of the Company’s capital investment and operations at the Allegany County,
Maryland site. These loan agreements were amended in 2013 and 2008. The aggregate balance of these loan agreements was
$2.2 million as of April 30, 2016 and 2015. The loan agreements expire at December 31, 2018 and bear interest at a fixed rate of
3% per annum. These loan agreements are secured by mortgages on the manufacturing facility constructed in Allegany County,
Maryland. These loan agreements defer principal and interest during the term of the obligation and forgive any outstanding balance
at December 31, 2018, if the Company complies with certain employment levels at the facility.
From 2012 through 2016, the Company entered into a total of eighteen capitalized lease agreements in the aggregate amount of
$2.5 million with First American Financial Bancorp related to financing computer equipment. Each lease has a term of 48 months
and an interest rate of 6.5%. The leases require quarterly rental payments. The aggregate outstanding amount under all of these
leases as of April 30, 2016 and 2015 was $1.1 million and $1.3 million, respectively.
From 2013 through 2016, the Company entered into a total of seventeen capitalized lease agreements in the aggregate amount of
$1.9 million with e-Plus Group related to financing computer equipment. Each lease has a term of 51 months and an interest rate
of 6.5%. The leases require monthly rental payments. The aggregate outstanding amount under all of these leases as of April 30,
2016 and 2015 was $1.0 million and $1.0 million, respectively.
In 2004, the Company entered into a lease agreement with the West Virginia Economic Development Authority as part of the
Company’s capital investment and operations at the South Branch plant located in Hardy County, West Virginia. This capital lease
agreement is a $10 million term obligation, which expires June 30, 2024, bearing interest at a fixed rate of 2% per annum. The
lease requires monthly rental payments. The outstanding amounts owed as of April 30, 2016 and 2015 were $5.0 million and $5.6
million, respectively.
In 2015, the Company entered into a $1.5 million loan agreement with the West Virginia Economic Development Authority as
part of the Company's capital investment and operations at the South Branch plant located in Hardy County, West Virginia. The
loan agreement expires on February 1, 2025 and bears interest at a fixed rate of 3% per annum. The loan agreement is secured
by certain equipment. It defers principal and interest during the term of the obligation and forgives any outstanding balance at
December 31, 2018 if the Company complies with certain employment levels at the facility.
On January 25, 2016 the Company entered into a New Markets Tax Credit ("NMTC") financing agreement, pursuant to section
45D of the Internal Revenue Code of 1986, as amended, and Kentucky Revised Statutes Sections 141.432 through 141.434, to
take advantage of a tax credit related to working capital and capital improvements at its Monticello, Kentucky facility. This
financing agreement was structured with unrelated third party financial institutions (the Investors), their wholly-owned investment
funds ("Investment Funds") and their wholly-owned community development entities ("CDEs") in connection with our
participation in qualified transactions under the NMTC program. In exchange for substantially all of the benefits derived from
the tax credits, the Investors made a contribution of $2.3 million, net of syndication fees, to the project. Upon closing the transaction,
a wholly owned subsidiary of the Company provided a $4.3 million loan receivable to the Investment Funds, which is included
in other long term assets in the accompanying consolidated balance sheets. The Company also entered into loan agreements
aggregating $6.6 million payable to the CDEs sponsoring the project. The loans have a term of thirty years with an aggregate
interest rate of approximately 1.2%. As of April 30, 2016 the Company had drawn $3.2 million of the loan proceeds, which is
included in long-term debt in the accompanying consolidated balance sheets. The NMTC is subject to recapture for a period of
seven years, the compliance period. During the compliance period, the Company is required to comply with various regulations
and contractual provisions that apply to the NMTC arrangement. We do not anticipate any credit recaptures will be required in
connection with this arrangement. This transaction also includes a put/call feature which becomes enforceable at the end of the
compliance period whereby we may be obligated or entitled to repurchase the Investors’ interest in the Investment Funds. The
value attributable to the put/call is nominal. Direct costs of $0.3 million incurred in structuring the financing arrangement are
deferred and will be recognized as expense over the term of the loans (30 years).
Certain of the Company's loan agreements limit the amount and type of indebtedness the Company can incur and require the
Company to maintain specified financial ratios measured on a quarterly basis. In addition to the assets previously discussed, certain
of the Company’s property, plant and equipment are pledged as collateral under a loan agreement and the capital lease arrangements.
The Company was in compliance with all covenants contained in its loan agreements and capital leases at April 30, 2016.
Interest paid under the Company’s loan agreements and capital leases during fiscal years 2016, 2015 and 2014 was $0.5 million,
$0.5 million and $0.7 million, respectively.
27
Note F -- Earnings Per Share
The following table summarizes the computations of basic and diluted earnings per share:
(in thousands, except per share amounts)
Numerator used in basic and diluted earnings per common share:
Net income
Denominator:
Denominator for basic earnings per common share -
weighted-average shares
Effect of dilutive securities:
Stock options and restricted stock units
Denominator for diluted earnings per common share -
weighted-average shares and assumed conversions
Net earnings per share
Basic
Diluted
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$
58,723
$
35,499
$
20,461
16,256
15,764
15,299
186
273
354
16,442
16,037
15,653
$
$
3.61
3.57
$
$
2.25
2.21
$
$
1.34
1.31
There were no potentially dilutive securities for the fiscal year ended April 30, 2016, which were excluded from the calculation
of net earnings per share. Potentially dilutive shares of 0.1 million issuable under the Company’s stock incentive plans have been
excluded from the calculation of net earnings per share for each of the fiscal years ended April 30, 2015 and 2014, as the effect
would be anti-dilutive.
Note G – Stock-Based Compensation
The Company has two types of stock-based compensation awards in effect for its employees and directors. The Company has
issued stock options since 1986 and restricted stock units ("RSUs") since fiscal 2010. Total compensation expense related to stock-
based awards for the fiscal years ended April 30, 2016, 2015 and 2014 was $3.6 million, $3.5 million and $3.3 million,
respectively. The Company recognizes stock-based compensation costs net of an estimated forfeiture rate for those shares expected
to vest on a straight-line basis over the requisite service period of the award. The Company estimates the forfeiture rates based
upon its historical experience.
Stock Incentive Plans
At April 30, 2016, the Company had stock option and RSU awards outstanding under four different plans: (1) second amended
and restated 2004 stock incentive plan for employees; (2) 2006 non-employee directors equity ownership plan; and (3) 2011 non-
employee directors equity ownership plan. As of April 30, 2016, there were 935,626 shares of common stock available for future
stock-based compensation awards under the Company’s stock incentive plans.
Methodology Assumptions
For purposes of valuing stock option grants, the Company has identified one employee group and one non-employee director
group, based upon observed option exercise patterns. The Company uses the Black-Scholes option-pricing model to value the
Company’s stock options for each of the groups. Using this option-pricing model, the fair value of each stock option award is
estimated on the date of grant. The fair value of the Company’s stock option awards is expensed on a straight-line basis over the
vesting period of the stock options. The expected volatility assumption is based on the historical volatility of the Company’s stock
over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from
the Company’s historical exercise experience and represents the period of time that stock option awards granted are expected to
be outstanding for each of the identified groups. The expected term assumption incorporates the contractual term of an option
grant, which is generally ten years for employees and from four to ten years for non-employee directors, as well as the vesting
period of an award, which is typically three years. The risk-free interest rate is based on the implied yield on a U.S. Treasury
constant maturity with a remaining term equal to the expected term of the option granted.
28
For purposes of determining the fair value of RSUs, the Company uses the closing stock price of its common stock as reported
on the NASDAQ Global Select Market on the date of grant. The fair value of the Company’s RSU awards is expensed on a straight-
line basis over the vesting period of the RSUs to the extent the Company believes it is probable the related performance criteria,
if any, will be met. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining
term equal to the vesting period of the RSU grant.
The weighted-average assumptions and valuation of the Company’s stock options were as follows:
Weighted-average fair value of grants
Expected volatility
Expected term in years
Risk-free interest rate
Expected dividend yield
Stock Option Activity
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$
18.59
$
9.25
$
14.46
29.8%
5.8
2.16%
—%
27.4%
5.9
2.19%
—%
38.2%
6.1
1.59%
—%
Stock options granted and outstanding under each of the Company’s plans vest evenly over a three-year period and have contractual
terms of ten years. The exercise price of all stock options granted is equal to the fair market value of the Company’s common
stock on the option grant date.
The following table presents a summary of the Company’s stock option activity for the fiscal years ended April 30, 2016, 2015
and 2014 (remaining contractual term in years and exercise prices are weighted-averages):
Outstanding at April 30, 2013
Granted
Exercised
Cancelled or expired
Outstanding at April 30, 2014
Granted
Exercised
Cancelled or expired
Outstanding at April 30, 2015
Granted
Exercised
Cancelled or expired
Outstanding at April 30, 2016
Vested and expected to vest in the future
at April 30, 2016
Exercisable at April 30, 2016
NUMBER OF
OPTIONS
1,401,813
60,500
(551,485)
(59,514)
851,314
66,600
(508,639)
(11,200)
398,075
30,700
(287,975)
(14,167)
126,633
120,715
46,599
REMAINING
CONTRACTUAL
TERM
4.8
9.1
—
—
4.3
9.1
—
—
5.0
9.1
—
—
5.8
5.7
1.7
WEIGHTED
AVERAGE
EXERCISE
PRICE
$27.27
36.74
26.61
30.17
$28.16
29.92
28.05
32.64
$28.46
57.11
27.99
40.43
$35.15
$34.97
$26.72
$
$
$
$
$
$
AGGREGATE
INTRINSIC
VALUE
(in thousands)
9,272
—
5,156
—
3,121
—
7,209
—
8,851
—
11,089
—
4,773
4,572
2,149
The aggregate intrinsic value in the previous table of the outstanding options on April 30, 2016 represents the total pre-tax intrinsic
value (the excess, if any, of the Company’s closing stock price on the last trading day of fiscal 2016 over the exercise price,
multiplied by the number of in-the-money options) of the shares of the Company’s common stock that would have been received
29
by the option holders had all option holders exercised their options on April 30, 2016. This amount changes based upon the fair
market value of the Company’s common stock. The total fair value of options vested for the fiscal years ended April 30, 2016,
2015 and 2014 was $0.7 million, $0.7 million and $0.7 million, respectively.
As of April 30, 2016, there was $0.6 million of total unrecognized compensation expense related to unvested stock options granted
under the Company’s stock-based compensation plans. This expense is expected to be recognized over a weighted-average period
of 1.7 years.
Cash received from option exercises for the fiscal years ended April 30, 2016, 2015 and 2014, was an aggregate of $8.1 million,
$14.3 million and $14.7 million, respectively. The actual tax benefit realized for the tax deduction from option exercises of stock
option awards totaled $4.3 million, $2.8 million and $2.0 million for the fiscal years ended April 30, 2016, 2015 and 2014,
respectively.
The following table summarizes information about stock options outstanding at April 30, 2016 (remaining lives in years and
exercise prices are weighted-averages):
OPTION PRICE
PER SHARE
$22.77-$23.96
$29.92-$34.11
$36.74-$36.74
$57.11-$57.11
OPTIONS OUTSTANDING
OPTIONS EXERCISABLE
REMAINING
LIFE
2.2
5.8
7.1
9.1
EXERCISE
PRICE
$23.32
30.52
36.74
57.11
OPTIONS
27,900
57,766
14,867
26,100
126,633
EXERCISE
PRICE
$23.32
31.79
36.74
—
OPTIONS
27,900
18,633
66
—
46,599
Restricted Stock Unit Activity:
The Company’s RSUs granted to employees cliff-vest over a three-year period from date of grant, while RSUs granted to non-
employee directors vest daily over a two-year period from date of grant. Directors were granted service-based RSUs only, while
employees were awarded both service-based and performance-based RSUs ("PBRSUs") in fiscal years 2016, 2015 and 2014. The
PBRSUs granted in fiscal 2016 are earned based on achievement of a number of goals pertaining to the Company’s operational
and financial performance during the performance period of fiscal 2016. Employees who satisfy the vesting criteria will receive
a proportional amount of PBRSUs based upon the Compensation Committee’s assessment of the Company’s achievement of the
performance criteria.
30
The following table contains a summary of the Company’s RSU activity for the fiscal years ended April 30, 2016, 2015 and 2014:
PERFORMANCE-
BASED RSUs
SERVICE-
BASED RSUs
TOTAL RSUs
WEIGHTED
AVERAGE
GRANT
DATE FAIR
VALUE
Issued and outstanding, April 30, 2013
279,105
155,000
434,105
$17.96
Granted
Cancelled due to non-achievement of
performance goals
Settled in common stock
Forfeited
Issued and outstanding, April 30, 2014
Granted
Cancelled due to non-achievement of
performance goals
Settled in common stock
Forfeited
Issued and outstanding, April 30, 2015
Granted
Cancelled due to non-achievement of
performance goals
Settled in common stock
Forfeited
Issued and outstanding, April 30, 2016
75,600
44,092
119,692
$36.09
(23,384)
(74,935)
(20,591)
235,795
—
(60,310)
(15,407)
123,375
(23,384)
(135,245)
(35,998)
359,170
$17.62
$19.75
$23.12
$22.79
79,500
40,100
119,600
$30.82
(16,218)
(79,407)
(8,726)
210,944
—
(54,861)
(4,764)
103,850
(16,218)
(134,268)
(13,490)
314,794
$36.18
$17.45
$27.78
$27.15
48,201
22,349
70,550
$57.83
(19,657)
(89,665)
(9,056)
140,767
—
(46,950)
(3,537)
75,712
(19,657)
(136,615)
(12,593)
216,479
$29.92
$19.57
$40.99
$40.88
As of April 30, 2016, there was $3.3 million of total unrecognized compensation expense related to unvested RSUs granted under
the Company’s stock-based compensation plans. This expense is expected to be recognized over a weighted-average period of
1.7 years.
For the fiscal years ended April 30, 2016, 2015 and 2014 stock-based compensation expense was allocated as follows:
(in thousands)
Cost of sales and distribution
Selling and marketing expenses
General and administrative expenses
Stock-based compensation expense, before income taxes
Restricted Stock Tracking Units:
2016
2015
2014
$
$
$
608
1,079
1,922
$
518
954
2,025
3,609
$
3,497
$
505
801
1,989
3,295
During fiscal 2016, the Board of Directors of the Company approved grants of 7,616 cash-settled performance-based restricted
stock tracking units ("RSTUs") and 2,499 cash-settled service-based RSTUs for more junior level employees who previously
received RSU grants under the Company’s shareholder approved plan. Each performance-based RSTU entitles the recipient to
receive a payment in cash equal to the fair market value of a share of the Company’s common stock as of the payment date if
applicable performance conditions are met and the recipient remains continuously employed with the Company until the units
vest. The service-based RSTUs entitle the recipients to receive a payment in cash equal to the fair market value of a share of our
common stock as of the payment date if they remain continuously employed with the Company until the units vest. The RSTUs
cliff-vest three years from the grant date. Since the RSTUs will be settled in cash, the grant date fair value of these awards is
recorded as a liability until the date of payment. The fair value of each cash-settled RSTU award is remeasured at the end of each
reporting period and the liability is adjusted, and related expense recorded, based on the new fair value. The Company recognized
31
expense of $0.8 million, $0.4 million and $0.1 million related to RSTUs for the fiscal years ended April 30, 2016, 2015 and 2014,
respectively. A liability for payment of the RSTUs is included in the Company's balance sheets in the amount of $1.2 million and
$0.4 million as of April 30, 2016 and 2015, respectively.
Note H – Employee Benefit and Retirement Plans
Employee Stock Ownership Plan
In fiscal 1990, the Company instituted the American Woodmark Investment Savings Stock Ownership Plan. Effective January 1,
2016 the plan name was changed to the American Woodmark Corporation Retirement Savings Plan. Under this plan, all employees
who are at least 18 years old and have been employed by the Company for at least six consecutive months are eligible to receive
Company stock through a discretionary profit-sharing contribution and a 401(k) matching contribution based upon the employee's
contribution to the plan.
Discretionary profit-sharing contributions ranging from 0-5%, based on predetermined net income levels of the Company, may
be made annually in the form of Company stock. The Company recognized expenses for profit-sharing contributions of $2.9
million, $1.8 million and $0.8 million in fiscal years 2016, 2015 and 2014, respectively.
In fiscal 2013, as part of the realignment of its retirement plans, the Company increased the match on 401(k) contributions in the
form of Company stock to 100% of an employee’s annual contribution to the plan up to 4% of annual compensation. Effective
May 1, 2015, matching contributions are made in cash by the Company. The expense for 401(k) matching contributions for this
plan was $6.6 million, $5.6 million and $4.1 million, in fiscal years 2016, 2015 and 2014, respectively.
Pension Benefits
The Company has two defined benefit pension plans covering many of the Company’s employees hired prior to April 30, 2012.
These plans provide defined benefits based on years of service and final average earnings (for salaried employees) or benefit rate
(for hourly employees).
Effective April 30, 2012, the Company froze all future benefit accruals under the Company’s hourly and salaried defined benefit
pension plans.
Included in accumulated other comprehensive loss at April 30, 2016 is $77.5 million ($47.3 million net of tax) related to net
unrecognized actuarial losses that have not yet been recognized in net periodic pension benefit costs. The Company expects to
recognize $1.8 million ($1.1 million net of tax) in net actuarial losses in net periodic pension benefit costs during fiscal 2017.
The Company uses an April 30 measurement date for its benefit plans.
32
The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company’s non-contributory
defined benefit pension plans as of April 30:
(in thousands)
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of year
Interest cost
Actuarial losses
Benefits paid
Projected benefit obligation at end of year
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Fair value of plan assets at end of year
Funded status of the plans
Unrecognized net actuarial loss
Prepaid benefit cost
APRIL 30
2016
2015
$
$
$
$
$
$
169,986
7,014
1,921
(4,825)
174,096
108,661
(1,888)
5,016
(4,824)
106,965
$
$
$
$
(67,131) $
77,514
10,383
$
144,142
6,466
24,168
(4,790)
169,986
102,599
6,583
4,269
(4,790)
108,661
(61,325)
66,975
5,650
The accumulated benefit obligation for both pension plans was $174.1 million and $170.0 million at April 30, 2016 and 2015,
respectively.
(in thousands)
PENSION BENEFITS
2015
2016
2014
COMPONENTS OF NET PERIODIC PENSION BENEFIT COST
Interest cost
Expected return on plan assets
Recognized net actuarial loss
Pension benefit cost
$
$
7,014
(8,142)
1,412
284
$
$
$
6,466
(7,666)
865
(335) $
6,203
(7,113)
1,129
219
The components of net periodic pension benefit cost do not include service costs or prior service costs due to the plans being
frozen.
Actuarial Assumptions: The discount rate at April 30 was used to measure the year-end benefit obligations and the earnings effects
for the subsequent year. Actuarial assumptions used to determine benefit obligations and earnings effects for the pension plans
follow:
FISCAL YEARS ENDED APRIL 30
2016
2015
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE BENEFIT
OBLIGATIONS
Discount rate
4.06 %
4.19 %
33
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET
PERIODIC PENSION BENEFIT COST
Discount rate
Expected return on plan assets
4.19 %
7.5 %
4.56 %
7.5 %
4.21%
7.5 %
The Company bases the discount rate on a current yield curve developed from a portfolio of high-quality fixed-income investments
with maturities consistent with the projected benefit payout period. The long-term rate of return on assets is determined based on
consideration of historical and forward-looking returns and the current and expected asset allocation strategy.
Beginning with the April 30, 2016 measurement, the Company refined the method used to determine the service and interest cost
components of its net periodic benefit cost. Previously, the cost was determined using a single weighted-average discount rate
derived from the yield curve. Under the refined method, known as the spot rate approach, individual spot rates along the yield
curve that correspond with the timing of each benefit payment will be used. The Company believes this change provides a more
precise measurement of service and interest costs by improving the correlation between projected cash outflows and corresponding
spot rates on the yield curve. Compared to the previous method, the spot rate approach will decrease the service and interest
components of the benefit costs in fiscal 2017. There is no impact on the total benefit obligation. The Company will account for
this change prospectively as a change in accounting estimate.
In developing the expected long-term rate of return assumption for the assets of the defined benefit pension plans, the Company
evaluated input from its third party pension plan asset managers, including their review of asset class return expectations and long-
term inflation assumptions.
The Company amortizes experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions,
over the average remaining lifetime of the active participants.
Contributions: The Company funds the pension plans in amounts sufficient to meet minimum funding requirements under
applicable employee benefit and tax laws plus additional amounts the Company deems appropriate.
The Company expects to contribute $7.3 million to its pension plans in fiscal 2017. The Company made contributions of $5.0
million and $4.3 million to its pension plans in fiscal 2016 and 2015, respectively.
Estimated Future Benefit Payments: The following benefit payments, which reflect expected future service, are expected to be
paid:
FISCAL YEAR
2017
2018
2019
2020
2021
Years 2022-2026
BENEFIT
PAYMENTS
(in thousands)
$
5,547
5,903
6,334
6,696
7,147
41,024
34
—
—
—
—
—
—
—
—
—
—
61,338
27,681
17,936
62,533
28,408
17,712
Plan Assets: Pension assets by major category and the type of fair value measurement as of April 30, 2016 and 2015 are presented
in the following tables:
FAIR VALUE MEASUREMENTS AT APRIL 30, 2016
QUOTED PRICES IN
ACTIVE MARKETS
(LEVEL 1)
TOTAL
SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)
SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
$
10
$
10
$
— $
(in thousands)
Cash Equivalents
Equity Funds:
Mutual Fund Equity
Fixed Income Funds:
Mutual Fund Tax Income
Common and Collective Funds:1
Capital Preservation Fund
Total
$
106,965
$
61,338
27,681
—
—
—
89,029
$
17,936
17,936
$
FAIR VALUE MEASUREMENTS AT APRIL 30, 2015
QUOTED PRICES IN
ACTIVE MARKETS
(LEVEL 1)
TOTAL
SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)
SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)
$
8
$
8
$
— $
(in thousands)
Cash Equivalents
Equity Funds:
Mutual Fund Equity
Fixed Income Funds:
Mutual Fund Tax Income
Common Collective Funds:1
Capital Preservation Fund
62,533
28,408
—
—
—
90,949
$
17,712
17,712
$
Total
$
108,661
$
1The Collective Trust Funds are valued by applying each plan's ownership percentage in the fund to the fund's net assets at fair
value at the valuation date.
Investment Strategy: The Company has established formal investment policies for the assets associated with its pension plans. The
objectives of the investment strategies include preservation of capital and long-term growth of capital while avoiding excessive
risk. Target allocation percentages are established at an asset class level by the Company’s Pension Committee. Target allocation
ranges are guidelines, not limitations, and the Pension Committee may approve allocations above or below a target range.
During a period of uncertainty in the equity and fixed income markets, the Pension Committee may suspend the Target Asset
Allocation and manage the investment mix as it sees reasonable, prudent and in the best interest of the plans to better protect the
value of the plan assets.
The Company’s pension plans’ weighted-average asset allocations at April 30, 2016 and 2015, by asset category, were as follows:
PLAN ASSET ALLOCATION
2016
2015
2016
APRIL 30
Equity Funds
Fixed Income Funds
Total
TARGET
ACTUAL
ACTUAL
50.0 %
50.0 %
57.0 %
43.0 %
100.0 %
100.0 %
58.0 %
42.0 %
100.0 %
35
Within the broad categories outlined in the preceding table, the Company has the following specific allocations as a percentage
of total funds invested: 17% Capital Preservation, 26% Bond and 57% Equity.
Note I -- Income Taxes
Income tax expense was comprised of the following:
(in thousands)
CURRENT EXPENSE
Federal
State
Total current expense
DEFERRED EXPENSE
Federal
State
Total deferred expense
Total expense
Other comprehensive income (loss)
Total comprehensive income tax expense
FISCAL YEARS ENDED APRIL 30
2016
2015
2014
$
18,239
$
12,663
$
3,195
21,434
1,890
14,553
10,179
1,450
11,629
33,063
(4,110)
28,953
$
3,024
1,311
4,335
18,888
(9,510)
9,378
$
4,825
406
5,231
6,076
1,902
7,978
13,209
3,944
$
17,153
The Company's effective income tax rate varied from the federal statutory rate as follows:
FISCAL YEARS ENDED APRIL 30
2015
2016
2014
Federal statutory rate
Effect of:
Research and experimentation tax credit
Meals and entertainment
Domestic production deduction
Other
Total
Effective federal income tax rate
State income taxes, net of federal tax effect
Effective income tax rate
35.0 %
35.0 %
35.0 %
— %
0.3
(2.5)
(0.1)
(2.3)%
32.7 %
3.3
36.0 %
(2.3)%
0.5
(2.4)
0.1
(4.1)%
30.9 %
3.8
34.7 %
— %
0.8
(1.8)
0.7
(0.3)%
34.7 %
4.5
39.2 %
Included in the fiscal year 2015 effective income tax rate are research and experimentation tax credits for fiscal years 2011 through
2014. The research and experimentation tax credit for fiscal year 2016 is not estimated to be significant.
Income taxes paid were $24.5 million, $13.3 million and $4.3 million for fiscal years 2016, 2015 and 2014, respectively.
36
The significant components of deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
Pension benefits
Accounts receivable
Product liability
Employee benefits
State tax credit carryforwards
Other
Gross deferred tax assets, before valuation allowance
Valuation allowance
Gross deferred tax assets, after valuation allowance
Deferred tax liabilities:
Inventory
Depreciation
APRIL 30
2016
2015
$
24,930
$
5,981
1,141
7,101
4,867
353
44,373
(3,061)
41,312
440
8,298
8,738
23,074
5,523
1,031
7,429
—
266
37,323
—
37,323
451
3,485
3,936
Net deferred tax asset
$
32,574
$
33,387
The Company has recorded a valuation allowance related to deferred tax assets for certain state investment tax credit (ITC)
carryforwards. Deferred tax assets are reduced by a valuation allowance when, after considering all positive and negative evidence,
it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
The gross amount of state tax credit carryforwards related to state ITCs as of April 30, 2016 was $5.8 million. These credits expire
in various years beginning in fiscal 2020. Net of the federal impact and related valuation allowance, the Company has recorded
$1.8 million of deferred tax assets related to these credits. The Company accounts for ITCs under the deferral method, under
which the tax benefit from the ITC is deferred and amortized into income tax expense over the book life of the related property.
As of April 30, 2016, a deferred credit balance of $1.8 million is included in other liabilities on the balance sheet.
Note J -- Accounting for Uncertainty in Income Taxes
The Company accounts for its income tax uncertainties in accordance with ASC Topic 740, “Income Taxes.” The Company had
recorded a liability relating to uncertain tax positions for the years ended April 30, 2016 and 2015 of $30,000 and $0, respectively.
With minor exceptions, the Company is currently open to audit by tax authorities for tax years ending April 30, 2013 through April
30, 2016. The Company is currently not under federal audit.
Note K -- Commitments and Contingencies
Legal Matters
The Company is involved in suits and claims in the normal course of business, including without limitation product liability and
general liability claims, and claims pending before the Equal Employment Opportunity Commission. 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 ASC Topic 450, “Contingencies” (ASC 450), the Company categorizes the various suits and claims into three categories
according to their likelihood for resulting in potential loss: those that are probable, 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, a range of loss estimates is determined and considered for disclosure. In determining these loss range
estimates, the Company considers known values of similar claims and consultation with independent counsel.
37
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 is not material as of April 30, 2016.
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 two months of the original shipment date.
The following is a reconciliation of the Company’s warranty liability:
(in thousands)
PRODUCT WARRANTY RESERVE
Beginning balance
Accrual for warranties
Settlements
Ending balance at fiscal year end
Lease Agreements
APRIL 30
2016
2015
$
$
2,643
$
16,279
(15,996)
2,926
$
1,910
14,738
(14,005)
2,643
The Company leases certain office buildings, manufacturing buildings, service centers and equipment. Total rental expenses under
operating leases amounted to approximately $9.8 million, $8.8 million and $8.0 million, in fiscal years 2016, 2015 and 2014,
respectively. Minimum rental commitments as of April 30, 2016, under noncancelable leases with terms in excess of one year are
as follows:
FISCAL YEAR
2017
2018
2019
2020
2021
2022 (and thereafter)
Less amounts representing interest (2%)
Total obligations under capital leases
Related Parties
OPERATING
(in thousands)
CAPITAL
(in thousands)
$
$
3,143
$
2,533
2,330
2,090
559
16
10,671
$
$
1,781
1,402
1,008
774
666
2,152
7,783
(618)
7,165
During fiscal 1985, prior to becoming a publicly held corporation, the Company entered into an agreement with a partnership
which includes certain former executive officers and current significant shareholders of the Company, including one current
member of the Board of Directors of the Company, to lease the Company’s headquarters building which was constructed and is
owned by the partnership. The Company has subsequently renewed this lease in accordance with Company policy and procedures
which includes approval by the Board of Directors. In considering the renewal of this lease, the Company assesses the lease terms
in relation to market terms for comparable properties. Based upon this review, the Company believes that the rent under the lease
is in line with market rates that could be obtained at arm’s length from unaffiliated third parties. As of April 30, 2016, the Company
is in the first year of the latest five-year renewal period, which expires in 2021. Under this agreement, rental expense was $0.5
million, $0.5 million and $0.5 million, in fiscal years 2016, 2015 and 2014, respectively. Rent due during the remaining term of
the lease is approximately $2.5 million (included in the preceding table).
38
Note L -- Credit Concentration
Credit is extended to customers based on an evaluation of each customer's financial condition and generally collateral is not
required. The Company's customers operate in the new home construction and home remodeling markets.
The Company maintains an allowance for bad debt based upon management's evaluation and judgment of potential net loss. The
allowance is estimated based upon historical experience, the effects of current developments and economic conditions and of each
customer’s current and anticipated financial condition. Estimates and assumptions are periodically reviewed and updated. Any
resulting adjustments to the allowance are reflected in current operating results.
At April 30, 2016, the Company's two largest customers, Customers A and B, represented 12.4% and 21.0% of the Company's
gross customer receivables, respectively. At April 30, 2015, Customers A and B represented 14.4% and 21.9% of the Company’s
gross customer receivables, respectively.
The following table summarizes the percentage of sales to the Company's two largest customers for the last three fiscal years:
Customer A
Customer B
Note M -- Fair Value Measurements
PERCENT OF ANNUAL GROSS SALES
2016
23.9%
17.2%
2015
26.5%
18.6%
2014
28.6%
20.6%
The Company utilizes the hierarchy of fair value measurements to classify certain of its assets and liabilities based upon the
following definitions:
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 certificates of deposit. 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.
The fair value measurement of assets held by the Company’s defined benefit pension plans is discussed in Note H.
39
The Company's financial instruments include cash and equivalents, marketable securities and other investments; accounts
receivable and accounts payable; and short- and long-term debt. The carrying values of cash and equivalents, accounts receivable
and payable and short- and long-term debt on the Consolidated Balance Sheets approximate their fair value. The following table
summarizes the fair value of assets that are recorded in the Company’s consolidated financial statements as of April 30, 2016 and
2015 at fair value on a recurring basis:
(in thousands)
ASSETS:
Money market funds
Mutual funds
Certificates of deposit
Total assets at fair value
(in thousands)
ASSETS:
Money market funds
Mutual funds
Certificates of deposit
Total assets at fair value
FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2016
LEVEL 1
LEVEL 2
LEVEL 3
30,490
$
998
47,500
78,988
$
— $
—
—
— $
FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2015
LEVEL 1
LEVEL 2
LEVEL 3
$
30,480
1,048
38,000
69,528
$
— $
—
—
— $
—
—
—
—
—
—
—
—
$
$
$
$
Note N -- Restructuring Charges
In the third quarter of fiscal 2012, the Company announced a restructuring initiative (“2012 Restructuring Plan”) that committed
to the closing of two of the Company’s manufacturing plants located in Hardy County, West Virginia and Hazard, Kentucky,
offering its previously idled plant in Tahlequah, Oklahoma for sale, and realigning its retirement program, including freezing the
Company’s defined benefit pension plans. Operations ceased at the Hazard plant in April 2012 and at the Hardy County plant in
May 2012. The 2012 Restructuring Plan was adopted to reduce costs and increase the Company’s capacity utilization rates.
During fiscal years 2015 and 2014, the Company recognized total pre-tax restructuring charges for the 2012 Restructuring Plan
of $(0.2) million and $(0.2) million, respectively. The Company did not recognize any restructuring charges during fiscal year
2016.
During the fourth quarter of fiscal 2015, the Company sold its closed plant located in Hardy County, West Virginia and recognized
a gain of $0.3 million on the sale. During the fourth quarter of fiscal 2014, the Company sold its closed plant located in Hazard,
Kentucky and recognized a gain of $0.3 million on the sale. The gains were included in restructuring charges on the Company’s
statements of income.
40
Note O -- Quarterly Financial Data (Unaudited)
FISCAL 2016
(in thousands, except per share amounts)
Net sales
Gross profit
Income before income taxes
Net income
Earnings per share
Basic
Diluted
FISCAL 2015
(in thousands, except per share amounts)
Net sales
Gross profit
Income before income taxes
Net income
Earnings per share
Basic
Diluted
07/31/15
10/31/2015
01/31/16
04/30/16
$ 231,198
$ 256,292
$ 218,632
$ 240,923
50,173
23,721
15,158
56,052
28,533
18,180
44,598
18,683
12,013
48,871
20,849
13,372
$
$
0.94
0.92
$
$
1.12
1.10
$
$
0.74
0.73
$
$
0.82
0.81
07/31/14
10/31/2014
01/31/15
04/30/15
$ 211,917
$ 217,693
$ 188,963
$ 206,892
37,114
13,054
9,238
36,981
12,322
7,671
35,117
10,976
7,282
43,320
18,035
11,308
$
$
0.59
0.59
$
$
0.49
0.48
$
$
0.46
0.45
$
$
0.71
0.69
41
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of American Woodmark Corporation:
We have audited the accompanying consolidated balance sheets of American Woodmark Corporation and subsidiary
(the Company), as of April 30, 2016 and 2015, and the related consolidated statements of income, comprehensive income,
shareholders’ equity, and cash flows for each of the years in the
period ended April 30, 2016. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the financial position
of American Woodmark Corporation and subsidiary as of April 30, 2016 and 2015, and the results of their operations and their
cash flows for each of the years in the three year period ended April 30, 2016, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of April 30, 2016, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated June 29, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
/s/ KPMG LLP
McLean, Virginia
June 29, 2016
42
Management's Annual Report on Internal Control over Financial Reporting
Management has responsibility for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2016. In
making its assessment, Management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Management concluded that based on its
assessment, American Woodmark Corporation’s internal control over financial reporting was effective as of April 30, 2016. The
Company’s internal control over financial reporting as of April 30, 2016 has been audited by KPMG LLP, an independent registered
public accounting firm, as stated in their report, which appears in this Annual Report on Form 10-K.
/s/ S. CARY DUNSTON
S. Cary Dunston
President and Chief Executive Officer
/s/ M. SCOTT CULBRETH
M. Scott Culbreth
Senior Vice President and Chief Financial Officer
43
Report of Independent Registered Public Accounting Firm –
Internal Control over Financial Reporting
The Board of Directors and Shareholders of American Woodmark Corporation:
We have audited American Woodmark Corporation’s internal control over financial reporting as of April 30, 2016, based on criteria
established in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, American Woodmark Corporation maintained, in all material respects, effective internal control over financial
reporting as of April 30, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of American Woodmark Corporation and subsidiary as of April 30, 2016 and 2015, and the related
consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-
year period ended April 30, 2016 and our report dated June 29, 2016 expressed an unqualified opinion on those consolidated
financial statements.
/s/ KPMG LLP
McLean, Virginia
June 29, 2016
44
Item 9.
FINANCIAL DISCLOSURE
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
None.
Item 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure 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 April
30, 2016. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures are effective.
Management’s Annual Report on Internal Control over Financial Reporting. Management has conducted an assessment of the
Company’s internal control over financial reporting as of April 30, 2016. Management’s report regarding that assessment is
included with the Consolidated Financial Statements included in this report under Item 8, “Financial Statements and Supplementary
Data,” and is incorporated in this Item by reference.
Report of Registered Public Accounting Firm. The Company’s independent registered public accounting firm, KPMG LLP
(KPMG), audited the Consolidated Financial Statements included in this report and has issued an audit report on the effectiveness
of the Company’s internal control over financial reporting. KPMG’s report is included with the Consolidated Financial Statements
included in this report under Item 8, “Financial Statements and Supplementary Data,” and is incorporated in this Item by reference.
Changes in Internal Control over Financial Reporting. There has been no change in the Company’s internal control over financial
reporting during the fiscal quarter ended April 30, 2016, that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.
Item 9B.
OTHER INFORMATION
None.
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K:
(1) the information concerning the Company’s directors is set forth under the caption “Information Regarding Nominees” in the
Company’s Proxy Statement for its Annual Meeting of Shareholders to be held on August 25, 2016 (“Proxy Statement”) and is
incorporated in this Item by reference;
(2) the information concerning the Company’s executive officers is set forth under the caption “Executive Officers of the
Registrant” in Part I of this report and is incorporated in this Item by reference;
(3) the information concerning compliance with Section 16(a) of the Exchange Act is set forth under the caption “Section 16(a)
Beneficial Ownership Reporting Compliance” in the Proxy Statement and is incorporated in this Item by reference;
(4) the information concerning the Code of Business Conduct and Ethics governing the Company’s Chief Executive Officer,
Chief Financial Officer, Controller, and Treasurer is set forth under the caption “Corporate Governance – Codes of Business
Conduct and Ethics” in the Proxy Statement and is incorporated in this Item by reference;
(5) the information concerning material changes, if any, in the procedures by which security holders may recommend nominees
to the Company’s Board of Directors is set forth under the caption “Corporate Governance – Procedures for Shareholder
Nominations of Directors” in the Proxy Statement and is incorporated in this Item by reference; and
(6) the information concerning the Audit Committee of the Company’s Board of Directors, including the members of the Audit
Committee and the Board’s determination concerning whether certain members of the Audit Committee are “audit committee
financial experts” as that term is defined under Item 407(d)(5) of Regulation S-K is set forth under the captions “Corporate
Governance – Board of Directors and Committees” and “Audit Committee” in the Proxy Statement and is incorporated in this
Item by reference.
45
Item 11.
EXECUTIVE COMPENSATION
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K, the information set forth under the captions
“Executive Compensation,” “Report of the Compensation Committee” and "Non-Management Directors' Compensation" in the
Proxy Statement is incorporated in this Item by reference.
Item 12.
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K, the information set forth under the captions
“Security Ownership” and "Equity Compensation Plan Information" in the Proxy Statement is incorporated in this Item by reference.
Item 13.
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K, the information set forth under the captions
“Certain Related Party Transactions,” “Audit Committee” and “Corporate Governance – Director Independence” in the Proxy
Statement and is incorporated in this Item by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K, the information concerning fees and
services of the Company’s principal accounting firms is set forth under the captions “Independent Auditor Fee Information” and
“Pre-Approval Policies and Procedures” in the Proxy Statement and is incorporated in this Item by reference.
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1.
Financial Statements
The following consolidated financial statements of American Woodmark Corporation are incorporated
by reference to Item 8 of this report:
Consolidated Balance Sheets as of April 30, 2016 and 2015
Consolidated Statements of Income – for each year of the three-year period ended April 30, 2016.
Consolidated Statements of Comprehensive Income – for each year of the three-year period ended
April 30, 2016.
Consolidated Statements of Shareholders’ Equity – for each year of the three-year period ended April
30, 2016.
Consolidated Statements of Cash Flows – for each year of the three-year period ended April 30, 2016.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Management’s Annual Report on Internal Control over Financial Reporting.
Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting.
(a)2.
Financial Statement Schedules
The following financial statement schedule is filed as a part of this Form 10-K:
Schedule II – Valuation of Qualifying Accounts for each year of the three-year period ended April 30,
2016.
Schedules other than the one listed above are omitted either because they are not required or are
inapplicable.
(a)3.
Exhibits
3.1
Articles of Incorporation as amended effective September 10, 2004 (incorporated by reference to Exhibit 3.1 to
the Registrant's Form 10-Q for the quarter ended July 31, 2004; Commission File No. 000-14798).
46
3.2
4.1
4.2
10.1 (a)
10.1 (b)
10.1 (c)
10.1 (d)
10.1 (e)
10.1 (f)
10.1 (g)
10.1 (h)
10.1 (i)
10.1 (j)
10.1 (k)
10.1 (l)
Bylaws - as amended and restated November 4, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s
Form 8-K as filed on November 9, 2015; Commission File No. 000-14798).
The Articles of Incorporation and Bylaws of the Registrant as currently in effect (incorporated by reference to
Exhibits 3.1 and 3.2).
Amended and Restated Stockholders' 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% of the Registrant's total assets, have been omitted and will be furnished to the Securities and Exchange
Commission upon request.
Credit Agreement, dated as of December 2, 2009, between the Company and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended October 31, 2009;
Commission File No. 000-14798).
Revolving Line of Credit Note, dated as of December 2, 2009, made by the Company in favor of Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended
October 31, 2009; Commission File No. 000-14798).
Amendment to Revolving Line of Credit Note and Credit Agreement, dated as of January 3, 2012, made by the
Company in favor of Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form
10-Q for the quarter ended January 31, 2012; Commission File No. 000-14798).
Second Amendment to Revolving Line of Credit Note and Credit Agreement, dated as of May 29, 2012, between
the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1(e) of the Registrant’s Form
10-K for the fiscal year ended April 30, 2012; Commission File No. 000-14798 ).
Third Amendment to Revolving Line of Credit Note and Credit Agreement, dated as of March 18, 2013, between
the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form
8-K as filed on March 19, 2013; Commission File No. 000-14798).
Security Agreement (Financial Assets), dated as of April 26, 2012, between the Company and Wells Fargo Bank,
N.A. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended July 31,
2012; Commission File No. 000-14798).
Addendum to Security Agreement (Financial Assets), effective as of April 26, 2012, made by the Company in
favor of Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1(i) of the Registrant’s Form 10-K for
the fiscal year ended April 30, 2012; Commission File No. 000-14798).
Security Agreement, dated as of May 29, 2012, made by the Company in favor of Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.1(j) of the Registrant’s Form 10-K for the fiscal year ended April 30,
2012; Commission File No. 000-14798).
Fifth Amendment to Revolving Line of Credit Note and Fourth Amendment to Credit Agreement, dated as of
September 26, 2014, effective as of September 1, 2014, between the Company and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K as filed on September 30, 2014;
Commission File No. 000-14798).
Loan Agreement, dated as of February 9, 2005, by and between the Company and the Maryland Economic
Development Corporation (incorporated by reference to Exhibit 10.1(n) to the Registrant’s Form 10-K for the
fiscal year ended April 30, 2005; Commission File No. 000-14798).
First Amendment to Loan Agreement, dated as of April 4, 2008, by and between the Company and Maryland
Economic Development Corporation (incorporated by reference to Exhibit 10.1(d) to the Registrant’s Form 10-
K for the fiscal year ended April 30, 2008; Commission File No. 000-14798).
Second Amendment to Loan Agreement, dated as of April 23, 2013, by and between the Company and Maryland
Economic Development Corporation (incorporated by reference to Exhibit 10.1(k) to the Registrant’s Form 10-
K for the fiscal year ended April 30, 2013; Commission File No. 000-14798).
10.6 (a)(i)
10.6 (a)(ii)
Lease and Agreement, dated as of November 1, 1984, between the Company and Amwood Associates
(incorporated by reference to Exhibit 10.6(a) to the Registrant’s Form S-1 for the fiscal year ended April 30,
1986; Commission File No. 33-6245).
Fourth Amendment to Lease and Agreement, dated as of April 1, 2011, between the Company and Amwood
Associates (incorporated by reference to Exhibit 10.6 of the Registrant’s Form 10-K for the fiscal year ended
April 30, 2012; Commission File No. 000-14798).
47
10.6 (b)
10.7 (a)
10.7 (b)
10.7 (c)
10.7 (d)
10.7(e)
10.8 (a)
10.8 (b)
10.8 (c)
10.8 (d)
10.8 (e)
10.8 (f)
10.8 (g)
10.8(h)
10.8(i)
10.8(j)
10.10 (a)
10.10 (b)
10.10 (c)
10.10 (d)
Lease, dated as of December 15, 2000, between the Company and the Industrial Development Board of The
City of Humboldt, Tennessee (incorporated by reference to Exhibit 10.6(d) to the Registrant’s Form 10-K for
the fiscal year ended April 30, 2001; Commission File No. 000-14798).
Second Amended and Restated 2004 Stock Incentive Plan for Employees (incorporated by reference to Appendix
A to the Registrant’s DEF-14A as filed on June 28, 2013; Commission File No. 000-14798).*
2006 Non-Employee Directors Equity Ownership Plan (incorporated by reference to Appendix A to the
Registrant's DEF-14A as filed on July 12, 2006; Commission File No. 000-14798).*
Amendment to 2006 Non-Employee Directors Equity Ownership Plan, dated as of August 27, 2009 (incorporated
by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended July 31, 2009; Commission
File No. 000-14798).*
2011 Non-Empoyee Directors Equity Ownership Plan (incorporated by reference to Appendix A to the
Registrant's DEF-14A as filed on June 30, 2011; Commission File No. 000-14798).*
2015 Non-Employee Directors Restricted Stock Unit Plan (incorporated by reference to Appendix A to the
Registrant's Definitive Proxy Statement on Schedule 14A as filed on June 30, 2015; Commission File No.
000-14798).
Form of Grant Letter used in connection with awards of stock options granted under the Company’s Second
Amended and Restated 2004 Stock Incentive Plan for Employees (incorporated by reference to Exhibit 10.5 to
the Registrant’s Form 8-K as filed on June 5, 2013; Commission File No. 000-14798).*
Form of Grant Letter used in connection with awards of service-based restricted stock units granted under the
Company’s Second Amended and Restated 2004 Stock Incentive Plan for Employees (incorporated by reference
to Exhibit 10.6 to the Registrant’s Form 8-K as filed on June 5, 2013; Commission File No. 000-14798).*
Form of Grant Letter used in connection with awards of performance-based restricted stock units granted under
the Company’s Second Amended and Restated 2004 Stock Incentive Plan for Employees (incorporated by
reference to Exhibit 10.7 to the Registrant’s Form 8-K as filed on June 5, 2013; Commission File No. 000-14798).*
Form of Grant Letter used in connection with restricted stock unit awards granted under the Company's Second
Amended and Restated 2004 Stock Incentive Plan for Employees (incorporated by reference to Exhibit 10.1 to
the Registrant’s Form 8-K as filed on June 10, 2016; Commission File No. 000-14798).*
Form of Grant Letter used in connection with awards of service-based restricted stock units granted under the
Company’s 2011 Non-Employee Directors Equity Ownership Plan (incorporated by reference to Exhibit 10.1
to the Registrant’s Form 10-Q for the quarter ended October 31, 2011; Commission File No. 000-14798).*
Employment Agreement for Mr. M. Scott Culbreth (incorporated by reference to Exhibit 10.1 to the Registrant’s
Form 8-K as filed on August 27, 2014; Commission File No. 000-14798).*
Employment Agreement for Mr. R. Perry Campbell (incorporated by reference to Exhibit 10.2 to the Registrant’s
Form 8-K as filed on August 27, 2014; Commission File No. 000-14798).*
Employment Agreement for Mr. S. Cary Dunston (incorporated by reference to Exhibit 10.1 to the Registrant’s
Form 8-K as filed on August 31, 2015; Commission File No. 000-14798).*
Letter of Understanding for Mr. Kent Guichard (incorporated by reference to Exhibit 10.2 to the Registrant’s
Form 8-K as filed on August 31, 2015; Commission File No. 000-14798).*
Employment Agreement for Mr. Robert Adams (incorporated by reference to Exhibit 10.3 to the Registrant’s
Form 8-K as filed on August 31, 2015; Commission File No. 000-14798).*
Promissory Note, dated July 30, 1998, made by the Company in favor of Amende Cabinet Corporation, a wholly
owned subsidiary of the Company (incorporated by reference to Exhibit 10.10(f) to the Registrant’s Form 10-
K for the fiscal year ended April 30, 1999; Commission File No. 000-14798).
Loan Agreement, dated as of December 31, 2001, between the Company and Amende Cabinet Corporation, a
wholly owned subsidiary of the Company (incorporated by reference to Exhibit 10.8(k) to the Registrant’s Form
10-K for the fiscal year ended April 30, 2002; Commission File No. 000-14798).
Equipment Lease, dated as of June 30, 2004, between the Company and the West Virginia Economic Development
Authority (incorporated by reference to Exhibit 10.1(l) to the Registrant's Form 10-Q for the quarter ended July
31, 2004; Commission File No. 000-14798).
West Virginia Facility Lease, dated as of July 30, 2004, between the Company and the West Virginia Economic
Development Authority (incorporated by reference to Exhibit 10.1(m) to the Registrant’s Form 10-Q for the
quarter ended July 31, 2004; Commission File No. 000-14798).
48
21
23.1
31.1
31.2
32.1
101
Subsidiary of the Company (Filed Herewith).
Consent of KPMG LLP, Independent Registered Public Accounting Firm (Filed Herewith).
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).
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 (Furnished Herewith).
Interactive Data File for the Registrant’s Annual Report on Form 10-K for the year ended April 30, 2016
formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii)
Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss); (iv)
Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes
to Consolidated Financial Statements (Filed Herewith).
*Management contract or compensatory plan or arrangement.
49
Schedule II - Valuation and Qualifying Accounts
AMERICAN WOODMARK CORPORATION
(In Thousands)
Description (a)
Year ended April 30, 2016:
Allowance for doubtful accounts
Reserve for cash discounts
Reserve for sales returns and allowances
Year ended April 30, 2015:
Allowance for doubtful accounts
Reserve for cash discounts
Reserve for sales returns and allowances
Year ended April 30, 2014:
Allowance for doubtful accounts
Reserve for cash discounts
Reserve for sales returns and allowances
$
$
$
$
$
$
$
$
$
Balance at
Beginning of
Year
Additions
(Reductions)
Charged to
Cost and
Expenses
Other
Deductions
Balance at
End of
Year
173
746
$
$
108
$ — $
(110) (b) $
171
9,570 (c) $ — $
(9,489) (d) $
827
1,594
$
7,833 (c) $ — $
(7,645)
$
1,782
102
727
$
$
184
$ — $
(113) (b) $
173
8,859 (c) $ — $
(8,840) (d) $
746
1,639
$
7,326 (c) $ — $
(7,371)
$
1,594
148
669
$
$
31
$ — $
(77) (b) $
102
8,529 (c) $ — $
(8,471) (d) $
727
1,536
$
7,245 (c) $ — $
(7,142)
$
1,639
(a)
(b)
(c)
(d)
All reserves relate to accounts receivable.
Principally write-offs, net of collections.
Reduction of gross sales.
Cash discounts granted.
50
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
June 29, 2016
American Woodmark Corporation
(Registrant)
/s/ S. CARY DUNSTON
S. Cary Dunston
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
June 29, 2016
June 29, 2016
June 29, 2016
June 29, 2016
June 29, 2016
June 29, 2016
June 29, 2016
/s/ S. CARY DUNSTON
S. Cary Dunston
President and Chief Executive
Officer
(Principal Executive Officer)
Director
/s/ M. SCOTT CULBRETH
M. Scott Culbreth
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ KENT B. GUICHARD
Kent B. Guichard
Chairman of the Board
Director
/s/ ANDREW B. COGAN
Andrew B. Cogan
Director
/s/ JAMES G. DAVIS, JR.
James G. Davis, Jr.
Director
/s/ CAROL B. MOERDYK
Carol B. Moerdyk
Director
/s/ VANCE W. TANG
Vance W. Tang
Director
June 29, 2016
/s/ WILLIAM F. BRANDT, JR.
William F. Brandt, Jr.
Director
June 29, 2016
June 29, 2016
June 29, 2016
/s/ MARTHA M. DALLY
Martha M. Dally
Director
/s/ DANIEL T. HENDRIX
Daniel T. Hendrix
Director
/s/ DAVID W. MOON
David W. Moon
Director
In accordance with Securities and Exchange Commission requirements, the Company will furnish copies of all exhibits to its Form
10-K not contained herein upon receipt of a written request and payment of $0.10 per page to:
Mr. Kevin Dunnigan
Assistant Treasurer
American Woodmark Corporation
P.O. Box 1980
Winchester, Virginia 22604-8090
51
corporate information
annual meeting
The Annual Meeting of Shareholders of
American Woodmark Corporation will be held
on Thursday, August 25, 2016, at 9:00 a.m.
at the Holiday Inn, 333 Front Royal Pike in
Winchester, Virginia.
annual report on form 10-k
A copy of the Company’s Annual Report
on Form 10-K for the fiscal year ended
April 30, 2016, may be obtained free
of charge on the Company’s web site
at www.americanwoodmark.com or by writing:
Kevin Dunnigan
Assistant Treasurer
American Woodmark Corporation
PO Box 1980
Winchester, VA 22604-8090
corporate headquarters
American Woodmark Corporation
3102 Shawnee Drive
Winchester, VA 22601-4208
(540) 665-9100
mailing address
PO Box 1980
Winchester, VA 22604-8090
transfer agent
Computershare Shareholder Services
Investor Relations
(800) 942-5909
shareholder inquiries
Investor Relations
American Woodmark Corporation
3102 Shawnee Drive
Winchester, VA 22601-4208
(540) 665-9100
www.americanwoodmark.com
directors and executive officers
Robert J. Adams, Jr.
Senior Vice President of Value Stream Operations
William F. Brandt, Jr.
Director
Former Chairman and Chief Executive Officer
R. Perry Cambell
Senior Vice President of Sales and Marketing
Andrew B. Cogan
Director
Chair of the Audit Committee
President and Chief Executive Officer of Knoll, Inc.
M. Scott Culbreth
Senior Vice President and Chief Financial Officer
Corporate Secretary
Martha M. Dally
Director
Member of the Compensation Committee and Member of the
Governance Committee
Retired Vice President Customer Development of Sara Lee Corporation
James G. Davis, Jr.
Director
Chair of the Governance Committee and Member of the
Audit Committee
President and Chief Executive Officer of James G. Davis Construction Corporation
S. Cary Dunston
Director
President and Chief Executive Officer
Kent B. Guichard
Director
Chairman of the Board
Daniel T. Hendrix
Director
Member of the Compensation Committee
Chairman and Chief Executive Officer of Interface, Inc.
Carol B. Moerdyk
Director
Member of the Audit Committee and Member of the
Governance Committee
Retired Senior Vice President, International, OfficeMax Incorporated
David W. Moon
Director
Member of the Audit Committee
Executive Vice President and President and Chief Operating Officer of Lennox
International, Inc.’s Worldwide Refrigeration Segment
Vance W. Tang
Director
Chair of the Compensation Committee
Retired President and Chief Executive Officer of KONE Inc.
American Woodmark® is a trademark of American Woodmark Corporation.®
Printed in U.S.A. © 2016 American Woodmark Corporation®
Printed on recycled paper
AMERICAN WOODMARK
C O R P O R A T I O N
®
3102 Shawnee Drive
Winchester, Virginia 22601-4208
(540) 665-9100
Fax (540) 665-9176