American Woodmark Corporation
Annual Report 2018

AMERICAN WOODMARK

C O R P O R A T I O N

®

561 Shady Elm Road 
Winchester, Virginia 22602
(540) 665-9100
americanwoodmark.com

AMERICAN WOODMARK

C O R P O R A T I O N

®

2018 Annual Report

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.

directors and executive officers
Robert J. Adams, Jr.
Senior Vice President of Value Stream Operations

R. Perry Campbell
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

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
Chairman and Chief Executive Officer

Martha M. Hayes
Director
Member of the Compensation Committee and Member of the 
Governance Committee 
Retired Vice President Customer Development of Sara Lee Corporation

Daniel T. Hendrix
Director
Member of the Audit Committee
Chairman 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 Compensation Committee
Former 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.

corporate information
annual meeting
The 2018 Annual Meeting of Shareholders will 
be held on Thursday, August 23, 2018, at 9:00 
a.m. at The George Washington Hotel, 103 East  
Piccadilly Street 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 ending on  
April 30, 2018, may be obtained free  
of charge on the Company’s website  
at americanwoodmark.com or by writing:
Kevin Dunnigan 
Treasury Director 
American Woodmark Corporation 
PO Box 1980 
Winchester, VA 22604-8090

corporate headquarters
American Woodmark Corporation 
561 Shady Elm Road 
Winchester, VA 22602 
(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 
561 Shady Elm Road 
Winchester, VA 22602 
(540) 665-9100 
americanwoodmark.com

Printed in the U.S.A. on recycled paper. © 2018 American Woodmark Corporation

To Our
Shareholders

Fiscal year 2018 will be a year for the history books at American Woodmark. 
Despite some challenges in the market, we stayed true to our strategic growth 
plan and successfully completed the acquisition of RSI Home Products, Inc. 
(“RSI”), bringing together two industry leaders that positions us for continued 
long-term success. In addition, we continued to move forward in our 2019 Vision 
on many fronts, particularly innovation and cultural advancement.

Financially, net sales for the year increased 21% to $1.250B, including four months 
of RSI’s results. Excluding the acquisition, we grew our core sales by 4% over prior 
year. Within new construction, we grew our core business a very healthy 7%.  
Mid-year we began to see a more aggressive transition to the opening price 
point, single-family new construction home. Although the move was anticipated 
and a key rationale for our acquisition of RSI, the timing was a bit earlier than we 
had forecasted, which resulted in lower growth in our third and fourth fiscal 

quarters. The positive news is that RSI’s low cost, value-based platform offers us the ideal product to leverage 
our direct-to-builder platform and continue to grow as the market moves to satisfy the increasing demand of 
first-time homebuyers.

Within remodel, we began to see some slowing of the more affluent consumer, particularly within the dealer 
channel. Despite this movement, we grew our dealer business by 11% year-over-year, continuing to gain market 
share and over-index the industry. Our sales organization is the best in the business, particularly when combined 
with our customer care platform. We are now leveraging this sales expertise to also drive incremental share 
growth within our distribution network given the similar market attributes.

Within the home center channel, our net sales increased 29%, driven by the acquisition of RSI and their 
concentration within home center kitchen and bath. Excluding the acquisition, our core home center business 
was down 3% from the prior year. Home center special order cabinetry continues to struggle and lags other 
repair and remodel categories in post-recession recovery. However, as the younger generation is now beginning 

to enter the housing market, we believe future growth will materialize within repair and remodel. A convincing 

indicator is evident in the strong growth of the pro-consumer business within home center and independent 

dealers and distributors. As do-it-yourself in America continues to diminish, the pro-consumer offers the 

services needed for a successful kitchen remodel.

Our adjusted EBITDA for the year was 14.1%, including four months of RSI results, up from 13.0% from prior year. 

In the later part of the year, we started to see a more prominent impact from a number of headwinds, most 

notably material inflation, labor turnover and logistics cost. The growth in the American economy is creating 

inflationary and capacity constraints in a number of areas. Manufacturers in America are struggling to fill open 

labor positions, in addition to experiencing high turnover, both of which add costs to the system. Likewise, the 

demand on our nation’s logistics system is a macro-economic impact on all of America and will continue for 

some time to come. Our long-standing relationships with our material vendors and national logistics carriers 
provides a strategic advantage in this environment, however, we do expect to experience cost pressure. As we 
have shown in the past, our industry is fairly efficient at passing price increases through, however, consumer 
elasticity is a factor that we have to take into consideration.

Adjusted net income for the year was $87.7M or $5.24 per diluted share versus $72.9M or $4.45 per diluted 
share for the prior year. Cash flow from operations remained very strong, generating $86.8M compared to 

Before I close, I would like to mention the progress we continue to 
make in our cultural advancement. American Woodmark has always 
stood for something much greater than simply a business. Our 
people are the heart and soul of our company, and what truly 
differentiates us in all we do. This past year, we have expanded our 
internal personal connections by encouraging employees to share in 
the “Power of Story.” Through the sharing of story, we have learned 
so much about each other, creating new relationships and breaking 
down barriers we did not even know existed. We quickly learned that 
oftentimes the challenge did not rest with a person’s ability to tell 
their story, it is within our own choice to slow down long enough to 
actually listen. As we move into our new fiscal year, we look forward 
to learning more about each other while celebrating the individuality 
of each and every employee that makes us so great. With 
approximately 4,500 new teammates that are now part of the 
American Woodmark family, we have a tremendous opportunity to 
expand through the “Power of Story.” I look forward to continuing to 
learn and share as one, new team.

Over the next year, we will be wrapping up our 2019 Vision. It is hard 
to believe we are already in the sixth year and we will be developing 
and launching the 2025 Vision over the next year. Imagining where 
we can take American Woodmark by 2025 is incredibly exciting. Our 
industry has its share of challenges, but we firmly believe it offers 
tremendous opportunity for American Woodmark to continue to win 
and grow in our markets. Winning will demand the best of us through 
relentless innovation, creative thinking and the ability to continue to 
execute and deliver. However, with our people as our foundation, I 
know there is nothing we cannot accomplish.

On behalf of the Board of Directors, the leadership team, and the 
entire Company, we thank you for your continued support.

$77.1M in the prior year. Our ending cash, cash equivalents and 
investments in certificates of deposit decreased to $87.9M, down 
from $249.2M in FY17, with the acquisition being the key driver. We 
made a commitment to deploy our cash for the best long-term 
strategic growth of our business while continuing to generate a 
positive return for shareholders. The acquisition successfully aligned 
with this commitment.

Looking forward, we remain positive on both the industry and our 
ability to continue to grow. The integration of RSI is progressing very 
well and we remain on plan to meet our synergy commitments. It has 
been a tremendous pleasure getting to know our new teammates 
over the past six months. The more time we spend together, the 
more affirmation we have regarding the alignment of our two 
cultures. Both organizations are very vision driven and values based 
which has allowed us to come together very quickly as one team. The 
progress we have made on our revenue and cost synergies in a short 
period of time is a strong indicator of how efficiently we are truly 
working together as one team.

Our greatest opportunity rests with growing our business by 
leveraging our core direct-to-builder service platform to sell our new 
low-cost product. With single-family housing starts sitting near 
875,000 units per year, we believe strong growth remains as the 
market continues to recover to more historical levels of 1.1 to 1.2 
million starts per year. Within this growth, we will see a shift toward a 
lower priced home to meet first-time home buyer demand. This 
transition is already occurring as the majority of our nation’s top 
builders have launched entry-level brands and are starting to build 
subdivisions geared towards first-time buyers. We have a cross-
functional team in place that has successfully developed the systems 
and processes needed for us to serve this market, and we will be 
shipping opening price point product under the brand name of 
Origins by Timberlake in our first quarter of fiscal year 2019.

Additional growth opportunity exists within repair and remodel and 
multi-family new construction. We are working closely with our home 
center and dealer/distributor partners to strategically leverage our 
expanded product offering and service platform. Regarding 

multi-family, we have a very unique opportunity to offer a national 

turn-key solution through our builder service centers. In the coming 

months, we will be launching a team to develop our go-to-market 

strategy for multi-family. Although growth within this channel has 

S. Cary Dunston 
Chairman and Chief Executive Officer

slowed, multi-family accounts for roughly 40% of total housing starts 

in America and we currently have very little share. We see this as a 

tremendous opportunity for growth.

Just as exciting are the cost synergies that we will be able to capture 

as we leverage our consolidated manufacturing, engineering and 

supply chain expertise across the entire platform as part of our 

integration effort. We are challenging ourselves to share best 
practices and learn from each other, driving innovation in all we do. 
The opportunity to leverage RSI’s low-cost platform across the core 
AWC product and supply chain is tremendous. 

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, 2018
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

561 Shady Elm Road, Winchester, Virginia

(Address of principal executive offices)

(Registrant's telephone number, including area code)

22602

(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.  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller 
reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller 
reporting company” and "emerging growth company"   in Rule 12b-2 of the Exchange Act.

Large accelerated filer   

[X]

Accelerated filer                 

Non-accelerated filer     

(Do not check if a smaller reporting company)  

Smaller reporting company

[   ]

[   ]

Emerging growth
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 
complying with an new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

[   ]
[   ]

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 
31,  2017, the last business day of the Company’s most recent second quarter was $1,366,648,307.

 
 
 
 
 
 
 
 
 
As of June 22, 2018, 17,546,622 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 23, 2018 
(“Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.

American Woodmark Corporation
2018 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

Form 10-K Summary

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.

Item 16.

SIGNATURES

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12
13
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14

15

17

18

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30

63

63

63

63

64

64

64

65

65

69

70

1

PART I

Item 1. 

BUSINESS

Our Company

American Woodmark Corporation (“American Woodmark,” the “Company,” “we,” “our” or “us”) was incorporated in 1980 by 
the four principal managers of the Boise Cascade Cabinet Division through a leveraged buyout of that division. We operated 
privately until 1986 when we became a public company through a registered public offering of common stock.

We manufacture and distribute kitchen, bath and home organization products for the remodeling and new home construction 
markets. Our products are sold on a national basis directly to home centers, builders and through a network of independent dealers 
and distributors. We presently operate 18 manufacturing facilities and seven primary service centers across the country.

Our  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 our website, 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 our website are not, however, part of, or incorporated by reference into, this report.

Core Business Excluding RSI Home Products, Inc. ("RSI")

Our core business offers framed stock cabinets in over 420 different cabinet lines, ranging in price from relatively inexpensive to 
medium-priced styles. These cabinets are offered in a broad range of sizes, construction and decorative options to achieve a broad 
range of design layouts. To satisfy the fashion and style needs of the market place we offer over 90 door designs with a targeted 
range of painted and stained finishes on maple, cherry and oak as well as engineered fronts under the Duraform® mark. 

These  products  are  sold  under  the  brand  names  of American  Woodmark®,  Simply  Woodmark®,  Timberlake®,  Shenandoah 
Cabinetry®, Shenandoah Value Series® and Waypoint Living Spaces®.

The RSI Acquisition

On December 29, 2017, we completed the acquisition of RSI, a leading manufacturer of kitchen and bath cabinetry and home 
organization products, for consideration consisting of 1,457,568 newly issued shares of American Woodmark common stock, 
approximately $364 million in net cash, and the assumption of approximately $589 million of RSI debt, including accrued interest. 
We refer to this acquisition as the “RSI Acquisition.”

Founded in 1989 by Ron Simon with a vision of creating value for customers by providing high quality products at affordable 
prices not otherwise widely available in the industry, RSI had grown to one of the largest in-stock and value-based cabinet makers 
in North America providing kitchen, bathroom, home and garage organization cabinetry, counter tops and accessories with over 
100 styles and finishes to home centers, builders, dealers and remodeling contractors.

RSI sells products under the brand names of American Classics by RSI®, Estate by RSI®, Continental Cabinets®, Insignia by 
RSI®, Architectural Bath®, MasterBath by RSI®, VillaBath by RSI®, Designer Series and RSI Professional Cabinet Solutions®. 
RSI also sells products under key customer’s private label brands, such as Hampton Bay, Glacier Bay, Blue Hawk, Style Selections, 
Home Decorators Collection and Project Source.

Our Products 

We offer a wide variety of products that fall into product lines including kitchen cabinetry, bath cabinetry, office cabinetry, home 
organization and hardware. Our cabinetry products are available in a variety of designs, finishes and finish colors and door styles. 

We offer products in the following categories: in-stock and stock. In-stock products represent cash and carry products sold through 
home centers. Stock products utilize higher grade materials with more options as compared to in-stock and are all special ordered 
and shipped directly to the home from the factory.  Our home organization products are exclusively in-stock products. Our kitchen 
cabinetry and bath cabinetry are offered across all both product categories (in-stock and stock) and our office cabinetry is offered 
in stock. Our in-stock products are sold through home centers, while our stock products are sold through home centers, builders 
and independent dealers and distributors. 

2

Our Market 

Our products are sold on a national basis across the United States to the remodeling and new home construction markets. We 
service  these  markets  through  three  primary  channels:  home  centers,  builders,  and  independent  dealers  and  distributors.   We 
distribute our products to each market channel directly from our assembly plants through a third party logistics network.

Our Customers 

We serve three main categories of customers: home center customers, builders and independent dealers and distributors. 

Home Center Customers 

Contractors, builders, remodelers and do it yourself homeowners use our products primarily for repair and remodel (“R&R”) 
projects. Products for R&R projects are predominately purchased through home centers such as Home Depot and Lowe’s. Due to 
the market presence, store network and customer reach of these large home centers, our strategy has been to develop long-term 
strategic relationships with both Home Depot and Lowe’s to distribute our products.  During the fiscal year ended April 30, 2018 
(“fiscal 2018”), Home Depot and Lowe’s accounted for approximately 41.8% of gross sales of the Company.  The loss of either 
Home Depot or Lowe’s as a customer would have a material adverse effect on us.

Builders

The Builder business represents a large portion of our overall revenue and has historically been a strategic component of our go-
to-market strategy. We serve the majority of the top U.S. builders with a high degree of geographic concentration around major 
metro areas where single family starts are most robust. Our various service center locations serve the function of being close to 
this business and enable us to deliver exceptional service to our builder partners. 

Independent Dealers & Distributors

In 2010, we expanded our business into the dealer channel with the launch of the Waypoint Living Spaces brand. Today, we sell 
this brand to over 1,200 regional and local dealers across the country. The dealer channel of the market is the largest by volume, 
characterized by a high degree of entrepreneurship and one that rewards suppliers that deliver great service. Our ability to provide 
superior value delivered with exceptional service has helped drive our expansion into this channel and will continue to be a strong 
growth and market share opportunity for us. 

Manufacturing, Distribution and Service 

Our manufacturing facilities are strategically located to serve our customers, which enhances our ability to provide high quality, 
value priced products with low production costs. We manufacture our products across 18 facilities located in Maryland, Indiana, 
West Virginia, Tennessee, Georgia, Arizona, Kentucky, Virginia, California, Texas, North Carolina and Tijuana, Mexico. The 
geographic  distribution  of  our  facilities  throughout  the  United  States,  together  with  our  third  party  logistics  network  for  the 
American Woodmark business and beneficial freight arrangement with home centers for the RSI business, enable us to provide a 
“short supply chain” to our U.S. customers. The ordering patterns of Home Depot and Lowe’s, our two biggest customers, require 
suppliers to have sufficient manufacturing capacity to meet demand and to serve a large number (frequently hundreds to thousands) 
of stores. They impose strict logistics and performance obligations on us. As enhanced with the RSI Acquisition, the scale and 
strategic locations of our manufacturing facilities help us to meet these demands of the home center customers, as well as provide 
a logistics platform that we can leverage for builders and dealers. We distribute our products through distribution centers located 
in  our  manufacturing  facilities  to  maximize  efficiency.  Our  vertically-integrated  production  and  assembly  lines,  standardized 
product construction and investments in automation have allowed us to continuously improve productivity and develop an expertise 
in  wood  processing  and  yield-maximizing  technologies. We  have  standardized  our  raw  material  inputs  and  a  number  of  our 
production processes, which reduces logistical requirements to manufacture and gives us increased economies of scale in sourcing 
these inputs. Certain of our inputs are also partially processed by our vendors, which reduces cost. In addition, RSI’s production 
of labor-intensive manufacturing and fabrication processes in its three Tijuana, Mexico facilities have enabled it to keep overall 
labor  costs  low  while  maintaining  higher  quality,  greater  speed-to-market  and  transportation  cost  advantage  over  Asian 
manufacturers. 

We provide complete turnkey installation services to our direct builder customers via our network of seven primary service centers 
that  are  strategically  located  throughout  the  United  States  in Virginia, Texas,  North  Carolina,  Georgia,  Florida, Arizona  and 
California. 

3

We regularly evaluate our organizational productivity and supply chains and assess opportunities to reduce costs and enhance 
quality. We strive to improve quality, speed and flexibility to meet changing and uncertain market conditions, as well as manage 
cost inflation, including wages and employee medical costs. 

Raw Materials and Suppliers 

The primary raw materials used in our products include hard maple, soft maple, oak, and cherry lumber and plywood. Additional 
raw materials include paint, particleboard, medium density fiberboard, high density fiberboard, manufactured components and 
hardware. We purchase these and other raw materials from more than one source and believe them to be readily available. We rely 
on outside suppliers for some of our key components and do not typically enter into long-term contracts with our suppliers or 
sourcing partners. We source a portion of our components from third parties in Asia. The distances involved in these arrangements, 
together with the differences in business practices, shipping and delivery requirements, and laws and regulations add complexity 
to our supply chain logistics and increase the potential for interruptions in our production scheduling. In addition, prices and 
availability of these components may be affected by world market conditions and government policies. 

Competition 

We operate in a highly fragmented industry that is composed of several thousand local, regional and national manufacturers. Most 
of our competitors compete on a local or regional basis, but others, like us, compete on a national basis as well. Our competitors 
include  large  consolidated  operations  as  well  as  relatively  small,  local  cabinet  manufacturers.  Moreover,  companies  in  other 
building  products  industries  may  compete  with  us.  Competitive  factors  within  the  industry  include  pricing,  quality,  product 
availability, service, delivery time and relationships with customers. Our principal means for competition is our breadth and variety 
of product offerings, expanded service capabilities, geographic reach, competitive price points for our products and affordable 
quality. We are the second largest manufacturer of kitchen, bath and home organization products in the United States.

Environmental Matters and Regulatory Matters 

Our operations are subject to federal, state and local environmental laws and regulations relating to, among other things, the 
generation, storage, handling, emission, transportation and discharge of regulated materials into the environment. Permits are 
required for certain of our operations, and these permits are subject to revocation, modification and renewal by issuing authorities. 
Governmental authorities have the power to enforce compliance with their regulations, and violations may result in the payment 
of fines or the entry of injunctions, or both. We may also incur liability for investigation and clean-up of soil or groundwater 
contamination on or emanating from current or formerly owned and operated properties, or at offsite locations at which regulated 
materials are located where we are identified as a responsible party. Discovery of currently unknown conditions could require 
responses that could result in significant costs.  

Intellectual Property 

We maintain trademarks, copyrights and trade secrets. We sell many of our products under a number of registered and unregistered 
trademarks, which we believe are widely recognized in our industry. We rely on trade secrets and confidentiality agreements to 
develop and maintain our competitive position. Monitoring the unauthorized use of our intellectual property is difficult, and the 
steps we have taken may not prevent unauthorized use of our intellectual property. The disclosure or misappropriation of our 
intellectual property could harm our ability to protect our rights and our competitive position. If we must litigate to protect our 
rights, we may incur significant expenses and divert significant attention from our business operations. To date, we have not relied 
on patents in operating our business. 

Seasonality 

Our core business has been subject to seasonal influences, with higher sales typically realized in our second and fourth fiscal 
quarters. General economic forces and changes in our customer mix have reduced seasonal fluctuations in revenue over the past 
few years. RSI’s historic net sales vary from quarter to quarter primarily due to the timing of Home Depot and Lowe’s customer 
promotions,  product  roll-outs  and  their  inventory  management.  However,  RSI  historically  did  not  have  significant  recurring 
seasonality impacts on its business. 

Employees 

As of April 30, 2018, we employed approximately 9,400 full-time employees, and approximately 230 of the RSI employees in 
Anaheim, California were unionized. We believe that our employee relations and relationship with the union representing the RSI 
employees in Anaheim are good. 

4

Market Leader with Nationwide Manufacturing and Distribution Network

Our Competitive Strengths

We believe our combined company holds the number two market position in the United States cabinet market with an estimated 
10% market share. We are one of a select number of market participants with a national manufacturing and distribution footprint, 
including  18  manufacturing  facilities  and  seven  primary  service  centers  across  the  United  States  and  Mexico.  Our  operating 
footprint provides us an ability to service our builder, dealer and home center customers on a national basis, and with the RSI 
Acquisition, we offer a broader set of products to serve our customers across a variety of price points. Our facilities are primarily 
located in or near major metropolitan markets to facilitate efficient product distribution to our customers. We believe the scale 
and breadth of our operations differentiate us and result in a competitive advantage providing superior customer service, low-cost 
distribution and on-time delivery.

Comprehensive Product Offering with Diversified End Markets

We believe that the diversity of our product portfolio across categories, channels and end markets benefits our financial performance, 
both in periods of growth and cyclicality. Our stock offerings provide products for customers looking for a designer product, which 
can be used for both new home construction and remodeling applications. The addition of the in-stock offering with our RSI 
Acquisition allows us to further serve our existing end markets through the addition of a lower price point product that is well-
suited for areas of growing demand such as new home construction targeting the first-time homebuyer. We also offer turnkey 
cabinet solutions for our builder customers which we believe is a unique aspect of our service platform. Our turnkey solution 
provides in-house design and measurement as well as installation service. We believe the ability to leverage our labor and expertise 
is a value-added service to our builder customers which has helped strengthen our position in the new home construction market.

Deep Relationships with Leading Retailers

We have built strong and stable relationships with a base of long-standing, customers across home centers, builders and independent 
dealers and distributors. We have an average relationship length of 20 years with our top 10 customers, including long-standing 
relationships with Home Depot and Lowe’s. We believe our customers value our national manufacturing and distribution footprint, 
which allows us to meet demanding logistics and performance obligations. We believe our focus on providing exceptional customer 
service and a quality product at a competitive price have enabled us to establish ourselves as a vendor of choice.

Best-in-Class Manufacturing Capabilities

We operate 18 manufacturing facilities across the United States and Mexico. Our vertically-integrated production and assembly 
lines, standardized product construction and investments in automation, have allowed us to continuously improve productivity 
and efficiency. We have standardized our raw material inputs and a number of our production processes, which reduces logistical 
requirements and provides increased economies of scale in sourcing these inputs. The RSI Acquisition increases our manufacturing 
capacity to support additional growth. In addition, RSI’s production of labor-intensive manufacturing and fabrication processes 
in Mexico offer a low cost alternative to Asian manufacturers, while providing a higher quality product with lower transportation 
costs. 

Experienced Management Team

We have assembled an executive team from leading organizations with a deep base of management experience within industrial 
manufacturing companies. Our Chairman and Chief Executive Officer, Cary Dunston, joined our team in 2006 and was named 
Chief Executive Officer in 2015 and elected Chairman in 2017. Mr. Dunston has a broad range of experience in manufacturing 
and  supply  chain  management  including  the  implementation  of  continuous  improvement  programs  and  lean  manufacturing 
initiatives. Our team has identified and begun to execute on opportunities for operational improvement that has yielded increased 
profitability. These initiatives are focused on manufacturing productivity, strategic sourcing and new product development. The 
addition of RSI’s talented employee base will further add to the experience and expertise of the combined company’s management 
team.

Item 1A. 

RISK FACTORS

There are a number of 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 
5

 
 
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.  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 Item 7. “Management’s Discussion and Analysis of Financial Condition and 
Results of Operations” under the headings “Forward-Looking Statements,” “Seasonality,” and “Outlook for Fiscal 2019” and Item 
7A, "Quantitative and Qualitative Disclosures about Market Risk."  

Because of the concentration of our sales to our two largest customers, the loss of either customer or a significant reduction 
in orders from either customer could adversely affect our financial results.  Home Depot and Lowe’s collectively accounted for 
approximately 41.8% of total gross sales during the fiscal year 2018 and with the RSI Acquisition, we expect this concentration 
to significantly increase. We do not typically enter into long-term sales contracts with Home Depot or Lowe’s and our sales usually 
occur  on  a  “purchase  order”  basis.  Our  customers  can  make  significant  changes  in  their  purchase  volumes  and  can  seek  to 
significantly affect the prices we receive for our products and services and the other terms and conditions on which we do business. 
They have discontinued, and may in the future choose to discontinue, purchasing some or all of our products with little or no 
notice. In the past, purchase volumes from our customers, including Home Depot and Lowe’s, have fluctuated substantially, and 
we expect such fluctuations to occur from time to time in the future. Any reduction in, or termination of, our sales to either Home 
Depot or Lowe’s could have a material adverse effect on our business, financial condition or results of operations.

In addition, the potential for orders from these large retail customers to increase significantly from time to time requires us to have 
sufficient manufacturing capacity. These large retailers also impose strict logistics and performance obligations. Failure to comply 
with these obligations may result in these customers reducing or stopping their purchase of our products.

We could also experience delays or defaults in payment from Home Depot or Lowe’s, which could adversely affect our business, 
financial condition or results of operations. The loss of a substantial portion of our order volumes or revenue from either Home 
Depot or Lowe’s for any reason would have a material adverse effect on our business, financial condition or results of operations.

Our business primarily relies on U.S. home improvement, repair and remodel and new home construction activity levels, all 
of which are impacted by risks associated with fluctuations in the housing market. Downward changes in the general economy, 
the housing market or other business conditions could adversely affect our results of operations, cash flows and financial 
condition.  Our business primarily relies on home improvement, repair and remodel and new home construction activity levels in 
the  United  States. The  housing  market is  sensitive to  changes  in  economic  conditions  and  other  factors,  such  as  the level of 
employment, access to labor, consumer confidence, consumer income, availability of financing and interest rate levels. Adverse 
changes in any of these conditions generally, or in any of the markets where we operate, could decrease demand and could adversely 
impact our businesses by: causing consumers to delay or decrease homeownership; making consumers more price conscious 
resulting in a shift in demand to smaller, less expensive homes; making consumers more reluctant to make investments in their 
existing homes, including large kitchen and bath repair and remodel projects; or making it more difficult to secure loans for major 
renovations. Although the U.S. new home construction market is improving, demand for new homes is still recovering after the 
2007-2009 U.S. economic recession and continues to remain below historical levels.

Prolonged economic downturns may adversely impact our  sales, earnings and  liquidity. Our  industry historically has been 
cyclical in nature and has fluctuated with economic cycles. During economic downturns, our industry could experience longer 
periods of recession and greater declines than the general economy. We believe that our 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 may affect not only the ultimate consumer of our products, but also 
may impact home centers, builders and our other primary customers. As a result, a worsening of economic conditions could 
adversely affect our sales and earnings as well as our cash flow and liquidity.

The U.S. cabinetry industry is highly competitive, and we may not be able to compete successfully. We operate within the highly 
competitive U.S. cabinetry industry, which is characterized by competition from a number of other manufacturers. Competition 
is further intensified during economic downturns. We compete with numerous large national and regional home products companies 
for,  among  other  things,  customers,  orders  from  Home  Depot  and  Lowe’s,  raw  materials  and  skilled  management  and  labor 
resources.  Purchase volumes from our main home center customers have fluctuated substantially from time to time in the past, 
and we expect such fluctuations to occur from time to time in the future.

Some of our competitors have greater financial, marketing and other resources than we do and, therefore, may be able to adapt to 
changes in customer preferences more quickly, devote more resources to the marketing and sale of their products, generate greater 
national brand recognition or adopt more aggressive pricing policies than we can.

6

 
In addition, some of our competitors may resort to price competition to sustain or gain market share and manufacturing capacity 
utilization, and we may have to adjust the prices on some of our products to stay competitive, which could reduce our revenues. 
We may not ultimately succeed in competing with other manufacturers and distributors in our market, which may have a material 
adverse effect on our business, financial condition or results of operations.

Our failure to develop new products or respond to changing consumer preferences and purchasing practices could have a 
material adverse effect on our business, financial condition or results of operations.  The U.S. cabinetry industry is subject to 
changing consumer trends, demands and preferences. The uncertainties associated with developing and introducing new products, 
such as gauging changing consumer preferences and successfully developing, manufacturing, marketing and selling new products, 
could lead to, among other things, rejection of a new product line, reduced demand and price reductions for our products. If our 
products do not keep up with consumer trends, demands and preference, we could lose market share, which could have a material 
adverse effect on our business, financial condition or results of operations.

Changes to consumer shopping habits and potential trends toward “online” purchases could also impact our ability to compete. 
Further,  the  volatile  and  challenging  economic  environment  of  recent  years  has  caused  shifts  in  consumer  trends,  demands, 
preferences and purchasing practices and changes in the business models and strategies of our customers. Shifts in consumer 
preferences, which may or may not be long-term, have altered the quantity, type and prices of products demanded by the end-
consumer and our customers. If we do not timely and effectively identify and respond to these changing consumer preferences 
and purchasing practices, our relationships with our customers could be harmed, the demand for our products could be reduced 
and our market share could be negatively affected.

We may fail to fully realize the anticipated benefits of our growth strategy within the dealer and homebuilder channels.  Part 
of  our  growth  strategy  depends  on  expanding  our  business  in  the  dealer  and  homebuilder  channels. We  may  fail  to  compete 
successfully against other companies that are already established providers within the dealer and homebuilder channels.  Demand 
for  our  products  within  the  homebuilder  and  dealer  channels  may  not  grow,  or  might  even  decline.  In  addition,  we  may  not 
accurately gauge consumer preferences and successfully develop, manufacture and market our products at a national level. Further, 
the implementation of our growth strategy may place additional demands on our administrative, operational and financial resources 
and may divert management’s attention away from our existing business and increase the demands on our financial systems and 
controls. If our management is unable to effectively manage growth, our business, financial condition or results of operations 
could be adversely affected. If our growth strategy is not successful then our revenue and earnings may not grow as anticipated 
or may decline, we may not be profitable, or our reputation and brand may be damaged. In addition, we may change our financial 
strategy or other components of our overall business strategy if we believe our current strategy is not effective, if our business or 
markets change, or for other reasons, which may cause fluctuations in our financial results.

Manufacturing expansion to add capacity, manufacturing realignments, and other cost savings programs could result in a 
decrease in our near-term earnings.  We continually review our manufacturing operations. These reviews could result in the 
expansion  of  capacity,  manufacturing  realignments  and  various  cost  savings  programs.  Effects  of  manufacturing  expansion, 
realignments or cost savings programs could result in a decrease in our short-term earnings until the additional capacity is in place, 
cost reductions are achieved and/or production volumes stabilize. Such manufacturing expansions, realignments and programs 
involve  substantial  planning,  often  require  capital  investments,  and  may  result  in  charges  for  fixed  asset  impairments  or 
obsolescence and substantial severance costs. We also cannot assure you that we will achieve all of the intended cost savings. Our 
ability to achieve cost savings and other benefits within expected time frames is subject to many estimates and assumptions. These 
estimates and assumptions are subject to significant economic, competitive, and other uncertainties, some of which are beyond 
our control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our 
business, financial condition, and results of operations could be materially and adversely affected. In addition, downturns in the 
economy could potentially have a larger impact on the Company as a result of this added capacity.

We may record future goodwill impairment charges or other asset impairment charges which could negatively impact our 
future results of operations and financial condition.  We have recorded significant goodwill as a result of the RSI Acquisition, 
and goodwill and other acquired intangible assets represent a substantial portion of our assets. We also have long-lived assets 
consisting of property and equipment and other identifiable intangible assets which we review both on an annual basis as well as 
when events or circumstances indicate that the carrying amount of an asset may not be recoverable. If a determination is made 
that a significant impairment in value of goodwill, other intangible assets or long-lived assets has occurred, such determination 
could require us to impair a substantial portion of our assets. Asset impairments could have a material adverse effect on our financial 
condition and results of operations.

Fluctuating raw material and energy costs could have a material adverse effect on our business and results of operations.  We 
purchase  various  raw  materials,  including,  among  others,  wood,  wood-based  and  resin  products,  which  are  subject  to  price 
fluctuations that could materially increase our manufacturing costs. Further, increases in energy costs increase our production 
7

costs and also the cost to transport our products, each of which could have a material adverse effect on our business and results 
of operations. In addition, some of our suppliers have consolidated and other suppliers may do so in the future. Combined with 
increased demand, such consolidation could increase the price of our supplies and raw materials.

We also may be unwilling or unable to pass on to customers commensurate cost increases. Competitive considerations and customer 
resistance to price increases may delay or make us unable to adjust selling prices. To the extent we are unable to either re-engineer 
or otherwise offset increased costs or are unwilling or unable to build price increases into our sales prices, our margins will be 
negatively affected. Even if we are able to increase our selling prices, sustained price increases for our products may lead to sales 
declines and loss of market share, particularly if our competitors do not increase their prices. Conversely, when raw materials or 
energy prices decline, we may receive customer pressure to reduce our sales prices.

These prices are market-based and fluctuate based on factors beyond our control. We do not have long-term fixed supply agreements 
and do not hedge against price fluctuations. We, therefore, cannot predict our raw materials costs for the coming year. 

The inability to obtain raw materials from suppliers in a timely manner would adversely affect our ability to manufacture and 
market our products.  Our ability to offer a wide variety of products depends on our ability to obtain an adequate supply of 
components  from  manufacturers and  other  suppliers,  particularly  wood-based  and  resin  products.  Failure  by  our  suppliers  to 
provide us with quality products on commercially reasonable terms, and to comply with legal requirements for business practices, 
could have a material adverse effect on our business, financial condition or results of operations. Furthermore, we rely heavily or, 
in certain cases, exclusively, on outside suppliers for some of our key components. While we do not rely exclusively on any one 
supplier for any particular raw materials, the loss of a major supplier could increase our costs to obtain raw materials until we 
obtain an adequate alternative source.

We typically do not enter into long-term contracts with our suppliers or sourcing partners. Instead, most raw materials and sourced 
goods are obtained on a “purchase order” basis. Although these components are generally obtainable in sufficient quantities from 
other sources, resourcing them from another supplier could take time. Financial, operating, or other difficulties encountered by 
our suppliers or sourcing partners or changes in our relationships with them could result in manufacturing or sourcing interruptions, 
delays and inefficiencies, and prevent us from manufacturing enough products to meet customer demands.

Our operations may be adversely affected by information systems interruptions or intrusions.  We rely on a number of information 
technology  systems  to  process,  transmit,  store  and  manage  information  to  support  our  business  activities.  Increased  global 
cybersecurity vulnerabilities, threats and more sophisticated and targeted attacks pose a risk to our information technology systems. 
We have established security policies, processes and layers of defense designed to help identify and protect against intentional 
and unintentional misappropriation or corruption of our systems and information and disruption of our 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 our 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 our reputation, exposure to litigation and increased operational costs. Such events could have a material 
adverse impact on our business, financial condition and results of operation. In addition, we could be adversely affected if any of 
our significant customers or suppliers experience any similar events that disrupt their business operations or damage their reputation.

Increased compliance costs or liabilities associated with environmental regulations could have a material adverse effect on 
our business, financial condition or results of operations.  Our facilities are subject to numerous environmental laws, regulations 
and permits, including those governing emissions to air, discharges to water, storage, treatment and disposal of waste, remediation 
of contaminated sites and protection of worker health and safety. We may not be in complete compliance with these laws, regulations 
or permits at all times. Our efforts to comply with environmental requirements do not remove the risk that we may incur material 
liabilities, fines or penalties for, among other things, releases of regulated materials occurring on or emanating from current or 
formerly owned or operated properties or any associated offsite disposal location, or for contamination discovered at any of our 
properties from activities conducted by previous occupants. Liability for environmental contamination or a release of hazardous 
materials may be joint and several, so that we may be held responsible for more than our share of the contamination or other 
damages, or even for the entire share.

Changes in environmental laws and regulations or the discovery of previously unknown contamination or other liabilities relating 
to  our  properties  and  operations  could  result  in  significant  environmental  liabilities  that  could  impact  our  business,  financial 
condition  or  results  of  operation.  In  addition,  we  may  incur  capital  and  other  costs  to  comply  with  increasingly  stringent 
environmental  laws  and  enforcement  policies.  These  laws,  including,  for  example,  the  regulations  relating  to  formaldehyde 
emissions promulgated by the California Air Resources Board, require us to rely on compliance by our suppliers of raw materials. 
Should a supplier fail to comply with such regulations, notify us of non-compliance, or provide us with a product that does not 
comply, we could be subject to disruption in our business and incur substantial liabilities.

8

Unauthorized disclosure of confidential information provided to us by customers, employees or third parties could harm our 
business.    We  rely  on  the  internet  and  other  electronic  methods  to  transmit  confidential  information  and  store  confidential 
information on our networks. If there were 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, our 
reputation could be harmed and we could be subject to civil or criminal liability and regulatory actions.

Changes in government and industry regulatory standards could have a material adverse effect on our business, financial 
condition or results of operations.  Government regulations pertaining to health and safety and environmental concerns continue 
to emerge, domestically as well as internationally. These regulations include the Occupational Safety and Health Administration 
and other worker safety regulations for the protection of employees, as well as regulations for the protection of consumers. It is 
necessary for us to comply with current requirements (including requirements that do not become effective until a future date), 
and even more stringent requirements could be imposed on our products or processes. Compliance with these regulations may 
require  us  to  alter  our  manufacturing  and  installation  processes  and  our  sourcing.  Such  actions  could  increase  our  capital 
expenditures and adversely impact our business, financial condition or results of operations, and our inability to effectively and 
timely meet such regulations could adversely impact our competitive position.

The loss of certain members of our management may have an adverse effect on our operating results.  Our success will depend, 
in part, on the efforts of our senior management and other key employees. These individuals possess sales, marketing, engineering, 
manufacturing, financial and administrative skills and know-how that are critical to the operation of our business. If we lose or 
suffer an extended interruption in the services of one or more of our senior officers or other key employees, our financial condition 
and results of operations may be negatively affected. Moreover, the pool of qualified individuals may be highly competitive and 
we may not be able to attract and retain qualified personnel to replace or succeed members of our senior management or other 
key employees, should the need arise. The loss of the services of any key personnel, or our inability to hire new personnel with 
the requisite skills, could impair our ability to develop new products or enhance existing products, sell products to our customers 
or manage our business effectively.

We could continue to pursue growth opportunities through either acquisitions, mergers or internally developed projects, which 
may be unsuccessful or may adversely affect future financial condition and operating results.  We could continue to pursue 
opportunities for growth through either acquisitions, mergers or internally developed projects as part of our growth strategy. We 
cannot assure you that we will be successful in integrating an acquired business or that an internally developed project will perform 
at the levels we anticipate. We may pay for future acquisitions using cash, stock, the assumption of debt, or a combination of these. 
Future acquisitions could result in dilution to existing shareholders and to earnings per share. In addition, we may fail to identify 
significant liabilities or risks associated with a given acquisition that could adversely affect our future financial condition and 
operating results or result in us paying more for the acquired business or assets than they are worth.

Our ability to operate and our growth potential could be materially and adversely affected if we cannot employ, train and retain 
qualified personnel at a competitive cost.  Many of the products that we manufacture and assemble require manual processes in 
plant environments.  We believe that our success depends upon our ability to attract, employ, train and retain qualified personnel 
with the ability to design, manufacture and assemble these products. In addition, our ability to expand our operations depends in 
part on our ability to increase our skilled labor force as the housing market continues to recover in the United States. A significant 
increase in the wages paid by competing employers could result in a reduction of our qualified labor force, increases in the wage 
rates that we must pay, or both. In addition, we believe that our success depends in part on our ability to quickly and effectively 
train additional workforce to handle the increased volume and production while minimizing labor inefficiencies and maintaining 
product quality in a housing market recovery. If either of these events were to occur, our cost structure could increase, our margins 
could decrease, and any growth potential could be impaired.

We manufacture our products internationally and are exposed to risks associated with doing business globally.  We manufacture 
our products in the United States and Mexico and sell our products in the United States and Canada.  Accordingly, we are subject 
to risks associated with potential disruption caused by changes in political, monetary, economic and social environments, including 
civil and political unrest, terrorism, possible expropriation, local labor conditions, changes in laws, regulations and policies of 
foreign governments and trade disputes with the United States, and compliance with U.S. laws affecting activities of U.S. companies 
abroad, including tax laws, economic sanctions and enforcement of contract and intellectual property rights. 

We are also subject to the Foreign Corrupt Practices Act and other anti-bribery laws. While we have implemented safeguards and 
policies to discourage these practices by our employees and agents, our existing safeguards and policies to assure compliance and 
any future improvements may prove to be less than effective and our employees or agents may engage in conduct for which we 
might be held responsible. If employees violate our policies, we may be subject to regulatory sanctions. Violations of these laws 
or regulations could result in sanctions including fines, debarment from export privileges and penalties and could have a material 
adverse effect on our business, financial condition or results of operations.

9

We may hedge certain foreign currency transactions in the future; however, a change in the value of the currencies may impact 
our financial statements when translated into U.S. dollars. In addition, fluctuations in currency can adversely impact the cost 
position in local currency of our products, making it more difficult for us to compete. Our success will depend, in part, on our 
ability to effectively manage our business through the impact of these potential changes.

In addition, we source raw materials and components from Asia where we have recently experienced higher manufacturing costs 
and longer lead times due to currency fluctuations, higher wage rates, labor shortages and higher raw material costs. Our international 
sourcing of materials could be harmed by a variety of factors including:

• 
• 
• 

introduction of non-native invasive organisms into new environments;
recessionary trends in international markets;
legal and regulatory changes and the burdens and costs of our compliance with a variety of laws, including export controls, 
import and customs trade restrictions and tariffs;
increases in transportation costs or transportation delays;

• 
•  work stoppages and labor strikes;
• 
• 

fluctuations in exchange rates, particularly the value of the U.S. dollar relative to other currencies; and
political unrest, terrorism and economic instability.

If any of these or other factors were to render the conduct of our business in a particular country undesirable or impractical, our 
business, financial condition or results of operations could be materially adversely affected.

Our failure to maintain acceptable quality standards could result in significant unexpected costs.  Any failure to maintain 
acceptable quality standards could require us to recall or redesign such products, or pay substantial damages, any of which would 
result in significant unexpected costs. We may also have difficulty controlling the quality of products or components sourced from 
other manufacturers, so we are exposed to risks relating to the quality of such products and to limitations on our recourse against 
such suppliers. Further, any claim or product recall could result in adverse publicity against us, which could decrease our credibility, 
harm our reputations, adversely affect our sales, or increase our costs. Defects in our products could also result in decreased orders 
or sales to our customers, which could have a material adverse effect on our business, financial condition or results of operations.

New U.S. tax legislation could adversely affect us.  On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act 
of 2017 (H.R. 1) (the "Tax Act") into law. The Tax Act is generally effective for taxable years beginning after December 31, 2017. 
The  Tax Act  includes  significant  amendments  to  the  Internal  Revenue  Code  of  1986  (as  amended,  the  “Code”),  including 
amendments that lower the U.S. corporate federal income tax rate from 35% to 21% and impact the taxation of offshore earnings 
and the deductibility of interest. Some of the amendments could adversely affect our business and financial condition.

Comprehensive tax legislation enacted through the Tax Act significantly modified U.S. corporate income tax law. Provisional 
amounts have been recorded in our financial statements based on the Company’s initial analysis of the Tax Act. The Company 
may adjust these amounts in future periods if our interpretation of the Tax Act changes or as additional guidance from the U.S. 
Treasury becomes available. 

Future tax law changes or the interpretation of existing tax laws may materially impact our effective income tax rate and the 
resolution of unrecognized tax benefits.  Our businesses are subject to taxation in the United States as well as internationally. 
Tax legislation may be enacted that could have a material adverse impact on our worldwide income tax provision. Tax authorities 
in many jurisdictions routinely audit us. Because there are significant uncertainties in the outcome of such audits, the ultimate 
outcome from any audit could be materially different from amounts reflected in our income tax provisions and accruals. Future 
settlements of income tax audits may have a material adverse effect on earnings between the period of initial recognition of tax 
estimates in our financial statements and the point of ultimate tax audit settlement.

Natural disasters could have a material adverse effect on our business, financial condition or results of operations.  Many of 
our facilities are located in regions that are vulnerable to natural disasters and other risks, such as earthquakes, fires, floods, tropical 
storms and snow and ice, which at times have disrupted the local economy and posed physical risks to our property. In addition, 
the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, 
may cause further disruptions to the economies of the United States and other countries. Our redundant, multiple site capacity 
may not be sufficient in the event of a natural disaster, terrorist act or other catastrophic event. Such disruptions could, among 
other things, disrupt our manufacturing or distribution facilities and result in delays or cancellations of customer orders for our 
products, which in turn could have a material adverse effect on our business, financial condition and results of operations. Further, 
if a natural disaster occurs in a region from which we derive a significant portion of our revenue, end-user customers in that region 
may delay or forego purchases of our products, which may materially and adversely impact our operating results for a particular 
period.

10

Our ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available 
on terms favorable to us.  The ability of our business to grow and compete depends on the availability of adequate capital, which 
in turn depends in large part on our cash flow from operations and the availability of equity and debt financing. We cannot assure 
you that our cash flow from operations will be sufficient or that we will be able to obtain equity or debt financing on acceptable 
terms, if at all, to implement our growth strategy. As a result, we cannot assure you that adequate capital will be available to finance 
our current growth plans, take advantage of business opportunities or respond to competitive pressures, any of which could harm 
our business.

Certain of our customers have been expanding and may continue to expand through consolidation and internal growth, which 
may increase their buying power, which could materially and adversely affect our sales, results of operations and financial 
position.  Certain of our customers are large companies with significant buying power. In addition, potential further consolidation 
in the distribution channels could enhance the ability of certain of our customers to seek more favorable terms, including pricing, 
for the products that they purchase from us. Accordingly, our ability to maintain or raise prices in the future may be limited, 
including during periods of raw material and other cost increases. If we are forced to reduce prices or to maintain prices during 
periods of increased costs, or if we lose customers because of pricing or other methods of competition, our sales, operating results 
and financial position may be materially and adversely affected.

We may experience difficulties in integrating American Woodmark and RSI’s operations and realizing the expected benefits 
of the RSI Acquisition.  The success of the RSI Acquisition will depend in part on our ability to realize the anticipated business 
opportunities and growth prospects from combining with RSI in an efficient and effective manner. We may never realize these 
business opportunities and growth prospects. Further, our management might have its attention diverted while trying to integrate 
operations and corporate and administrative infrastructures.

The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of our and 
RSI’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, 
procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or 
other third parties, or our ability to achieve the anticipated benefits of the transaction, and could harm our financial performance. 
If we are unable to successfully or timely integrate the operations of RSI’s business with our business, we may incur unanticipated 
liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the transaction, and 
our business, results of operations and financial condition could be adversely affected.

American Woodmark and RSI’s important business relationships may be disrupted due to the RSI Acquisition, which could 
adversely affect American Woodmark’s and RSI’s business, respectively.  Some of the parties with which American Woodmark 
and  RSI  do  business  may  be  uncertain  about  their  business  relationships  with  the  combined  company  as  a  result  of  the  RSI 
Acquisition. For example, customers, partners, resellers, suppliers, vendors and others may consider entering into alternative 
business relationships with other parties. Some of RSI’s customers, partners, resellers, suppliers, vendors and others may decide 
to exercise their rights to terminate contracts that were triggered upon completion of the RSI Acquisition. These disruptions could 
have an adverse effect on RSI’s and/or American Woodmark’s businesses, financial condition or results of operations, or the 
prospects of the combined company.

Our level and terms of indebtedness could adversely affect our business and liquidity position.  Our consolidated indebtedness 
level could have important consequences to us, including, among other things, increasing our vulnerability to general economic 
and industry conditions; requiring a portion of our cash flow used in operations to be dedicated to the payment of principal and 
interest on our indebtedness, therefore reducing our liquidity and our ability to use our cash flow to fund our operations, capital 
expenditures and future business opportunities; exposing us to the risk of increased interest rates, and corresponding increased 
interest expense, because borrowings under our credit facilities are at variable rates of interest; reducing funds available for working 
capital, capital expenditures, acquisitions and other general corporate purposes, due to the costs and expenses associated with such 
debt;  limiting  our  ability  to  obtain  additional  financing  for  working  capital,  capital  expenditures,  debt  service  requirements, 
acquisitions, and general corporate or other purposes; and limiting our ability to adjust to changing marketplace conditions and 
placing us at a competitive disadvantage compared to our competitors who may have less debt.  

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay 
capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures 
may not be successful and may not permit us to meet our scheduled debt service obligations, which could cause us to default on 
our debt obligations and impair our liquidity. In the event of a default under any of our indebtedness, the holders of the defaulted 
debt could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest, which in turn 
could result in cross-defaults under our other indebtedness. The lenders under our credit facilities could also elect to terminate 
their commitments thereunder and cease making further loans, and such lenders could institute foreclosure proceedings against 
their collateral, all of which could adversely affect our financial condition in a material way.

11

The credit agreement that governs our credit facility and the indenture that governs our senior notes impose significant operating 
and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities or 
otherwise negatively impact our business.  The credit agreement that governs our credit facility and the indenture that governs 
our senior notes impose significant operating and financial restrictions on us.  These restrictions limit our ability and the ability 
of our subsidiaries to, among other things, incur additional indebtedness (including guarantee obligations); incur liens; engage in 
mergers, consolidations and certain other fundamental changes; dispose of assets; make advances, investments and loans; engage 
in sale and leaseback transactions; engage in certain transactions with affiliates; enter into contractual arrangements that encumber 
or restrict the ability to (A) (i) pay dividends or make distributions, (ii) pay indebtedness, (iii) make loans or advances or (iv) sell, 
lease or transfer property, in each case to us and our subsidiaries, or (B) incur liens; pay dividends, distributions and other payments 
in respect of capital stock or subordinated debt; repurchase or retire capital stock, warrants or options or subordinated debt; and 
amend the terms of documents governing, or make payments prior to the scheduled maturity of, certain other indebtedness.

As a result of these restrictions, each of which is subject to certain exceptions and qualifications, we will be limited as to how we 
conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage 
of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We 
cannot assure you that we will be able to maintain compliance with these existing covenants in the future and, if we fail to do so, 
that we will be able to obtain waivers from the lenders and/or amend the covenants.

Our failure to comply with the restrictive covenants described above as well as other terms of our indebtedness and/or the terms 
of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our 
being required to repay these borrowings before their due date.  If we are forced to refinance these borrowings on less favorable 
terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.

Item 1B. 

UNRESOLVED STAFF COMMENTS

None.

Item 2.   

PROPERTIES

We own our Corporate Office located in Winchester, Virginia. In addition, we lease 9 manufacturing facilities in the United States 
and Mexico and own 9 manufacturing facilities located primarily in the eastern and southern United States. We also lease 7 primary 
service centers, 11 satellite service centers and 4 additional offices located throughout the United States that support the sale and 
distribution of products to each market channel. We consider our properties suitable for our business and adequate for our needs 
and believe that, if necessary, we could find additional and/or replacement facilities to lease without suffering a material adverse 
effect on our business.

Primary properties as of April 30, 2018 include:

LOCATION

Allegany County, MD

Anaheim, CA

Austin, TX

Berryville, VA

Bradenton, FL

Commerce City, CO

Coppell, TX

Dallas, TX

Dallas, TX

Fort Myers, FL

Gas City, IN

Hamlet, NC
Hardy County, WV
Houston, TX
Humboldt, TN

DESCRIPTION

Manufacturing Facility

Office/ Manufacturing Facility*

Satellite Service Center*

Service Center*

Satellite Service Center*

Satellite Service Center*

Service Center*

Manufacturing Facility*

Manufacturing Facility

Satellite Service Center*

Manufacturing Facility

Manufacturing Facility*
Manufacturing Facility*
Satellite Service Center*
Manufacturing Facility

12

 
 
 
LOCATION
Huntersville, NC
Jackson, GA
Kingman, AZ
Kennesaw, GA
Las Vegas, NV
Lincolnton, NC
Mira Loma, CA
Mooresville, NC
Montgomeryville, PA
Monticello, KY
Orange, VA
Orlando, FL
Phoenix, AZ
Raleigh, NC
Rancho Cordova, CA

Roswell, GA

San Antonio, TX 

Tampa, FL

Tijuana, Mexico

Tijuana, Mexico

Tijuana, Mexico

Toccoa, GA

Tucson, AZ

Winchester, VA
Winchester, VA

 *Leased facility.

DESCRIPTION
Service Center*
Manufacturing Facility
Manufacturing Facility
Service Center*
Satellite Service Center*
Manufacturing Facility*
Manufacturing Facility*
Office (Sales)*
Satellite Service Center*
Manufacturing Facility
Manufacturing Facility
Service Center*
Service Center*
Satellite Service Center*
Service Center*

Office (Sales)*

Satellite Service Center*

Satellite Service Center*

Manufacturing Facility*

Manufacturing Facility*

Manufacturing Facility*

Manufacturing Facility

Satellite Service Center*

Current Corporate Office
Former Corporate Office* (lease terminated effective May 31, 2018)

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, 2018. 

Item 4.   

MINE SAFETY DISCLOSURES

None.

13

 
 
 
 
 
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 are as follows: 

Name
S. Cary Dunston

Age
53

M. Scott Culbreth

R. Perry Campbell

Robert J. Adams, Jr.

47

53

52

Position(s) Held During Past Five Years
Company  Chairman  from August  2017  to  present;  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 2009 to September 
2013 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  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.

14

 
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 during the last two fiscal years were as follows:

MARKET PRICE

(in dollars)

FISCAL 2018

First quarter
Second quarter
Third quarter
Fourth quarter

FISCAL 2017

First quarter

Second quarter

Third quarter

Fourth quarter

High

$101.20
100.35
140.05
138.75

$82.34

89.57

84.15

93.10

Low

$87.30
79.15
89.00
82.20

$60.80

72.60

69.65

71.75

As  of  May  24,  2018  there  were  approximately  20,000  total  shareholders  of  the  Company's  common  stock,  including  5,000 
shareholders of record and 15,000 beneficial owners whose shares are held in "street" name by securities broker-dealers or other 
nominees.  The Company's shareholders also include approximately 73% of the Company's employees who are eligible to participate 
in the American Woodmark Corporation Retirement Savings 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 (the "Board") from time 
to time and will depend on the Company's then current financial condition, capital requirements, and results of operations, as well 
as any other factors then deemed relevant by the Board of Directors, and will be subject to applicable restrictions in the credit 
agreement governing the Company's credit facility and the indenture governing the Company's senior notes. 

Purchases of Equity Securities by the Issuer 

Under a stock repurchase authorization approved by its Board on November 19, 2015, the Company was authorized to purchase 
up to $20 million of the Company's common shares. On November 30, 2016, the Board authorized an additional stock repurchase 
program of up to $50 million of the Company's common shares. This authorization is in addition to the stock repurchase program 
authorized on November 19, 2015. 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 credit 
agreement governing the Company's credit facility and the indenture governing the Company's senior notes, 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 operations. Repurchased shares will become 
authorized but unissued common shares. In the fourth quarter of fiscal 2018, the Company did not repurchase any common shares 
under the authorization.  At April 30, 2018, $36.0 million remained authorized by the Board to repurchase the Company’s common 
shares.  The Company announced on December 1, 2017 that the Board suspended the Company's stock repurchase program in 
conjunction with the RSI Acquisition.

15

 
 
 
 
 
 
 
 
 
Stock Performance Graph 

The performance graph shown below compares the percentage change in the cumulative total shareholder return on our common 
stock against the cumulative total return of the Russell 2000 Index and Standard & Poor’s Household Durables Index for the period 
from April 30, 2013 through April 30, 2018. The graph assumes an initial investment of $100 and the reinvestment of dividends. 
The graph is based on historical data and is not intended to be a forecast or indication of future performance of American Woodmark 
common stock.

2013

American Woodmark Corporation

$100.00

Russell 2000 Index

S&P Household Durables Index

100.00

100.00

2014

$89.18

120.50

117.82

2015

2016

2017

2018

$150.67

$216.46

$273.11

$244.27

132.19

138.11

124.33

142.95

156.20

164.16

174.22

152.42

The graph and related information above are not deemed to be "filed" with the Securities and Exchange ("SEC") for purposes of 
Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any future filing made by us 
with the SEC, except to the extent that we specifically incorporate it by reference into any such filing.

16

Item 6.   

SELECTED FINANCIAL DATA

(Dollars in millions except per share data)

20181,2

20172

2016

20153

20143

FISCAL YEARS ENDED APRIL 30

FINANCIAL STATEMENT DATA

Net sales
Operating income
Net income

Earnings  per share:

Basic
Diluted

Depreciation and amortization expense
Total assets
Long-term debt, less current maturities
Total shareholders' equity

Average shares outstanding

Basic

Diluted

PERCENT OF SALES

Gross profit

Selling, general and administrative expenses

Income before income taxes

Net income

RATIO ANALYSIS

Current ratio
Inventory turnover4
Collection period - days5

$ 1,250.3
107.7
63.1

$ 1,030.2
108.2
71.2

$

3.80
3.77
45.0
1,645.3
809.9
581.7

16.6

16.7

4.38
4.34
18.7
501.3
15.3
352.4

16.3

16.4

20.4%

21.8%

11.8

7.6

5.1

2.1

13.5
33.6

11.3

10.6

6.9

3.3

19.6
32.5

$

947.0
93.2
58.7

3.61
3.57
16.5
466.4
22.1
280.8

16.3

16.4

21.1%

11.2

9.7

6.2

3.3

19.8
31.2

$

825.5
54.7
35.5

2.25
2.21
14.5
398.8
21.4
229.8

15.8

16.0

18.5%

11.9

6.6

4.3

3.2

19.9
31.6

726.5
34.1
20.5

1.34
1.31
14.5
330.0
20.4
190.5

15.3

15.7

17.1%

12.5

4.5

2.7

2.8

19.8
32.8

Percentage of capital (long-term debt plus equity):

Long-term debt, less current maturities

58.2%

4.2%

7.4%

8.5%

9.7%

Equity

Return on equity6

41.8

13.5

95.8

22.5

92.6

23.0

91.4

16.9

90.3

12.2

The fiscal 2018 year results include four months of RSI activity.  See Note B--Acquisition of RSI Home Products, Inc. for 
further details. 

The Company incurred corporate business development expenses.  During fiscal 2018, these expenses decreased operating 
income, net income and earnings per share by $12.9 million, $12.9 million and $0.77, respectively.  During fiscal 2017, 
these expense decreased operating income, net income and earnings per share by $2.7 million, $2.7 million and $0.16, 
respectively.

The Company announced plans to realign its manufacturing network during fiscal 2012. During fiscal 2014, the credits 
related to these initiatives increased operating income, net income and earnings per share by $0.2 million, $0.1 million and 
$0.01, respectively.  During fiscal 2015, the credits related to these initiatives increased operating income, net income and 
earnings per share by $0.2 million, $0.1 million and $0.01, respectively.

Based on average beginning and ending inventory.

Based on the ratio of average monthly customer receivables to average sales per day.

Based on net income divided by average beginning and ending shareholders equity.

1

2

3

4

5

6

17

 
 
 
 
 
 
 
 
 
 
 
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:

PERCENTAGE OF NET SALES
Fiscal Years Ended April 30
2017

2018

2016

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

100.0%
79.6
20.4
6.2
5.6
8.6
1.0
7.6

2.5

5.1

100.0%
78.2
21.8
6.9
4.4
10.5
(0.1)
10.6

3.7

6.9

100.0%
78.9
21.1
7.0
4.3
9.8
0.1
9.7

3.5

6.2

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 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:

• 
• 

• 
• 
• 

• 
• 
• 

• 

• 

• 
• 
• 

the loss of or a reduction in business from one or more of our key customers;
negative developments in the U.S. housing market or general economy and the impact of such developments on our and 
our customers’ business, operations and access to financing;
competition from other manufacturers and the impact of such competition on pricing and promotional levels;
an inability to develop new products or respond to changing consumer preferences and purchasing practices;
a failure to effectively manage manufacturing operations, alignment and capacity or an inability to maintain the quality 
of our products;
the impairment of goodwill, other intangible assets or our long-lived assets;
an inability to obtain raw materials in a timely manner or fluctuations in raw material and energy costs;
information systems interruptions or intrusions or the unauthorized release of confidential information concerning 
customers, employees or other third parties;
the cost of compliance with, or liabilities related to, environmental or other governmental regulations or changes in 
governmental or industry regulatory standards, especially with respect to health and safety and the environment;
a failure to attract and retain certain members of management or other key employees or other negative labor 
developments, including increases in the cost of labor;
risks associated with the implementation of our growth strategy;
risks related to sourcing and selling products internationally and doing business globally;
unexpected costs resulting from a failure to maintain acceptable quality standards;

18

 
 
 
 
 
 
 
• 
• 
• 
• 
• 

• 

• 

changes in tax laws or the interpretations of existing tax laws;
the occurrence of significant natural disasters, including earthquakes, fires, floods, and hurricanes or tropical storms;
the unavailability of adequate capital for our business to grow and compete;
increased buying power of large customers and the impact on our ability to maintain or raise prices;
the effect of the RSI Acquisition on our ability to retain customers, maintain relationships with suppliers and hire and 
retain key personnel;
our ability to successfully integrate RSI into our business and operations and the risk that the anticipated economic 
benefits, costs savings and other synergies in connection with the RSI Acquisition are not fully realized or take longer to 
realize than expected; and
limitations on operating our business as a result of covenant restrictions under our indebtedness, and our ability to pay 
amounts due under our credit facilities, our senior notes and our other indebtedness.

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, bath and home organization products for the remodeling 
and new home construction markets.  Its products are sold on a national basis directly to home centers, builders and through a 
network of independent dealers and distributors.  At April 30, 2018, the Company operated eighteen manufacturing facilities in 
the United States and Mexico and seven primary service centers located throughout the United States.

During the Company’s fiscal year that ended on April 30, 2018 ("fiscal 2018"), 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 2018, including:

•  The unemployment rate improved by 11% compared to April 2017, falling to 3.9% as of April 2018 according to data provided 

by the U.S. Department of Labor;    

•  Increases in single family housing starts during the Company’s fiscal 2018 of 9%, as compared to the Company’s fiscal 2017, 

according to the U.S. Department of Commerce;

•  Mortgage interest rates increased with a 30-year fixed mortgage rate of 4.47% in April 2018, an increase of approximately 42 

basis points compared to April 2017;

•  The median price of existing homes sold in the U.S. rose by 5.3% during the Company’s fiscal 2018, according to data provided 

by the National Association of Realtors;

•  Consumer sentiment, as reported by the University of Michigan, averaged 4% higher during the Company’s fiscal 2018 than in 

its prior fiscal year; and 

•  Cabinet sales, as reported by members of the Kitchen Cabinet Manufacturers Association (KCMA), increased by 3% during 

fiscal 2018 versus the prior fiscal year, 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 2018 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 2018 that were higher than those 
experienced in its prior fiscal year. The Company’s core remodeling sales were flat during fiscal 2018, below the overall remodeling 
market.    

19

 
 
 
 
 
 
 
 
Sales in the new construction channel increased 12% during the fiscal year, 5% of which was attributable to four months of results 
from the Company's acquisition of RSI.  The Company believes it under indexed the market due to an increase in first time home 
buyers.

The Company increased its net sales by 21% during fiscal 2018, which management believes was driven primarily by a rise in 
overall market activity plus four months of sales from the Company’s acquisition of RSI.

Gross margin for fiscal 2018 was 20.4%, a decrease from 21.8% in fiscal 2017.  The decrease in gross profit margin was due 
primarily to higher transportation costs, raw material inflation, higher healthcare costs and $6.3 million, or 50 bps, of inventory 
step-up amortization. 

The Company regularly considers the need for a valuation allowance against its deferred tax assets.  The Company has been 
profitable for the last 6 years.  As of April 30, 2018, the Company had total deferred tax assets of $17.8 million net of valuation 
allowance, down from $27.5 million of deferred tax assets net of valuation allowance at April 30, 2017.  The reduction in total 
deferred tax assets from April 30, 2017 to April 30, 2018 is mainly due to the pension contributions and the reduction in the U.S. 
corporate federal income tax rate from 35% to 21%, partially offset by an increase in deferred tax assets due to the RSI Acquisition.  
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.  These credits 
expire in various years beginning in fiscal 2020.  The Company believes based on positive evidence of the housing industry 
improvement along with 6 consecutive years of profitability that the Company will more likely than not realize all other remaining 
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 its long-lived assets were impaired as of April 30, 2018. 

Results of Operations

FISCAL YEARS ENDED APRIL 30

(Dollars in thousands)

2018

2017

2016

2018 vs.
2017
PERCENT
 CHANGE

2017 vs.
2016
PERCENT
 CHANGE

Net sales

Gross profit

Selling and marketing expenses

General and administrative expenses

Interest expense (income), net

Net Sales

$1,250,274

$1,030,248

$ 947,045

255,403

224,636

199,694

77,843

69,855

13,054

70,979

45,419

521

66,489

40,045

129

21%

14

10

54

2,406

9%

12

7

13

304

Net sales for the 2018 fiscal year increased 21% to $1,250.3 million from the prior fiscal year.  Excluding the impact of the RSI 
Acquisition, net sales for the 2018 fiscal year increased 4% to $1,072.6 million from the prior fiscal year.  Excluding the impact 
of the RSI Acquisition, the Company experienced growth in both the new construction and dealer channels during the entire fiscal 
year. 

Net sales were $1,030.2 million in fiscal 2017, an increase of $83.2 million, or 9%, compared with fiscal 2016.  Overall unit 
volume  for  fiscal  2017  was  8.0%  higher  than  in  fiscal  2016,  which  was  driven  primarily  by  the  Company’s  increased  new 
construction and dealer volume.  Average revenue per unit increased 0.8% in fiscal 2017, driven by improvements in the Company’s 
product mix and pricing.

Gross Profit

Gross profit as a percentage of sales decreased to 20.4% in fiscal 2018 as compared with 21.8% in fiscal 2017. The decrease in 
gross profit margin was due primarily to higher transportation costs, raw material inflation, higher healthcare costs and $6.3 million, 
or 50 bps, of inventory step-up amortization related to the RSI Acquisition. 

20

 
 
 
 
 
 
During fiscal 2017, the Company’s gross profit increased as a percentage of net sales to 21.8% in fiscal 2017 as compared with 
21.1% in fiscal 2016. The improvement in gross profit margin was due primarily to the beneficial impact of increased sales volume, 
lower labor benefit costs and improved operating efficiency.  

Selling and Marketing Expenses

Selling and marketing expenses in fiscal 2018 were 6.2% of net sales, compared with 6.9% of net sales in fiscal 2017.  Selling 
and marketing costs increased by only 10% despite a 21% 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 costs and commissions.

Selling and marketing expenses were 6.9% of net sales in fiscal 2017 compared with 7.0% in fiscal 2016. Selling and marketing 
costs increased by only 7% despite a 9% 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 costs and 
commissions.

General and Administrative Expenses

General and administrative expenses increased by $24.4 million or 53.8% during fiscal 2018. The increase was related to intangible 
amortization and RSI Acquisition related expenses, offset by lower compensation incentive costs. General and administrative costs 
increased to 5.6% of net sales in fiscal 2018 compared with 4.4% of net sales in fiscal 2017.

General and administrative expenses in fiscal 2017 increased by $5.4 million, or 13.4%, compared with fiscal 2016 and represented 
4.4%  of  net  sales,  compared  with  4.3%  of  net  sales  for  fiscal  2016. The  increase  in  cost  was  related  to  increased  incentive 
compensation and staffing costs. 

Effective Income Tax Rates

The Company generated pre-tax income of $94.8 million during fiscal 2018.  The Company’s effective tax rate decreased from 
34.6% in fiscal 2017 to 33.4% in fiscal 2018.  The lower effective tax rate was primarily due the overall benefit from the reduction 
in the tax rate enacted in connection with the Tax Act, partially offset by non-deductible acquisition costs.  The Company’s effective 
tax rate decreased from 36.0% in fiscal 2016 to 34.6% in fiscal 2017. The lower effective tax rate in fiscal 2017 was primarily 
due to the benefit from adopting ASU 2016-09 for equity based compensation. 

Non-GAAP Financial Measures

We have reported our financial results in accordance with generally accepted accounting principles (GAAP).  In addition, we have 
presented in this report the non-GAAP measures described below.  

A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented 
in accordance with GAAP are set forth below.

Management believes these non-GAAP financial measures provide an additional means of analyzing the current period’s results 
against the corresponding prior period’s results.  However, these non-GAAP financial measures should be viewed in addition to, 
and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.  Our non-GAAP financial measures 
are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction 
with our consolidated financial statements prepared in accordance with GAAP.

Adjusted EPS per diluted share

We use Adjusted EPS per diluted share in evaluating the performance of our business and profitability.  Management believes that 
this measure provides useful information to investors by offering additional ways of viewing the Company’s results by providing 
an indication of performance and profitability excluding the impact of unusual and/or non-cash items. We define Adjusted EPS 
per diluted share as diluted earnings per share excluding the per share impact of (1) expenses related to the RSI Acquisition, (2) 
inventory step-up amortization due to the increase in the fair value of inventory acquired through the RSI Acquisition (that was 
fully expensed in the quarter ended January 31, 2018 when the inventory was sold), (3) the amortization of intangible assets, and 
(4) the tax benefit of RSI Acquisition expenses and the inventory step-up and intangible amortization.  The amortization of intangible 
assets is driven by the RSI Acquisition and will recur in future periods.  We began excluding amortization of intangible assets 
from our definition of Adjusted EPS per diluted share beginning with the fourth quarter earnings release as management determined 
21

 
 
 
 
 
 
that such an exclusion would better help it evaluate the performance of our business and profitability and we also received feedback 
from some of our investors regarding the same.

Adjusted EBITDA and Adjusted EBITDA margin

We use Adjusted EBITDA and Adjusted EBITDA margin in evaluating the performance of our business, and we use each in the 
preparation of our annual operating budgets and as indicators of business performance and profitability. We believe Adjusted 
EBITDA and Adjusted EBITDA margin allow us to readily view operating trends, perform analytical comparisons and identify 
strategies to improve operating performance.

We define Adjusted EBITDA as net income adjusted to exclude (1) income tax expense, (2) interest (income) expense, net, (3) 
depreciation and amortization expense, (4) amortization of customer relationship intangibles and trademarks, (5) expenses related 
to the RSI Acquisition, (6) inventory step-up amortization, (7) stock-based compensation expense, and (8) gain/loss on asset 
disposal.  We believe Adjusted EBITDA, when presented in conjunction with comparable GAAP measures, is useful for investors 
because management uses Adjusted EBITDA in evaluating the performance of our business.

We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net sales.

Net sales excluding RSI sales

To better understand and compare the performance of our core American Woodmark business by our management and our investors, 
we believe it is helpful to subtract the amount of sales from our recently acquired and now wholly-owned subsidiary, RSI Home 
Products, Inc., from our net sales and report this amount with our quarterly earnings announcements.  We may discontinue using 
this non-GAAP financial measure at a later juncture once RSI has become fully integrated into our Company and the quarter to 
quarter comparisons of our core business are no longer as helpful to compare performance. 

A reconciliation of these non-GAAP financial measures and the most directly comparable measures calculated and presented in 
accordance with GAAP are set forth in the following tables:

Reconciliation of Net Sales and Percentage of Net Sales Excluding RSI

FISCAL YEARS ENDED APRIL 30,

(Dollars in thousands)

2018

2017

2016

2018 vs.
2017
PERCENT
 CHANGE

2017 vs.
2016
PERCENT
 CHANGE

Net sales excluding RSI

RSI sales

Net Sales

$ 1,072,550

$ 1,030,248

177,724

—

$ 1,250,274

$ 1,030,248

$

$

947,045

—

947,045

4%

—

21%

9%

9%

22

 
Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents

(Dollars in thousands)

Net income (GAAP)
Add back:
      Income tax expense
      Interest expense (income), net
      Depreciation and amortization expense
      Amortization of customer relationship intangibles and trademarks
EBITDA (Non-GAAP)
Add back:
      Acquisition related expenses
      Inventory step-up amortization (1)
      Stock compensation expense
      Loss on asset disposal

Adjusted EBITDA (Non-GAAP)

Net Sales

FISCAL YEARS ENDED APRIL 30,
2017

2016

2018

$

63,141

$

71,199

$

58,723

$

31,619
13,054
28,671
16,333
152,818

12,902
6,334
3,097
615

$

175,766

$ 1,250,274

37,726
(521)
18,682
—
127,086

2,686
—
3,469
444

133,685

1,030,248

$

$

$

33,063
129
16,456

$

108,371

—
—
3,609
1,576

113,556

947,045

12.0%

$

$

Adjusted EBITDA margin (Non-GAAP)

14.1%

13.0%

(1) The inventory step-amortization is the increase in the fair value of inventory acquired through the RSI Acquisition that was 
fully expensed when the inventory was sold in the quarter ended January 31, 2018.

A reconciliation of Adjusted EBITDA and Adjusted EBITDA margin as projected for fiscal 2019 is not provided because we do 
not forecast Net income as we cannot, without reasonable effort, estimate or predict with certainty various components of Net 
income.

Adjusted EPS per diluted share

(Dollars in thousands, except share and per share data)

2018

2017

2016

FISCAL YEARS ENDED APRIL 30,

Net income (GAAP)

Add back:

      Acquisition related expenses

      Amortization of intangibles

      Inventory step-up amortization (1)

      Tax benefit of add backs

Adjusted net income (Non-GAAP)

Weighted average diluted shares

Adjusted EPS per diluted share (Non-GAAP)

$

63,141

$

71,199

$

58,723

12,902

16,333

6,334
(10,970)
87,740

$

2,686

—

—
(969)
72,916

—

—

—

—

$

58,723

16,744,705

16,398,240

16,441,571

5.24

$

4.45

$

3.57

$

$

(1) The inventory step-amortization is the increase in the fair value of inventory acquired through the RSI Acquisition that was 
fully expensed when the inventory was sold in the quarter ended January 31, 2018.

23

Outlook for Fiscal 2019

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 2019 it will continue to be below historical averages.

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 2019.  The Company’s 
home center market share will remain at normalized levels for fiscal 2019 after annualizing for market losses in the in-stock 
business, however this is heavily dependent upon competitive promotional activity.  The Company expects to continue to gain 
market share in its growing dealer/distributor business.  

Based on available information, it is expected that new residential construction starts will grow approximately 7 to 9% during fiscal 
2019.  The Company’s new residential construction direct business is expected to increase organically at the market rate for single 
family housing starts.

In total, the Company expects that it will grow core sales at a mid-single digit rate in fiscal 2019 with total sales growth of 
approximately 35%.  Margins will be challenged with increases in labor costs, raw materials, fuel and transportation rates.  The 
Company expects adjusted EBITDA margins for fiscal 2019 of 15.5 to 16% depending upon synergy timing and execution, and 
the significance of inflation and transportation rate increases.

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 RSI Acquisition significantly affected the Company’s financial condition, liquidity and cash flow. See Note B--Acquisition 
of RSI Home Products, Inc. for a table detailing the preliminary purchase price. The Company’s cash and cash equivalents and 
investments in certificates of deposit totaled $87.9 million at April 30, 2018, representing a $161.3 million decrease from its April 
30, 2017 levels.  At April 30, 2018, total long-term debt (including current maturities) was $814.0 million, an increase of $797.1 
million from its balance at April 30, 2017.  The Company’s ratio of long-term debt to total capital was 58.2% at April 30, 2018, 
compared with 4.2% at April 30, 2017.  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 also borrow up to $100 million under the Revolving Facility. Approximately $91.2 million was available under 
this facility as of April 30, 2018.   

The Company borrowed $250 million under its initial term loan facility on December 29, 2017 in connection with the closing of 
the RSI Acquisition and borrowed an additional $250 million under its delayed draw term loan facility on February 12, 2018 in 
connection  with  the  refinancing  of  RSI's  6  ½  %  Senior  Secured  Second  Lien  Notes  due  2023  ("the  RSI  Notes").   Amounts 
outstanding under the initial term loan facility and delayed draw term loan facility bear interest based on a fluctuating rate measured 
by reference to either, at the Company’s option, a base rate plus an applicable margin ranging between 0.25% and 1.25% or LIBOR 
plus an applicable margin ranging between 1.25% and 2.25%, with the applicable margin being determined by reference to the 
Company’s then-current “Total Funded Debt to EBITDA Ratio.” The Company will also incur a quarterly commitment fee on the 
average daily unused portion of the Revolving Facility during the applicable quarter at a rate per annum also determined by 
reference to the Company’s then-current “Total Funded Debt to EBITDA Ratio.” The initial applicable margin with respect to 
base rate loans was 1.00% and the initial applicable margin with respect to LIBOR loans was 2.00%. The initial commitment fee 
was 0.25%. As of April 30, 2018, the applicable margin with respect to base rate loans and LIBOR loans was 1.25% and 2.25%, 
respectively, and the commitment fee was 0.30%.

The Company is required to repay the aggregate outstanding amounts under its initial term loan facility and the delayed draw term 
loan facility in certain specified quarterly installments beginning on April 30, 2018. The initial term loan facility and the delayed 
draw term loan facility mature on December 29, 2022.

24

 
On February 12, 2018, the Company issued $350 million in aggregate principal amount of the 4.875% Senior Notes due 2026 
(the "Senior Notes") and utilized the proceeds of such issuance, together with the borrowings under the delayed draw term loan 
facility as discussed above and cash on hand, to fund the refinancing of the RSI Notes.

The credit agreement governing the Company's credit facilities and the indenture governing the Senior Notes restrict the ability 
of the Company and certain of the Company’s subsidiaries to, among other things, incur additional indebtedness, create additional 
liens, make certain investments, dispose of assets or engage in a merger or consolidation, engage in certain transactions with 
affiliates, and make certain restricted payments, including the payment of dividends or the repurchase or redemption of stock, 
subject, in each case, to the various exceptions and conditions described in the credit agreement and the indenture. See Note G--
Notes Payable and Long-Term Debt for a discussion of our compliance with the covenants in the credit agreement and the indenture.

OPERATING ACTIVITIES

Cash provided by operating activities in fiscal 2018 was $86.8 million, compared with $77.1 million in fiscal 2017.  The increase 
in the Company’s cash from operating activities was driven primarily by an increase in net income excluding non-cash items 
(primarily depreciation and amortization and changes in deferred taxes), which was partially offset by an increase in customer 
and income tax receivables.

Cash provided by operating activities in fiscal 2017 was $77.1 million, compared with $74.6 million in fiscal 2016.  The $2.5 
million improvement was primarily attributable to the Company’s $12.5 million improvement in net income and an increase in 
accrued expenses, which was partially offset by a $23.1 million increase in cash used for discretionary pension contributions.

On August 24, 2017, the Board of Directors of the Company approved up to $13.6 million of discretionary funding to reduce its 
defined benefit pension liabilities.  The Company made aggregate contributions of $19.3 million to its pension plans during fiscal 
2018, including the $13.6 million of discretionary funding.

On August 25, 2016, the Board of Directors of the Company approved up to $20 million of discretionary funding to reduce its 
defined benefit pension liabilities. The Company made aggregate contributions of $27.3 million to its pension plans during fiscal 
2017, including the $20.0 million of discretionary funding during fiscal 2017.

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 2018 was $44.3 million, compared with $53.7 million in fiscal 2017 and $40.8 million in 
fiscal 2016. Investments in property, plant and equipment for fiscal 2018 were $47.6 million, compared with $21.8 million in 
fiscal 2017 and $28.7 million in fiscal 2016. Investments in promotional displays were $2.3 million in fiscal 2018, compared with 
$3.7 million in fiscal 2017 and $4.4 million in fiscal 2016.  On August 21, 2014, the Board of Directors of the Company approved 
a $30.0 million capital expansion project at its West Virginia facility, which was completed during fiscal 2016.  

On November 30, 2016 the Board of Directors of the Company approved the construction of a new corporate headquarters in 
Winchester, Virginia. The new space has consolidated employees that previously occupied four buildings in Winchester, Virginia 
and Frederick County, Virginia, during the fourth quarter of fiscal 2018. The new building will be self-funded for approximately 
$30.0 million.  During fiscal 2018 and 2017, approximately $21.1 million and $3.0 million, respectively, was spent related to the 
new corporate headquarters. 

During fiscal 2018, the Company’s decrease in net cash used for investing activities was primarily driven by the acquisition of 
RSI and increased investment in property, plant and equipment, which was partially offset by a net $62.8 million increase in cash 
flow from certificates of deposit.

FINANCING ACTIVITIES

The Company realized a net outflow of $141.0 million from financing activities in fiscal 2018 compared with a net outflow of 
$20.8 million in fiscal 2017, and a net outflow of $8.9 million in fiscal 2016.  Proceeds were generated from the exercise of stock 
options of $1.3 million in fiscal 2018, $2.4 million in fiscal 2017, and $8.1 million in fiscal 2016.  During fiscal 2018, $96.6 
million was used to repay long-term debt, compared with approximately $11.7 million in fiscal 2017 and $1.5 million in fiscal 
2016.  

Under a stock repurchase authorization approved by the Board on November 30, 2015, the Company was authorized to purchase 
up to $20 million of the Company's common shares. On November 30, 2016, the Board authorized an additional stock repurchase 
25

 
 
 
 
 
 
 
 
program of up to $50 million of the Company's common shares. This authorization is in addition to the stock repurchase program 
authorized on November 19, 2015. 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 credit 
agreement governing the Company's credit facility and the indenture governing the Senior Notes, and other factors management 
deems relevant. At April 30, 2018, $36.0 million remained authorized to repurchase the Company’s common shares. The Company 
purchased  a  total  of  309,612  common  shares,  for  an  aggregate  purchase  price  of  $29.0  million  during  fiscal  2018  under  the 
authorizations.  The Board suspended the Company's stock repurchase program in conjunction with the RSI Acquisition.

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 2019.

The timing of the Company’s contractual obligations (excluding interest) as of April 30, 2018 is summarized in the table below:

FISCAL YEARS ENDED APRIL 30

(in thousands)

Total Amounts

2019

2020-2021

2022-2023

Term Loans

The Senior Notes

Economic development loans

Capital lease obligations

Other long-term debt

Operating lease obligations
Pension contributions1

$

460,000

$

— $

85,000

$

375,000

$

350,000

4,439

7,245

6,660

93,841

7,507

—

2,189

1,948

—

15,536

2,327

—

177

3,128

—

29,548

3,050

—

408

1,352

—

16,731

2,000

2024 and
Thereafter

—

350,000

1,665

817

6,660

32,026

130

Total

$

929,692

$

22,000

$

120,903

$

395,491

$

391,298

1 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 2024 have not been determined at this 
time.

SEASONALITY

Our core business has been subject to seasonal influences, with higher sales typically realized in our second and fourth fiscal 
quarters. General economic forces and changes in our customer mix have reduced seasonal fluctuations in revenue over the past 
few years. RSI’s historic net sales vary from quarter to quarter primarily due to the timing of Home Depot and Lowe’s customer 
promotions,  product  roll-outs,  and  their  inventory  management.  However,  RSI  historically  did  not  have  significant  recurring 
seasonality impacts on its business. 

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, 2018 and 2017, 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.

26

 
 
 
 
 
 
 
 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. 

The Company recognizes revenue based on the invoice price less allowances for sales returns, cash discounts and other deductions 
as required under U.S. 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.

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) $

(20.5) $

1.2

26.1

Pension expense for fiscal 2018 and the assumptions used in that calculation are presented in Note J of the Consolidated Financial 
Statements.  At April 30, 2018, the weighted average discount rate was 4.18% compared with 4.12% at April 30, 2017. The expected 
return on plan assets was 6.5% for the year ended April 30, 2018 and 7.5% for the year ended April 30, 2017. 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.

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 3.5%, 10.3% and (1.6)% for fiscal 2018, 2017 and 2016, respectively.

The fair value of plan assets at April 30, 2018 was $156.5 million compared with $137.1 million at April 30, 2017. The Company’s 
projected benefit obligation exceeded plan assets by $7.0 million in fiscal 2018 and by $28.0 million in fiscal 2017. The $21.0 
million decrease in the Company’s net under-funded position during fiscal 2018 was primarily driven by the Company’s $19.3 

27

 
 
 
 
 
 
 
 
million contributions.  The Company expects its pension expense to increase from $(1.6) million in fiscal 2018 to $(0.6) million 
in fiscal 2019, due primarily to a decrease in the expected long-term rate of return from 6.5% to 5.5%.  The Company expects to 
contribute $2.3 million to its pension plans in fiscal 2019, which represents required and discretionary funding.  The Company 
made contributions of $19.3 million to its pension plans in fiscal 2018. 

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, 2018 was $5.2 million.  These credits expire 
in various years beginning in fiscal 2020.  Net of the federal impact and related valuation allowance, the Company has recorded
$1.5 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, 2018, a deferred credit balance of $1.3 million is included in other liabilities on the balance sheet. 

Goodwill and Other Intangible Assets.  Goodwill represents the excess of purchase price over the fair value of net assets acquired. 
The Company does not amortize goodwill but evaluates for impairment annually, or whenever events or changes in circumstances 
indicate that the carrying value may not be recoverable.

In accordance with the accounting standards, an entity has the option first to assess qualitative factors to determine whether events 
and circumstances indicate that it is more likely than not that goodwill is impaired. If after such assessment an entity concludes 
that the asset is not impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then 
it is required to determine the fair value of the asset using a quantitative impairment test, and if impaired, the associated assets 
must be written down to fair value. There were no impairment charges related to goodwill for the fiscal years ended 2018 and 
2017.

The Company amortizes the cost of other intangible assets over their estimated useful lives, which range up to six years, unless 
such lives are deemed indefinite. There were no impairment charges related to other intangible assets for the fiscal years ended 
2018 and 2017.

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 does not expect the adoption of ASU 2014-09 and ASU 2015-14 to have a material impact on results 
of operations, cash flows and financial position.  The Company is continuing to evaluate the impact of ASU 2014-09 primarily to 
determine the transition method to utilize at adoption and the additional disclosures required.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." 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 
28

 
 
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. The Company early adopted 
this standard as of May 1, 2016. As a result, during fiscal 2017, it recognized the excess tax benefit of $1.3 million as income tax 
benefit on the condensed consolidated statements of income (adopted prospectively). The adoption did not impact the existing 
classification of the awards. Excess tax benefits from stock based compensation is now classified in net income in the statement 
of  cash  flows  instead  of  being  separately  stated  in  financing  activities  for  the  twelve  months  ended April  30,  2017  (adopted 
prospectively). Additionally, the Company reclassified $2.8 million and $1.4 million of employee withholding taxes paid from 
operating activities into financing activities in the statement of cash flows for the  twelve month periods ended April 30, 2016 and 
2015,  respectively,  as  required  by ASU  2016-09  (adopted  retrospectively).    Following  the  adoption  of  the  new  standard,  the 
Company elected to continue estimating the number of awards expected to be forfeited and adjust its estimate on an ongoing basis.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation 
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." ASU 2017-07 requires an employer to disaggregate 
the service cost component from the other components of net benefit (income) cost. The other components of net benefit (income) 
cost are required to be presented in the income statement separately from the service cost component and outside of operating 
income. The amendments also allow only the service cost component of net benefit (income) cost to be eligible for capitalization. 
The amendments in this ASU are effective for fiscal years beginning after December 15, 2017. The amendments in this ASU 
should be applied (1) retrospectively for the presentation of the service cost component and the other components of net periodic 
pension (income) cost and net periodic postretirement benefit (income) cost on the income statement, and (2) prospectively, on 
and after the effective date, for the capitalization of the service cost component of net periodic pension (income) cost and net 
periodic postretirement benefit (income) cost in assets. The Company is evaluating the effect this guidance will have on its results 
of operations, cash flows and financial position.

In  February  2018,  the  FASB  issued ASU No.  2018-02, Income  Statement—Reporting  Comprehensive  Income  (Topic  220): 
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to address a specific consequence of 
the Tax Act by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded 
tax effects resulting from the Tax Act's reduction of the U.S. federal corporate income tax rate. The standard is effective for all 
entities for annual periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the 
period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate 
in the Tax Act is recognized.  The Company early adopted this ASU on April 30, 2018 and as a result recorded a net increase to 
retained earnings and decrease to accumulated other comprehensive income (loss) of $8.7 million to reclassify the income tax 
effects of the Tax Act on the Company’s pension plans.  Other than those effects related to the Tax Act, the Company’s policy is 
to release stranded tax effects related to its pension plan from other comprehensive income only upon termination or full settlement 
of the plan.

 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.

Our revolving credit facility, initial term loan facility and delayed draw term loan facility, include a variable interest rate component. 
As a result, we are subject to interest rate risk with respect to such floating-rate debt. A 100 basis point increase in the variable 
interest rate component of our borrowings as of April 30, 2018 would increase our annual interest expense by approximately $4.6 
million.

The Company does not currently use commodity or interest rate derivatives or similar financial instruments to manage its commodity 
price or interest rate risks.

29

 
 
 
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
Income taxes receivable
Prepaid expenses and other
Total Current Assets

Property, plant and equipment, net
Investments - certificates of deposit

Customer relationships intangibles, net

Trademarks, net

Goodwill, net

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

Deferred income taxes

Defined benefit pension liabilities

Other long-term liabilities

Shareholders' Equity

APRIL 30

2018

2017

$

$

78,410
8,000
136,355
104,801
25,996
10,805
364,367

218,102
1,500

258,778

8,889

767,451

12,189

732

13,337

176,978
51,750
63,115
42,859
301
4,225
339,228

107,933
20,500
—

—

—

5,745

18,047

9,820

$

1,645,345

$

501,273

$

71,096

$

4,143

48,682

19,289

27,245

41,312

1,598

36,162

8,655

13,770

170,455

101,497

809,897

71,563

6,960

4,805

15,279
—

28,032

4,016

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, 2018: 17,503,922, at April 30, 2017: 16,232,775
Retained earnings

361,158

269,576

168,835

224,031

Accumulated other comprehensive loss -

Defined benefit pension plans
Total Shareholders' Equity

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

See notes to consolidated financial statements.

30

(49,069)
581,665
1,645,345

$

$

(40,417)
352,449
501,273

  
 
 
 
 
 
 
 
 
 
 
 
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

Operating Income

Interest expense (income), net
Other (income) expense

Income Before Income Taxes

Income tax expense

Net Income

SHARE INFORMATION

Earnings per share

Basic

Diluted

FISCAL YEARS ENDED APRIL 30
2018
2016
2017

$ 1,250,274
994,871
255,403

$ 1,030,248
805,612
224,636

$

947,045
747,351
199,694

77,843
69,855
107,705

13,054
(109)
94,760

70,979
45,419
108,238

(521)
(166)
108,925

66,489
40,045
93,160

129

1,245
91,786

31,619

37,726

33,063

$

63,141

$

71,199

$

58,723

$

$

3.80

3.77

$

4.38

4.34

3.61

3.57

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 $(50), $(4,391), and $4,110, respectively

FISCAL YEARS ENDED APRIL 30
2018

2017

2016

$

63,141

$

71,199

$

58,723

88

6,868

(6,428)

Total Comprehensive Income

$

63,229

$

78,067

$

52,295

See notes to consolidated financial statements.

31

 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

ACCUMULATED  
OTHER

TOTAL

(in thousands, except share data)
Balance, May 1, 2015

COMMON STOCK
SHARES AMOUNT
150,001
16,079,671

$

RETAINED
EARNINGS
120,698
$

COMPREHENSIVE SHAREHOLDERS

LOSS

'
EQUITY

$

(40,857) $

229,842

58,723

—

58,723

Net income

Other comprehensive loss, 

net of tax

Stock-based compensation

Adjustments to excess tax

benefit from stock-based

compensation

Exercise of stock-based

compensation awards, net of 

amounts withheld for taxes

Stock repurchases

Employee benefit plan

contributions

—

—

—

—

—

—

3,609

4,559

375,928

(243,143)

5,288

(1,928)

—

—

—

—

(14,665)

(6,428)

—

—

—

—

—

31,585

1,761

—

Balance, April 30, 2016

16,244,041

$

163,290

$

164,756

$

(47,285) $

Net income

Other comprehensive loss, 

net of tax

Stock-based compensation

Exercise of stock-based

compensation awards, net of 

amounts withheld for taxes

Stock repurchases

Employee benefit plan

contributions

—

—

—

—

—

3,469

122,772

(178,118)

633

(1,483)

71,199

—

—

—

(11,924)

44,080

2,926

—

—

6,868

—

—

—

—

Balance, April 30, 2017

16,232,775

$

168,835

$

224,031

$

(40,417) $

Net income

   Adoption of ASU 2018-02

Other comprehensive income, 

net of tax

Stock-based compensation

Exercise of stock-based

compensation awards, net of 

—

—

—

—

—

—

—

3,097

amounts withheld for taxes

86,927

(1,513)

Stock issuance related to acquisition

1,457,568

189,849

63,141

8,740

—

(8,740)

—

—

—

88

—

—

Stock repurchases

Employee benefit plan

contributions

(309,612)

(2,664)

(26,336)

36,264

3,554

Balance, April 30, 2018

17,503,922

$

361,158

$

269,576

$

(49,069) $

See notes to consolidated financial statements.

32

(6,428)

3,609

4,559

5,288

(16,593)

1,761

280,761

71,199

6,868

3,469

633

(13,407)

2,926

352,449

63,141

—

88

3,097

(1,513)

189,849

(29,000)

3,554

581,665

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
Loss on extinguishment of debt

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 (net of acquired assets and 
liabilities):

Customer receivables

Inventories

Income taxes receivable

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

Acquisition of business, net of cash acquired
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

Withholding of employee taxes related to stock-based compensation

Debt issuance cost

33

FISCAL YEARS ENDED APRIL 30

2018

2017

2016

$

63,141

$

71,199

$

58,723

45,004

615

257

3,097

21,404

(20,928)

—

3,554

14

(18,786)

2,802

(7,295)

(7,492)

(858)

(2,525)

—

4,771

86,775

18,682

444

—

3,469

9,899

(27,840)

—

2,926

318

(7,780)

(4,925)

—

(207)

6,301

773

—

3,821

77,080

16,456

1,576

—

3,609

11,629

(4,732)

(4,968)

1,761

(663)

(9,938)

(4,276)

—

(4,585)

723

5,269

(1,791)

5,811

74,604

(47,590)

(21,811)

(28,685)

27

(57,200)

(25,000)

87,750

(2,303)

(44,316)

37

—

(85,000)

56,750

(3,720)

(53,744)

(96,572)

(11,731)

734

—

1,289

(29,000)

(2,803)

(14,675)

3,477

—

2,366

(13,407)

(1,734)

—

846

—

(46,750)

38,250

(4,434)

(40,773)

(1,547)

3,196

4,968

8,114

(16,593)

(2,826)

—

 
 
 
 
 
 
 
 
 
 
Notes receivable, net

Net Cash Used by Financing Activities

—

(141,027)

208

(20,821)

(4,221)

(8,909)

Net (Decrease) Increase in Cash and Cash Equivalents

(98,568)

2,515

24,922

Cash and Cash Equivalents, Beginning of Year

176,978

174,463

149,541

Cash and Cash Equivalents, End of Year

$

78,410

$

176,978

$

174,463

Supplemental cash flow information:
     Non-cash investing and financing activities:
          Long-term debt related to funding acquisition
          Long-term debt issued to satisfy outstanding debt
          Long-term debt satisfied from issuance of debt
          Stock issuance in connection with acquisition
          Property, plant and equipment

          Net other assets and liabilities related to acquisition

    Cash paid during the period for:

          Interest

       Income taxes

See notes to consolidated financial statements.

$
$
$
$
$

$

$

$

300,000
600,000
(602,750)
189,849
5,530

7,169

5,919

18,219

$
$
$
$
$

$

$

$

— $
— $
— $
— $
— $

— $

—
—
—
—
—

—

596

27,302

$

$

776

24,510

34

 
 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A -- Summary of Significant Accounting Policies

American Woodmark Corporation (“American Woodmark,” the “Company,” “we,” “our” or “us”) manufactures and distributes 
kitchen, bath and home organization products for the remodeling and new home construction markets.  Its products are sold on a 
national basis directly to home centers, builders and through a network of independent dealers and distributors.  The Company 
operates within a single reportable segment primarily within the U.S.; long-lived assets and sales outside the U.S. are not significant.

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 subsidiaries.  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 2018, 2017 and 2016 were 
$40.1 million, $41.0 million and $38.1 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 $50.1 million at April 30, 2017.  There were 
no cash equivalents at April 30, 2018.

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 and for certain subsidiaries by the first-in, first-out (FIFO) method. 

The LIFO cost reserve is determined in the aggregate for inventory and is applied as a reduction to inventories determined on the 
FIFO method. 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 12 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 2018, 2017 and 2016, the 
Company concluded no impairment existed.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over the fair value of net assets acquired. 
The Company does not amortize goodwill but evaluates for impairment annually, or whenever events or changes in circumstances 
indicate that the carrying value may not be recoverable.

In accordance with the accounting standards, an entity has the option first to assess qualitative factors to determine whether events 
and circumstances indicate that it is more likely than not that goodwill is impaired. If after such assessment an entity concludes 
that the asset is not impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then 
it is required to determine the fair value of the asset using a quantitative impairment test, and if impaired, the associated assets 
must be written down to fair value.  During fiscal years 2018, 2017 and 2016, the Company concluded no impairment existed.

35

 
 
 
 
 
 
 
 
 
 
Intangible assets consist of customer relationship intangibles and trademarks.  The Company amortizes the cost of other intangible 
assets over their estimated useful lives, which range from 3 to 6 years, unless such lives are deemed indefinite.  During fiscal years 
2018, 2017 and 2016, the Company concluded no impairment existed.

Promotional Displays:  The Company invests in promotional displays in retail stores to demonstrate product features, product and 
quality specifications and to 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 60 months 
(the estimated period of benefit). Promotional display amortization expense for fiscal years 2018, 2017 and 2016 was $4.5 million, 
$3.4 million and $3.4 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.

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 does not expect the adoption of ASU 2014-09 and ASU 2015-14 to have a 
material impact on results of operations, cash flows and financial position.  The Company is continuing its assessment of the new 
standard, including the impact on processes, accounting policies, disclosures and internal controls over financial reporting. The 
Company is continuing to evaluate the impact of ASU 2014-09 primarily to determine the transition method to utilize at adoption 
and the additional disclosures required.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)."  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 
36

 
 
 
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. The Company early adopted 
this standard as of May 1, 2016. As a result, during fiscal 2017, it recognized the excess tax benefit of $1.3 million as income tax 
benefit on the condensed consolidated statements of income (adopted prospectively). The adoption did not impact the existing 
classification of the awards. Excess tax benefits from stock based compensation is now classified in net income in the statement 
of  cash  flows  instead  of  being  separately  stated  in  financing  activities  for  the  twelve  months  ended April  30,  2017  (adopted 
prospectively). Additionally, the Company reclassified $2.8 million and $1.4 million of employee withholding taxes paid from 
operating activities into financing activities in the statement of cash flows for the  twelve month periods ended April 30, 2016 and 
2015,  respectively,  as  required  by ASU  2016-09  (adopted  retrospectively).    Following  the  adoption  of  the  new  standard,  the 
Company elected to continue estimating the number of awards expected to be forfeited and adjust its estimate on an ongoing basis.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation 
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." ASU 2017-07 requires an employer to disaggregate 
the service cost component from the other components of net benefit (income) cost. The other components of net benefit (income) 
cost are required to be presented in the income statement separately from the service cost component and outside of operating 
income. The amendments also allow only the service cost component of net benefit (income) cost to be eligible for capitalization. 
The amendments in this ASU are effective for fiscal years beginning after December 15, 2017. The amendments in this ASU 
should be applied (1) retrospectively for the presentation of the service cost component and the other components of net periodic 
pension (income) cost and net periodic postretirement benefit (income) cost on the income statement, and (2) prospectively, on 
and after the effective date, for the capitalization of the service cost component of net periodic pension (income) cost and net 
periodic postretirement benefit (income) cost in assets.  The Company is evaluating the effect this guidance will have on its results 
of operations, cash flows and financial position.

In  February  2018,  the  FASB  issued ASU No.  2018-02, Income  Statement—Reporting  Comprehensive  Income  (Topic  220): 
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to address a specific consequence of 
the Tax Act by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded 
tax effects resulting from the Tax Act's reduction of the U.S. federal corporate income tax rate. The standard is effective for all 
entities for annual periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the 
period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate 
in the Tax Act is recognized.  The Company early adopted this ASU on April 30, 2018 and as a result recorded a net increase to 
retained earnings and decrease to accumulated other comprehensive income (loss) of $8.7 million to reclassify the income tax 
effects of the Tax Act on the Company’s pension plans.  Other than those effects related to the Tax Act, the Company’s policy is 
to release stranded tax effects related to its pension plan from other comprehensive income only upon termination or full settlement 
of the plan.

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.

Reclassifications:  Certain reclassifications have been made to prior period balances to conform to the current year presentation.

Note B -- Acquisition of RSI Home Products, Inc. (the "RSI Acquisition")

On November 30, 2017, American Woodmark, Alliance Merger Sub, Inc. ("Merger Sub"), RSI Home Products, Inc. ("RSI") and 
Ronald M. Simon, as the RSI stockholder representative, entered into a merger agreement (the "Merger Agreement"), pursuant to 
which the parties agreed to merge Merger Sub with and into RSI pursuant to the terms and subject to the conditions set forth in 
the Merger Agreement, with RSI continuing as the surviving corporation and as a wholly owned subsidiary of American Woodmark.  
On December 29, 2017 (the "Acquisition Date"), the Company consummated the RSI Acquisition pursuant to the terms of the 
Merger Agreement.  As a result of the merger of Merger Sub with and into RSI, Merger Sub’s separate corporate existence ceased, 
and  RSI  continued  as  the  surviving  corporation  and  a  wholly  owned  subsidiary  of American  Woodmark.  RSI  is  a  leading 
manufacturer of kitchen and bath cabinetry and home organization products. The acquisition is expected to enable the Company 
to make further progress in implementing its business strategy of increasing operational efficiency to drive enhanced profitability, 
leveraging differentiated service platforms to grow revenue, and continuing to deepen relationships within its existing customer 
base.

In  connection  with  the  RSI Acquisition,  on  December  29,  2017,  the  Company  entered  into  a  credit  agreement  (the  "Credit 
Agreement") with a syndicate of lenders and Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, 

37

 
 
 
providing for a $100 million, 5-year revolving loan facility with a $25 million sub-facility for the issuance of letters of credit (the 
“Revolving Facility”), a $250 million, 5-year initial term loan facility (the "Initial Term Loan") and  a $250 million delayed draw 
term loan facility (the "Delayed Draw Term Loan" and, together with the Revolving Facility and the Initial Term Loan, the "Credit 
Facilities") (See Note G--Loans Payable and Long-Term Debt for further details).  American Woodmark used the full proceeds 
of the Initial Term Loan and approximately $50 million in loans under the Revolving Facility, together with cash on its balance 
sheet, to fund the cash portion of the RSI Acquisition consideration and its transaction fees and expenses. 

At the closing of the RSI Acquisition, American Woodmark assumed approximately $589 million (including accrued interest) of 
RSI’s indebtedness consisting largely of RSI’s 6½% Senior Secured Second Lien Notes due 2023 (the "RSI Notes"). (See Note 
G--Loans Payable and Long-Term Debt).

Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

As consideration for the RSI Acquisition, American Woodmark paid total accounting consideration of $554.2 million including 
cash consideration of $364.4 million, net of cash acquired, and 1,457,568 newly issued shares of American Woodmark common 
stock valued at $189.8 million based on $130.25 per share, which was the closing stock price on the Acquisition Date.  The 
consideration paid was subject to a working capital adjustment by which the consideration was adjusted as the amount of working 
capital delivered at the Acquisition Date was less than a target amount.  The working capital adjustment has been finalized and 
the accounting consideration does reflect the adjustment to the estimated working capital reflected in the consideration paid at the 
Acquisition Date. 

The Company accounted for the acquisition of RSI as a business combination, which requires the Company to record the assets 
acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of net assets acquired 
is recorded as goodwill. The Company has commenced the appraisals necessary to assess the fair values of the tangible and 
intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the Acquisition Date. The 
amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional information 
is obtained about the facts and circumstances that existed as of the Acquisition Date. The final determination of the fair values of 
certain assets and liabilities will be completed within the measurement period of up to one year from the Acquisition Date permitted 
under GAAP. The final values may also result in changes to depreciation and amortization expense related to certain assets such 
as buildings, equipment and intangible assets. Any potential adjustments made could be material in relation to the preliminary 
values presented in the table below. 

The following table summarizes the allocation of the preliminary purchase price as of the Acquisition Date, which is based on the 
accounting consideration of $554.2 million, to the estimated fair value of assets acquired and liabilities assumed (in thousands):

38

Goodwill
Customer relationship intangibles
Property, plant and equipment
Inventories
Customer receivables
Income taxes receivable
Trademarks
Prepaid expenses and other
Leasehold interests

Total identifiable assets and goodwill acquired

Debt
Deferred income taxes
Accrued expenses
Accounts payable
Notes payable

Income taxes payable

Total liabilities assumed

$

767,451
274,000
86,275
66,293
54,649
18,450
10,000
4,571

151
1,281,840

602,313
67,368
29,777
25,113
2,988

49

727,608

Total accounting consideration

$

554,232

The fair value of the assets acquired and liabilities assumed were preliminarily determined using income, market and cost valuation 
methodologies. The fair value of debt acquired was determined using Level 1 inputs as quoted prices in active markets for identical 
liabilities were available.  The fair value measurements, aside from debt, were estimated using significant inputs that are not 
observable in the market and thus represent Level 3 measurements as defined in Accounting Standards Codification (ASC) 820. 
The income approach was primarily used to value the customer relationship intangibles and trademarks. The income approach 
determines value for an asset or liability based on the present value of cash flows projected to be generated over the remaining 
economic life of the asset or liability being measured. Both the amount and the duration of the cash flows are considered from a 
market participant perspective. Our estimates of market participant net cash flows considered historical and projected product 
pricing, operational performance including company specific synergies, product life cycles, material and labor pricing, and other 
relevant customer, contractual and market factors. The net cash flows are discounted to present value using a discount rate that 
reflects the relative risk of achieving the cash flow and the time value of money. The market approach is a valuation technique 
that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, 
or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with 
another of equivalent economic utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost 
for the property, less an allowance for loss in value due to depreciation. The cost and market approaches were used to value 
inventory, while the cost approach was the primary approach used to value property, plant and equipment. 

The preliminary purchase price allocation resulted in the recognition of $767.5 million of goodwill, which is not expected to be 
amortizable for tax purposes. The goodwill recognized is attributable to expected revenue synergies generated by the integration 
of the Company’s products with RSI's, cost synergies resulting from purchasing and manufacturing activities, and intangible assets 
that do not qualify for separate recognition, such as the assembled workforce of RSI. 

Customer receivables were recorded at the contractual amounts due of $57.1 million, less an allowance for returns and discounts 
of $2.4 million, and an allowance for doubtful accounts of $0.1 million, which approximates their fair value.

Determining the fair value of assets acquired and liabilities assumed requires the exercise of significant judgment, including the 
amount and timing of expected future cash flows, long-term growth rates and discount rates. The cash flows employed in the 
valuation are based on the Company’s best estimates of future sales, earnings and cash flows after considering factors such as 
general market conditions, expected future customer orders, contracts with suppliers, labor costs, changes in working capital, long 
term business plans and recent operating performance. Use of different estimates and judgments could yield different results.

39

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Impact to Financial Results for the Fiscal Year Ended April 30, 2018

RSI’s financial results have been included in our consolidated financial results for the period from the Acquisition Date to April 
30, 2018. As a result, our consolidated financial results for the fiscal year ended April 30, 2018 do not reflect a full year of RSI 
results. From December 29, 2017 to April 30, 2018, RSI generated net sales of approximately $177.7 million and an operating 
income of approximately $9.1 million, inclusive of intangible amortization and adjustments to account for the acquisition, including 
a $6.3 million charge to cost of sales as a result of the step-up of inventory as of the Acquisition Date to fair value.

The Company incurred approximately $12.9 million of transaction costs associated with the RSI Acquisition during the twelve 
months ended April 30, 2018 which the Company expensed as incurred. These costs are included in general and administrative 
expenses on the Consolidated Statements of Income.

Supplemental Pro Forma Financial Information (unaudited)

The following table presents summarized unaudited pro forma financial information as if RSI had been included in the Company’s 
financial results for the entire fiscal years ended April 30, 2018 and 2017:

(in thousands)
 Net Sales
 Net Income (1)
 Net earnings per share - basic
 Net earnings per share - diluted

FISCAL YEARS ENDED APRIL 30,

2018

2017

$
$
$
$

1,613,663 $
67,388 $
3.83 $
3.80 $

1,623,441
93,798
5.30
5.26

(1) Includes stock compensation expense of $17.5 million and $7.4 million for the fiscal year ended April 30, 2018 and 2017, 
respectively, calculated under the intrinsic value method in measuring stock-based liability awards related to stock-based grants 
made by RSI prior to the RSI Acquisition.

The unaudited supplemental pro forma financial data above assumes the RSI Acquisition occurred on May 1, 2016 and has been 
calculated after applying the Company’s accounting policies and adjusting the historical results of RSI with pro forma adjustments, 
net of a statutory tax rate of 34.4% and 40.4% for the fiscal years ended April 30, 2018 and 2017, respectively. Significant pro 
forma adjustments include the recognition of additional amortization expense related to acquired intangible assets (net of historical 
amortization expense of RSI), additional interest expense related to the initial term loan facility used to finance the acquisition, 
and elimination of the inventory fair value step-up expense and transaction related expenses which are non-recurring in nature. 
These adjustments assume the application of fair value adjustments to intangibles and that the $300.0 million borrowed under the 
Credit Agreement occurred on May 1, 2016 and are as follows: amortization expense, net of tax, of $20.0 million and $27.2 million
for the fiscal years ended April 30, 2018 and 2017, respectively; interest expense, net of tax, (including amortization expense 
related to $6.7 million of debt issuance costs, which are being amortized over a period of 5 years) of $2.4 million and $4.4 million
for the fiscal years ended April 30, 2018 and 2017, respectively.  The following amounts have been excluded: inventory fair value 
step-up expense, net of tax, of $4.1 million for the fiscal year ended April 30, 2018; and transaction expense add-back, net of tax, 
of $8.5 million and $1.6 million for the fiscal years ended April 30, 2018 and 2017.

The unaudited supplemental pro forma financial information does not reflect the realization of any expected ongoing cost or 
revenue synergies relating to the integration of the two companies. Further, the pro forma data should not be considered indicative 
of the results that would have occurred if the RSI Acquisition, related financing and associated issuance of Senior Notes (defined 
herein) and repurchase or redemption of the RSI Notes had been actually consummated on May 1, 2016, nor are they indicative 
of future results. 

40

Note C -- 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 D -- 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 inventories

APRIL 30

2018

2017

142,622

$

66,373

(259)
(6,008)

136,355

$

(148)
(3,110)

63,115

APRIL 30

2018

2017

41,728

$

44,905

34,111

120,744
(15,943)

18,230

18,704

19,372

56,306
(13,447)

104,801

$

42,859

$

$

$

$

Of the total inventory of $104.8 million, $56.6 million is carried under the FIFO method and $48.2 is carried under the LIFO 
methods of accounting.

Note E -- 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

APRIL 30

2018

2017

$

4,751

$

112,757

11,202

274,723

30,270

10,931

444,634
(226,532)

3,581

81,172

11,202

187,836

29,378

10,838

324,007
(216,074)

Total

$

218,102

$

107,933

Amortization and depreciation expense on property, plant and equipment amounted to $21.9 million, $14.2 million and $11.6 
million in fiscal years 2018, 2017 and 2016, respectively.  Accumulated amortization on capital leases included in the above table 
amounted to $30.0 million and $29.7 million as of April 30, 2018 and 2017, respectively.

41

 
 
 
 
 
 
Note F -- Intangible Assets and Trademarks

The components of customer relationships intangibles were:

(in thousands)
Customer relationship intangibles, acquired December 29, 2017
Less accumulated amortization

Total

The components of trademarks were:

(in thousands)
Trademarks, acquired December 29, 2017
Less accumulated amortization

Total

APRIL 30

2018

2017

$

274,000
(15,222)

258,778

$

APRIL 30

2018

2017

$

10,000
(1,111)

8,889

$

—

—

—

—

—

—

$

$

$

$

Amortization expense on customer relationship intangibles and trademarks amounted to $16.3 million in fiscal year 2018.

Note G -- Loans Payable and Long-Term Debt

Maturities of long-term debt are as follows:

FISCAL YEARS ENDING APRIL 30

(in thousands)

2019

2020

2021

2022

2023

2024
AND
THERE-
 AFTER

TOTAL
OUTSTANDING

Term loans

$

— $ 35,000

$ 50,000

$ 62,500

$312,500

$

— $

460,000

The Senior Notes

—

Economic development loans

2,189

—

88

—

89

Capital lease obligations

1,948

1,786

1,342

Other long-term debt

—

—

—

—

201

713

—

207

1,665

639

817

—

6,660

— 350,000

350,000

Total

$ 4,137

$ 36,874

$ 51,431

$ 63,414

$313,346

$359,142

Debt issuance costs

Current maturities

Total long-term debt

42

4,439

7,245

6,660

828,344

(14,304)

(4,143)

809,897

$

$

$

$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Credit Facilities

On December 29, 2017, the Company entered into the Credit Agreement, which provides for the Revolving Facility, the Initial 
Term Loan and the Delayed Draw Term Loan.  Also on December 29, 2017, the Company borrowed the entire $250 million
available under the Initial Term Loan and approximately $50 million under the Revolving Facility to fund, in part, the cash portion 
of the RSI Acquisition consideration and the Company’s transaction fees and expenses related to the RSI Acquisition.  On February 
12, 2018, the Company borrowed the entire $250 million under the Delayed Draw Term Loan in connection with the refinancing 
of the RSI Notes as discussed below or to repay, in part, amounts outstanding under the Revolving Facility.  In connection with 
its entry into the Credit Agreement, the Company terminated its prior $35 million revolving credit facility with Wells Fargo.  The 
Company is required to make specified quarterly installments on both the Initial Term Loan and the Delayed Draw Loan. As of 
April 30, 2018, $230 million remained outstanding on each of the Initial Term Loan and Delayed Draw Term Loan and no amount 
was outstanding on the Revolving Facility.  The Credit Facilities mature on December 29, 2022.

Amounts outstanding under the Credit Facilities bear interest based on a fluctuating rate measured by reference to either, at the 
Company’s option, a base rate plus an applicable margin or LIBOR plus an applicable margin, with the applicable margin being 
determined by reference to the Company’s then-current “Total Funded Debt to EBITDA Ratio.”  The Company will also incur a 
quarterly commitment fee on the average daily unused portion of the Revolving Facility during the applicable quarter at a rate per 
annum also determined by reference to the Company’s then-current “Total Funded Debt to EBITDA Ratio.” In addition, a letter 
of credit fee will accrue on the face amount of any outstanding letters of credit at a per annum rate equal to the applicable margin 
on LIBOR loans, payable quarterly in arrears.  As of April 30, 2018, the applicable margin with respect to base rate loans and 
LIBOR loans was 1.25% and 2.25%, respectively, and the commitment fee was 0.30%.

The Credit Agreement includes negative covenants restricting the ability of the Company and its subsidiaries to incur additional 
indebtedness, create additional liens on its assets, make certain investments, dispose of its assets or engage in a merger or other 
similar transaction or engage in transactions with affiliates, subject, in each case, to the various exceptions and conditions described 
in the Credit Agreement.  The negative covenants further restrict the Company’s ability to make certain restricted payments, 
including the payment of dividends, in certain limited circumstances.  As of April 30, 2108, the Company was in compliance with 
the restrictive covenants included in the Credit Agreement.  

The Credit Agreement also includes financial covenants that require the Company to maintain a Fixed Charge Coverage Ratio (as 
defined in the Credit Agreement) of no less than 1.25 to 1.00 and a Total Secured Debt to EBITDA Ratio (as defined in the Credit 
Agreement) of no more than 2.50 to 1.00.  The Credit Agreement further requires that the Company not exceed a specified Total 
Funded Debt to EBITDA Ratio (as defined in the Credit Agreement).  The Total Funded Debt to EBITDA Ratio currently applicable 
to the Company is 3.75 to 1.00 and will decrease to 3.50 to 1.00 beginning April 30, 2019 and to 3.25 to 1.00 beginning April 30, 
2020.

At April 30, 2018, the Company’s Fixed Charge Coverage Ratio was 3.12, its Total Secured Debt to EBITDA Ratio was 1.87 and 
its Total Funded Debt to EBITDA Ratio was 3.25.

As of April 30, 2018, the Company’s obligations under the Credit Agreement were guaranteed by the Company’s subsidiaries and 
the obligations of the Company and its subsidiaries were secured by a pledge of substantially all of their respective personal 
property.

The Senior Notes

On February 12, 2018, the Company issued $350 million in aggregate principal amount of 4.875% Senior Notes due 2026 (the 
“Senior Notes”). The Senior Notes will mature on March 15, 2026. Proceeds from the sale of the Senior Notes were used to 
refinance the RSI Notes, as discussed below, and to repay, in part, amounts outstanding under the Revolving Facility.  Interest on 
the Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 
2018. The Senior Notes are, and will be, fully and unconditionally guaranteed by each of the Company’s current and future wholly-
owned domestic subsidiaries that guarantee the Company’s obligations under the Credit Agreement. The indenture governing the 
Senior Notes restricts the ability of the Company and the Company’s “restricted subsidiaries” to, as applicable, (i) incur additional 
indebtedness or issue certain preferred shares, (ii) create liens, (iii) pay dividends, redeem or repurchase stock or make other 
distributions  or  restricted  payments,  (iv)  make  certain  investments,  (v)  create  restrictions  on  the  ability  of  the  “restricted 
subsidiaries” to pay dividends to the Company or make other intercompany transfers, (vi) transfer or sell assets, (vii) merge or 
consolidate with a third party and (viii) enter into certain transactions with affiliates of the Company, subject, in each case, to 
certain qualifications and exceptions as described in the indenture.  As of April 30, 2108, the Company was in compliance with 
all covenants under the indenture governing the Senior Notes.

43

At April 30, 2018, the book value of the Senior Notes was $350 million and the fair value was $339 million, based on Level 2 
inputs.  See Note O -- Fair Value Measurements for a discussion of Level 2 inputs.

The RSI Notes

On December 29, 2017, as a result of the closing of the RSI Acquisition, the Company assumed, through its acquisition of all of 
the equity interests of RSI, the RSI Notes.  As of December 29, 2017, the RSI Notes had a fair value of $602.3 million.  

The Company utilized the proceeds from the issuance of the Senior Notes and borrowings under the Delayed Draw Term Loan, 
together with cash on hand, to (A) fund (i) the redemption of $115 million in aggregate principal amount of the RSI Notes on 
February 26, 2018, (ii) the purchase of approximately $449.1 million in aggregate principal amount of the RSI Notes on February 
12, 2018 pursuant to a tender offer that commenced on January 29, 2018 and (iii) the redemption of approximately $10.9 million in 
aggregate principal amount of the RSI Notes on February 28, 2018 pursuant to a make-whole call, and (B) repaid $30 million of 
the amount borrowed under the Revolving Facility in connection with the closing of the RSI Acquisition. As a result of these 
redemptions and the tender offer, none of the RSI Notes remain outstanding.

Other RSI Debt

On December 29, 2017, the Company also assumed, through its acquisition of all of the equity interests of RSI, $2.8 million of 
subordinated promissory notes payable to certain current and former RSI employees.  The promissory notes each have a term of 
5 years, bear interest at rates ranging from 1.01% to 2.12% per annum, may be prepaid by RSI at any time without penalty and 
are due in annual installments of principal and interest on their respective anniversary dates.  The notes were issued in exchange 
for the cancellation of vested stock options of RSI either upon the termination of the applicable employee or immediately prior 
to the expiration of such options.  During the fourth fiscal quarter of fiscal 2018 these notes were repaid in full. 

Economic Development Loans

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, 2018 and 2017.  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. 

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.

In 2016, the Company entered into a $0.8 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 June 1, 2026 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.

Capital Lease Obligations

From 2014 through 2018, the Company entered into a total of 12 capitalized lease agreements in the aggregate amount of $2.0 
million with First American Financial Bancorp related to financing computer equipment.  Each lease has a term of 48 months and 
an interest rate between 3.5% and 6.5%.  The leases require quarterly rental payments.  The aggregate outstanding amount under 
all of these leases as of April 30, 2018 and 2017 was $0.9 million and $1.4 million, respectively.

From 2014 through 2018, the Company entered into a total of 19 capitalized lease agreements in the aggregate amount of $3.2 
million with e-Plus Group related to financing computer equipment.  There are 15 leases with a term of 51 months and 4 leases 
with a term of 36 months.  All leases have an interest rate between 3.5% and 6.5%.  The leases require monthly rental payments.  The 
aggregate outstanding amount under all of these leases as of April 30, 2018 and 2017 was $2.2 million and $1.0 million, respectively. 

44

                                           
 
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, 2018 and 2017 were $3.8 million and $4.4 
million, respectively.

Other Long-term Debt

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 30 years with an aggregate interest 
rate of approximately 1.2%.  As of April 30, 2018 and 2017, the Company had drawn $6.7 million and $5.9 million, respectively, 
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 certain loan agreements and the capital lease 
arrangements. The Company was in compliance with all covenants contained in its loan agreements and capital leases at April 30, 
2018.

Principle Payments Subsequent to Year End

Since year-end, $40 million has been paid toward the principle of the Credit Facilities.

Note H -- 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

45

FISCAL YEARS ENDED APRIL 30

2018

2017

2016

$

63,141

$

71,199

$

58,723

16,631

16,259

16,256

114

139

186

16,745

16,398

16,442

$
$

3.80
3.77

$
$

4.38
4.34

$
$

3.61
3.57

          
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
There were no potentially dilutive securities for the fiscal years ended April 30, 2018, 2017 and 2016, which were excluded from 
the calculation of net earnings per share.    

Note I – 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,  2018,  2017  and  2016  was  $3.1  million,  $3.5  million  and  $3.6  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, 2018, the Company had stock option and RSU awards outstanding under three different plans: (1) second amended 
and restated 2004 stock incentive plan for employees; (2) 2006 non-employee directors equity ownership plan; and (3) 2015 non-
employee directors equity ownership plan.  As of April 30, 2018, there were 841,504 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.

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 Company did not grant stock options during the fiscal years ended April 30, 2018 and 2017.

FISCAL YEAR
ENDED APRIL 30

2016

Weighted-average fair value of grants

$

Expected volatility

Expected term in years

Risk-free interest rate

Expected dividend yield

Stock Option Activity

18.59

29.8%

5.8

2.16%

0.0%

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.

46

 
 
 
 
 
 
 
 
 
 
 
 
The following table presents a summary of the Company’s stock option activity for the fiscal years ended April 30, 2018, 2017 
and 2016 (remaining contractual term in years and exercise prices are weighted-averages):

Outstanding at April 30, 2015

Granted
Exercised
Cancelled or expired
Outstanding at April 30, 2016

Granted
Exercised
Cancelled or expired
Outstanding at April 30, 2017

Granted

Exercised

Cancelled or expired

Outstanding at April 30, 2018

Vested and expected to vest in the future
at April 30, 2018

Exercisable at April 30, 2018

NUMBER OF
OPTIONS

398,075

30,700
(287,975)
(14,167)
126,633

—
(71,715)
—
54,918

—

(36,950)

—

17,968

17,968

9,266

WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
TERM
5.0

9.1
—
—
5.8

—
—
—
5.6

—

—

—

4.5

4.5

2.1

WEIGHTED
AVERAGE
EXERCISE
PRICE

AGGREGATE
INTRINSIC
VALUE
(in thousands)

$28.46

57.11
27.99
40.43
$35.15

—
33.00
—
$37.95

—

34.90

—

$44.23

$44.23

$32.14

$

$

$

$

$

$

8,851

—
11,089
—
4,773

—
2,597
—
2,963

—

1,748

—

682

682

464

The aggregate intrinsic value in the previous table of the outstanding options on April 30, 2018 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 2018 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 
by the option holders had all option holders exercised their options on April 30, 2018. 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, 2018, 
2017 and 2016 was $0.3 million, $0.6 million and $0.7 million, respectively.    

Cash received from option exercises for the fiscal years ended April 30, 2018, 2017 and 2016, was an aggregate of $1.3 million, 
$2.4 million and $8.1 million, respectively.  The actual tax benefit realized for the tax deduction from option exercises of stock 
option  awards  totaled  $0.0  million,  $1.0  million  and  $4.3  million  for  the  fiscal  years  ended April  30,  2018,  2017  and  2016, 
respectively.

The following table summarizes information about stock options outstanding at April 30, 2018 (remaining lives in years and 
exercise prices are weighted-averages):

OPTION PRICE
PER SHARE
$22.77-$23.96
$57.11

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

REMAINING
LIFE
0.2
7.1

EXERCISE
PRICE
$23.09
$57.11

OPTIONS

6,800
11,168
17,968

EXERCISE
PRICE
$23.09
57.11

OPTIONS

6,800
2,466
9,266

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 

47

 
 
 
 
 
 
 
 
 
 
 
employees were awarded both service-based and performance-based RSUs ("PBRSUs") in fiscal years 2018, 2017 and 2016.  The 
PBRSUs granted in fiscal 2018 and 2017 are earned based on achievement of a number of goals pertaining to the Company’s 
financial performance during three one-year performance periods and the achievement of certain cultural goals for the three-year 
period. 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.

The following table contains a summary of the Company’s RSU activity for the fiscal years ended April 30, 2018, 2017 and 2016:

Issued and outstanding, April 30, 2015

210,944

103,850

314,794

PERFORMANCE-
BASED RSUs

SERVICE-
BASED RSUs

TOTAL RSUs

WEIGHTED
AVERAGE
GRANT
DATE FAIR
VALUE
$27.15

Granted
Cancelled due to non-achievement of
performance goals
Settled in common stock
Forfeited

Issued and outstanding, April 30, 2016

Granted

Cancelled due to non-achievement of
performance goals

Settled in common stock

Forfeited

Issued and outstanding, April 30, 2017

Granted

Cancelled due to non-achievement of
performance goals

Settled in common stock

Forfeited

Issued and outstanding, April 30, 2018

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

36,058

25,322

61,380

$66.58

(4,270)
(45,509)
(1,979)
125,067

—
(32,300)
(1,280)
67,454

(4,270)
(77,809)
(3,259)
192,521

$64.55

$37.09

$49.40

$50.09

33,080

22,250

55,330

$95.62

—
(51,191)
(9,305)
97,651

—
(28,447)
(6,198)
55,059

—
(79,638)
(15,503)
152,710

—

$32.96

$71.91

$73.34

As of April 30, 2018, there was $4.9 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 
1.6 years.

For the fiscal years ended April 30, 2018, 2017 and 2016 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:

2018

2017

2016

$

$

667

756

1,674

$

665

$

1,066

1,738

3,097

$

3,469

$

608

1,079

1,922

3,609

During fiscal 2018, the Board of Directors of the Company approved grants of 4,496 cash-settled performance-based restricted 
stock tracking units ("RSTUs") and 2,519 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 

48

 
 
 
applicable performance and cultural 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.  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 expense of $0.4 million, $0.8 million and $0.8 million related to RSTUs for the fiscal years ended April 30, 2018, 2017 
and 2016, respectively.  A liability for payment of the RSTUs is included in the Company's balance sheets in the amount of $1.0 
million and $1.5 million as of April 30, 2018 and 2017, respectively. 

Note J – Employee Benefit and Retirement Plans

Retirement Savings Plans

American Woodmark

In fiscal 1990, the Company instituted the American Woodmark Investment Savings Stock Ownership Plan and 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% of net income, 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 $3.7 million, $3.6 million and $2.9 million in fiscal years 2018, 2017 and 2016, respectively.  

The Company matches 100% of an employee’s annual 401(k) contributions to the plan up to 4% of annual compensation.      

RSI

The Company has a defined-contribution 401(k) profit sharing plan (“401(k) plan”) for all non-union employees. Employees are 
eligible to contribute to the 401(k) plan 60 days after starting employment. Under the 401(k) plan, employees may contribute up 
to 60 percent of their compensation, subject to an annual contribution limit prescribed by the Internal Revenue Service. The 
Company has elected to make safe harbor matching contributions of up to four percent of each participant’s eligible compensation. 
The Company’s safe harbor contributions vest immediately. 

The expense for 401(k) matching contributions for both plans was $8.0 million, $7.2 million and $6.6 million, in fiscal years 2018, 
2017 and 2016, 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, 2018 is $66.1 million ($49.1 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 $1.6 million ($1.2 million net of tax) in net actuarial losses in net periodic pension benefit costs during fiscal 2019.   
The Company uses an April 30 measurement date for its benefit plans.

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:

49

 
 
 
 
 
 
 
(in thousands)
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of year
Interest cost
Actuarial gains
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

APRIL 30

2018

2017

$

$

$

$

$

165,173
5,727
(2,596)
(4,881)
163,423

137,141
4,884
19,319
(4,881)
156,463

$

$

$

$

174,096
5,772
(4,672)
(10,023)
165,173

106,965
12,895
27,304
(10,023)
137,141

(6,960) $

(28,032)

The accumulated benefit obligation for both pension plans was $163.4 million and $165.2 million at April 30, 2018 and 2017, 
respectively.

(in thousands)

2018

APRIL 30
2017

2016

COMPONENTS OF NET PERIODIC PENSION BENEFIT COST
Interest cost
Expected return on plan assets
Recognized net actuarial loss
Pension benefit cost

$

$

$

5,727
(8,936)
1,601
(1,608) $

$

5,772
(8,079)
1,771
(536) $

7,014
(8,142)
1,412
284

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:

WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE BENEFIT
OBLIGATIONS

Discount rate

FISCAL YEARS ENDED APRIL 30

2018

2017

4.18 %

4.12 %

FISCAL YEARS ENDED APRIL 30

2018

2017

2016

WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET
PERIODIC PENSION BENEFIT COST

Discount rate
Expected return on plan assets

4.12 %
6.5 %

4.06 %
7.5 %

4.19%
7.5 %

50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 decreased the service and interest components 
of the benefit costs in fiscal 2017. There was no impact on the total benefit obligation. The Company accounted 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 $2.3 million to its pension plans in fiscal 2019.  The Company made contributions of $19.3 
million and $27.3 million to its pension plans in fiscal 2018 and 2017, respectively. 

Estimated Future Benefit Payments: The following benefit payments are expected to be paid: 

FISCAL YEAR

2019

2020

2021

2022

2023

Years 2024-2028

BENEFIT
PAYMENTS
(in thousands)

$

6,251

6,625

7,037

7,395

7,768

43,988

Plan Assets:  Pension assets by major category and the type of fair value measurement as of April 30, 2018 and 2017 are presented 
in the following tables:

51

 
 
 
 
 
FAIR VALUE MEASUREMENTS AT APRIL 30, 2018

QUOTED PRICES
IN ACTIVE
MARKETS
(LEVEL 1)

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS        

(LEVEL 3)

TOTAL

$

448

$

448

(in thousands)

Cash Equivalents
Equity Funds:

US Equity
International Equity
Fixed Income Funds:

Investment Grade Fixed Income

Total plan assets

93,459
156,463

$

$

37,421
25,135

37,421
25,135

93,459
156,463

—

—
—

—
—

—

—

—
—

FAIR VALUE MEASUREMENTS AT APRIL 30, 2017

QUOTED PRICES
IN ACTIVE
MARKETS
(LEVEL 1)

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)

SIGNIFICANT
UNOBSERVABLE
INPUTS        

(LEVEL 3)

TOTAL

$

295

$

295

78,335

78,335

45,290

123,920

$

45,290

123,920

13,221

$

137,141

—

—

—

—

—

—

—

—

(in thousands)
Cash Equivalents
Equity Funds:

Mutual Fund Equity
Fixed Income Funds:

Mutual Fund Tax Income

Plan assets at fair value

Common Collective Funds:
Capital Preservation Fund1
Total plan assets

1As discussed in Note A, investments that are measured at fair value using the net asset value per share (or its equivalent) practical 
expedient have been removed from the total plan assets in the fair value hierarchy.

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, 2018 and 2017, by asset category, were as follows:

PLAN ASSET ALLOCATION
2018

2017

2018

APRIL 30

Equity Funds
Fixed Income Funds
Total

TARGET

ACTUAL

ACTUAL

40.0 %
60.0 %
100.0 %

40.0 %
60.0 %
100.0 %

57.0 %
43.0 %
100.0 %

52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Within the broad categories outlined in the preceding table, the Company has the following specific allocations as a percentage 
of total funds invested:  60% Bond and 40% Equity.

Note K -- Income Taxes

Comprehensive tax legislation enacted through the Tax Act on December 22, 2017, significantly modified U.S. corporate income 
tax law. In addition to the law's corporate income tax rate reduction, several other provisions are pertinent to the Company's 
financial statements and related disclosures for the year ended April 30, 2018 or will have an impact on taxes in future years.

The Company recognized the income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 
118”) which provides SEC guidance on the application of ASC 740, Income Taxes, in the reporting period in which the 2017 Tax 
Act was signed into law. Accordingly, the Company’s financial statements as of January 31, 2018 reflected provisional amounts 
for those impacts for which the accounting under ASC 740 was incomplete, but a reasonable estimate could be determined. For 
items under the Tax act for which no reasonable estimate could be determined at the time, the Company continued to apply the 
tax law in effect prior to the enactment of the Tax Act.  As of April 30, 2018, the Company is still in the process of completing the 
accounting for the impact of the Tax Act.

We recorded a provisional expense of $1.6 million related to the re-valuation of U.S. deferred taxes as of January 31, 2018. During 
the three months ending April 30, 2018, we have further refined the calculation of the impact to reflect actual full-year activity 
and adjusted the provisional expense to $1.0 million.  The Company may further adjust these amounts in future periods if our 
interpretation of the Tax Act changes or as additional guidance from the U.S. Treasury becomes available.

We had not recorded an estimate of the impact of the Tax Act on the existing deferred tax assets related to executive compensation 
as of January 31, 2018 as no reasonable estimate could be made at the time. During the three months ending April 30, 2018, we 
have determined that a reasonable estimate of the impact is a reduction in deferred tax asset and a related expense of $0.1 million. 
This estimate is provisional and the Company may further adjust these amounts in future periods if our interpretation of the Tax 
Act changes or as additional guidance from the U.S. Treasury becomes available.

Income tax expense was comprised of the following:

(in thousands)

CURRENT EXPENSE

Federal

State

Foreign

Total current expense

DEFERRED EXPENSE

Federal

State

Foreign

Total deferred expense

Total expense

Other comprehensive income (loss)

Total comprehensive income tax expense

FISCAL YEARS ENDED APRIL 30

2018

2017

2016

$

8,668

$

23,638

$

18,239

1,290

257

10,215

17,833

3,642
(71)
21,404

31,619

50

4,189
—

27,827

8,607

1,292
—

9,899

37,726

4,391

$

31,669

$

42,117

$

3,195
—

21,434

10,179

1,450
—

11,629

33,063
(4,110)
28,953

The Company's effective income tax rate varied from the federal statutory rate as follows: 

53

 
 
 
 
 
 
 
 
 
 
FISCAL YEARS ENDED APRIL 30
2017

2018

2016

Federal statutory rate
Effect of:

Federal income tax credits
Acquisition and integration costs
Stock compensation
Meals and entertainment
Effect of Tax Act
Domestic production deduction
Other
Total

Effective federal income tax rate
State income taxes, net of federal tax effect
Effective income tax rate

30.4 %

35.0 %

35.0 %

(0.5)%
1.2
(2.4)
0.3
1.2
(0.8)
0.4
(0.6)%

29.8 %
3.6
33.4 %

(0.2)%
—
(1.3)
0.3
—
(2.2)
(0.3)
(3.7)%

31.3 %
3.3
34.6 %

— %
—
—
0.3
—
(2.5)
(0.1)
(2.3)%

32.7 %
3.3
36.0 %

Note that the Company's federal statutory rate for 2018 is calculated by using a blended rate comprising of the pre-Tax Act 35% 
federal statutory rate from May 1, 2017 through December 31, 2017 and 21% for the period from January 1, 2018 through April 
30, 2018.

Due to the adoption of ASU 2016-09 in fiscal year 2017, excess tax benefits of stock compensation were recorded in tax expense 
while in previous years excess benefits were recorded in additional paid-in-capital and therefore, did not impact the effective tax 
rate.      

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:

Pension benefits

Inventory

Depreciation

Intangibles
Other

APRIL 30

2018

2017

$

— $

4,772

2,180

6,513

3,937

2,865

20,267
(2,467)
17,800

1,035

240

21,076

65,294

986
88,631

8,852

6,938

1,272

7,914

4,083

862

29,921
(2,446)
27,475

—

297

9,131

—

—

9,428

Net deferred tax (liability) asset

$

(70,831) $

18,047

54

 
 
 
 
 
 
 
 
 
 
 
We have not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely 
reinvested in foreign operations. Undistributed earnings that are indefinitely reinvested in foreign operations are not significant 
as of April 30, 2018. 

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.  In fiscal 2018, 
the Company reassessed the valuation allowance related to ITCs and released $21 thousand of the valuation allowance recorded 
in fiscal 2016. 

The gross amount of state tax credit carryforwards related to state ITCs as of April 30, 2018 and 2017 was $5.2 million and $6.1 
million.  These credits expire in various years beginning in fiscal 2020.  Net of the federal impact and related valuation allowance, 
the Company recorded $1.5 million and $1.6 million of deferred tax assets related to these credits, as of April 30, 2018 and 2017.  
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, 2018 and 2017, a deferred credit balance of 
$1.3 million and $1.5 million, respectively, is included in other liabilities on the balance sheet. 

Note L -- Accounting for Uncertainty in Income Taxes

The Company accounts for its income tax uncertainties in accordance with ASC Topic 740, “Income Taxes.”

The following table summarizes the activity related to unrecognized tax benefits, excluding the federal tax benefit of state tax 
deductions:

(in thousands)
 Change in Unrecognized Tax Benefits

 Balance at beginning of year

 Reductions for tax positions of prior years

 Acquisitions, divestures, and other

 Balance at end of year

April 30

2018

2017

$

$

28

—

900

928

$

$

30
(2)
—

28

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination 
by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company 
has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has 
taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting standards. 
As of April 30, 2018, Federal tax years 2014 through 2017 remain subject to examination. The Company believes that adequate 
provisions have been made for all tax returns subject to examination.  The Company is currently not under federal audit. If the 
liability for uncertain tax positions is released the entire amount would impact the Company’s effective tax rate. 

Note M -- 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.

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, 2018.  

55

 
 
 
 
 
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

Acquisition
Accrual for warranties
Settlements

Ending balance at fiscal year end

Lease Agreements

APRIL 30

2018

2017

$

$

3,262
119
21,374
(20,710)
4,045

$

$

2,926
—

18,552
(18,216)
3,262

The Company leases certain office buildings, manufacturing buildings, service centers and equipment. Total rental expenses under 
operating leases amounted to approximately $17.0 million, $10.9 million and $9.8 million, in fiscal years 2018, 2017 and 2016, 
respectively. Minimum rental commitments as of April 30, 2018, under noncancellable leases with terms in excess of one year 
are as follows:

FISCAL YEAR

2019

2020

2021

2022

2023

2024 (and thereafter)

Less amounts representing interest (2% - 6.5%)

Total obligations under capital leases

Related Parties

OPERATING              
(in thousands)

CAPITAL                        

(in thousands)

$

$

15,536

$

15,416

14,132

9,321

7,410

32,026

93,841

$

$

2,138

1,889

1,422

750

662

828

7,689

(444)

7,245

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 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 assessed the lease terms in relation to market terms for comparable properties. Based upon this review, 
the Company believes that the rent under the lease was in line with market rates that could be obtained at arm’s length from 
unaffiliated third parties.  In April 2017, the Company gave notice that it would be terminating the lease on May 31, 2018 and the 
lease was terminated on that date.  Under this agreement, rental expense was $0.5 million, $0.5 million and $0.5 million, in fiscal 
years 2018, 2017 and 2016, respectively. As of April 30, 2018 rent due during the remaining term of the lease is approximately 
$43 thousand (included in the preceding table).

Note N -- 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. 

56

 
 
 
 
 
 
 
 
 
 
 
 
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, 2018, the Company's two largest customers, Customers A and B, represented 30.8% and 25.5% of the Company's 
gross customer receivables, respectively. At April 30, 2017, Customers A and B represented 8.2% and 20.7% 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 O -- Fair Value Measurements

PERCENT OF ANNUAL GROSS SALES
2017
20.7%
16.5%

2018
25.4%
16.4%

2016
23.9%
17.2%

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 J.

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--term debt on the Consolidated Balance Sheets approximate their fair value due to the short maturities of 
these items.  The following table summarizes the fair value of assets that are recorded in the Company’s consolidated financial 
statements as of April 30, 2018 and 2017 at fair value on a recurring basis: 

57

 
 
 
 
 
 
 
 
$

$

$

$

(in thousands)

ASSETS:

Certificates of deposit
Mutual funds

Total assets at fair value

(in thousands)

ASSETS:

Money market funds
Mutual funds
Certificates of deposit
Total assets at fair value

Note P -- Quarterly Financial Data (Unaudited)

FISCAL 2018
(in thousands, except per share amounts)

Net sales

Gross profit

Income before income taxes

Net income

Earnings per share

Basic

Diluted

FISCAL 2017
(in thousands, except per share amounts)

Net sales

Gross profit

Income before income taxes

Net income

Earnings per share

Basic

Diluted

Note Q -- Subsequent Events

FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2018
LEVEL 2

LEVEL 1

LEVEL 3

$

9,500
1,057

10,557

$

— $
—

— $

FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2017
LEVEL 2

LEVEL 1

LEVEL 3

50,146
1,038
72,250
123,434

$

$

— $
—
—
— $

—
—

—

—
—
—
—

07/31/17

10/31/17

01/31/18

04/30/18

$ 276,827

$ 274,769

$ 292,791

$ 405,887

58,494

31,372

22,281

57,335

31,463

19,755

50,379

3,764

1,996

89,195

28,161

19,109

$

$

1.37

1.36

$

$

1.22

1.21

$

$

0.12

0.12

$

$

1.09

1.08

07/31/16

10/31/16

01/31/17

04/30/17

$ 258,150

$ 264,076

$ 249,285

$ 258,737

59,317

31,960

21,661

56,152

28,430

17,637

51,596

21,773

14,553

57,571

26,762

17,348

$

$

1.33

1.32

$

$

1.08

1.07

$

$

0.90

0.89

$

$

1.07

1.06

On June 1, 2018, the Company implemented a reduction in force of approximately 69 employees nationwide.  Severance and 
outplacement charges relating to the reduction in force will total approximately $2.5 million and is expected to be completed 
during fiscal 2019.

In May 2018, the Company entered into 12 foreign currency contracts maturing from May 2018 to April 2019 to purchase
405.7 million Mexican pesos at exchange rates ranging from 19.51 to 20.47 Mexican pesos to the U.S. dollar.  The Company does 
not expect to apply hedge accounting for these contracts.

58

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
American Woodmark Corporation:

Opinion on the Consolidated Financial Statements

We  have  audited  the  accompanying  consolidated  balance  sheets  of American  Woodmark  Corporation  and  subsidiaries  (the 
Company) as of April 30, 2018 and 2017, 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, 2018, and the related notes and financial 
statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements 
present fairly, in all material respects, the financial position of the Company as of April 30, 2018 and 2017, and the results of their 
operations and their cash flows for each of the years in the three-year period ended April 30, 2018, 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) 
(PCAOB), the Company’s internal control over financial reporting as of April 30, 2018, based on criteria established in Internal 
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and 
our report dated June 29, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over 
financial reporting.

Basis for Opinion

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 are a public accounting firm registered with the PCAOB 
and  are  required  to  be  independent  with  respect  to  the  Company  in  accordance  with  the  U.S. federal  securities  laws  and  the 
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether 
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included 
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits 
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the 
overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2004.

McLean, Virginia
June 29, 2018 

59

 
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, 2018. 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,  2018.   
Pursuant to the Securities and Exchange Commission's general guidance that an assessment of a recently acquired business may 
be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our 
internal control over financial reporting does not include internal control over financial reporting related to RSI Home Products, 
Inc. (RSI).  RSI constituted approximately 15% of total assets and approximately 14% of total revenue included in the consolidated 
financial statements of the Company as of and for the year ended April 30, 2018.  The Company’s internal control over financial 
reporting as of April 30, 2018 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

Chairman and Chief Executive Officer

/s/ M. SCOTT CULBRETH

M. Scott Culbreth

Senior Vice President and Chief Financial Officer

60

 
 
  
 
Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
American Woodmark Corporation:

Opinion on Internal Control Over Financial Reporting 

We have audited American Woodmark Corporation and subsidiaries’ (the Company) internal control over financial reporting as 
of April 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of 
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective 
internal  control  over  financial  reporting  as  of April 30,  2018,  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) 
(PCAOB), the consolidated balance sheets of the Company as of April 30, 2018 and 2017, 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, 
2018, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report 
dated June 29, 2018 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired RSI Home Products, Inc. (RSI) during the year ended April 30, 2018, and management excluded from its 
assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2018, RSI’s internal 
control  over  financial  reporting  associated  with  approximately  15%  of  total  assets  and  approximately  14%  of  total  revenues  
included in the consolidated financial statements of the Company as of and for the year ended April 30, 2018.  Our audit of internal 
control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of 
RSI. 

Basis for Opinion 

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 are a public accounting firm registered with the PCAOB and are required to be independent 
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the 
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.

Definition and Limitations of Internal Control Over Financial Reporting 

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.

/s/ KPMG LLP
McLean, Virginia
June 29, 2018 

61

 
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, 2018.  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,  2018.  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, 2018, 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 “Item 1 - Election of Directors -  Information 
Regarding Nominees” in the Company’s Proxy Statement for its Annual Meeting of Shareholders to be held on August 23, 2018 
(“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 – Audit Committee” in the Proxy Statement and is incorporated in this Item by 
reference.

62

 
 
 
 
 
 
  
 
 
 
 
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,”  "Compensation  Committee  Interlocks  and  Insider 
Participation," "Company's Compensation Policies and Practices Relating to Risk Management" 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 caption 
“Security Ownership” in the Proxy Statement is incorporated in this Item by reference.

The following table summarizes information about the Company’s equity compensation plans as of April 30, 2018:

Equity Compensation Plans

Equity Compensation Plan Information

Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
(a)

Weighted average
exercise price of
outstanding
options, warrants
and rights
(b)

Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))

(c)

Plan Category

Equity compensation plans approved by security holders(1)

—

—

841,504

Options

Performance-based restricted stock units
Service-based restricted stock units

Equity compensation plans not approved by security holders(3)

Total

17,968

$

97,651

55,059

—

170,678

42.23
N/A (2)
N/A (2)

—

$42.23

—

—

—

—

841,504

(1) At April 30, 2018, the Company had stock option and restricted stock unit awards outstanding under three different plans: Amended and 
Restated 2004 Stock Incentive Plan for Employees, 2006 Non-Employee Directors Equity Ownership Plan, and 2015 Non-Employee Directors 
Restricted Stock Unit Plan.

(2) Excludes exercise price for restricted stock units issued under the Amended and Restated 2004 Stock Incentive Plan for Employees, 2006  Non-
Employee Directors Equity Ownership Plan and 2015 Non-Employee Directors Restricted Stock Unit Plan because they are converted into 
common stock on a one-for-one basis at no additional cost.

(3) The Company does not have equity compensation plans that have not been approved by the Company's security holders.

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,” and “Corporate Governance – Director Independence” in the Proxy Statement is incorporated 
in this Item by reference.

63

 
 
 
 
 
 
 
 
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 firm set forth under the captions “Report of the Audit Committee - Independent 
Auditor Fee Information” and “Report of the Audit Committee - Pre-Approval Policies and Procedures” in the Proxy Statement 
is incorporated in this Item by reference. 

Item 15.  

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)1.

 Financial Statements

PART IV

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, 2018 and 2017

Consolidated Statements of Income – for each year of the three-year period ended April 30, 2018.

Consolidated Statements of Comprehensive Income – for each year of the three-year period ended 
April 30, 2018.

Consolidated Statements of Shareholders’ Equity – for each year of the three-year period ended April 
30, 2018.

Consolidated Statements of Cash Flows – for each year of the three-year period ended April 30, 2018.

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, 
2018.

Schedules  other  than  the  one  listed  above  are  omitted  either  because  they  are  not  required  or  are 
inapplicable.

(a)3.

Exhibits 

2.1

3.1

3.1(b)

3.2

4.1

4.2(a)

Agreement and Plan of Merger, dated as of November 30, 2017, among RSI Home Products, Inc., American 
Woodmark Corporation, Alliance Merger Sub, Inc. and Ronald M. Simon, solely in his capacity as the Stockholder 
Representative (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K as filed on December 1, 
2017; Commission File No. 000-14798)

Articles of Incorporation as amended effective August 12, 1987 (incorporated by reference to Exhibit 3.1 to the 
Registrant’s Form 10-Q for the quarter ended January 31, 2003; Commission File No. 000-14798).

Articles of Amendment to the Articles of Incorporation effective September 10, 2004 (incorporated by reference 
to Exhibit 3.1 to the Registrant’s Form 8-K as filed on August 31, 2004; Commission File No. 000-14798).

Bylaws - as amended and restated effective August 24, 2017 (incorporated by reference to Exhibit 3.1 to the 
Registrant’s Form 8-K as filed on May 26, 2017; 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).

Indenture, dated as of March 16, 2015, by and among RSI Home Products, Inc., the guarantors from time to 
time party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (incorporated 
by reference to Exhibit 4.2 to the Registrant’s Form 10-Q for the quarter ended January 31, 2018; Commission 
File No. 000-14798).

64

4.2(b)

4.2(c)

4.3

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)

10.1(m)

Supplemental Indenture, dated as of December 15, 2017, among RSI Home Products, Inc., the guarantors party 
thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (incorporated by reference 
to Exhibit 4.3 to the Registrant’s Form 10-Q for the quarter ended January 31, 2018; Commission File No. 
000-14798).

Second Supplemental Indenture, dated as of February 9, 2018, among RSI Home Products, Inc., the guarantors 
party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (incorporated by 
reference to Exhibit 4.4 to the Registrant’s Form 10-Q for the quarter ended January 31, 2018; Commission File 
No. 000-14798).

Indenture, dated as of February 12, 2018, among American Woodmark Corporation, the guarantors from time 
to time party thereto and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 
4.1 to the Registrant’s Form 8-K as filed on February 14, 2018; Commission File No. 000-14798).

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).

Commitment Letter, dated as of November 30, 2017, among American Woodmark Corporation, Wells Fargo 
Bank, National Association, and Wells Fargo Securities, LLC (incorporated by reference to Exhibit 10.1 to the 
Registrant’s Form 8-K as filed on December 1, 2017; Commission File No. 000-14798).

65

 
10.1(n)

10.1(o)

10.1(p)

10.6 (a)(i)

10.6 (a)(ii)

10.6 (b)

10.7 (a)

10.7 (b)

10.7 (c)

10.7(d)

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)

Credit Agreement, dated as of December 29, 2017, by and among American Woodmark Corporation, as Borrower, 
the Lenders referred to therein as Lenders and Wells Fargo Bank, National Association, as Administrative Agent, 
Swingline Lender and Issuer Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K as 
filed on January 5, 2018; Commission File No. 000-14798).

Collateral Agreement, dated as of December 29, 2017, by American Woodmark Corporation and certain of its 
subsidiaries,  as  Grantors,  in  favor  of  Wells  Fargo  Bank,  National  Association,  as  Administrative  Agent 
(incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K as filed on January 5, 2018; Commission 
File No. 000-14798).

Joinder Agreement, dated as of February 12, 2018, by American Woodmark Corporation and each of its subsidiary 
named therein in favor of Wells Fargo Bank, National Association, as Administrative Agent, for the benefit of 
the Secured Parties (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter 
ended January 31, 2018; Commission File No. 000-14798).

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).

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).*

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).*

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).*

66

10.10 (a)

10.10 (b)

10.10 (c)

10.10 (d)

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 10.10(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).

10.11

2016 Employee Stock Incentive Plan (incorporated by reference to Exhibit A to the Registrant’s Definitive Proxy 
Statement on Schedule 14A as filed on June 29, 2016; Commission File No. 000-14798).

10.11(a)

10.11(b)

10.11(c)

10.12

21

23.1

31.1

31.2

32.1

101

Form of Grant Letter used in connection with awards of service-based restricted stock units granted under the 
Company's 2016 Employee Stock Incentive Plan (incorporated by reference to Exhibit 10.1(a) to the Registrant’s 
Form 10-Q for the quarter ended July 31, 2017; 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  2016  Employee  Stock  Incentive  Plan  (incorporated  by  reference  to  Exhibit  10.1(b)  to  the 
Registrant’s Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).*

Form of Grant Letter used in connection with awards of cultural-based restricted stock units granted under the 
Company's 2016 Employee Stock Incentive Plan (incorporated by reference to Exhibit 10.1(c) to the Registrant’s 
Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).*

Shareholders Agreement, dated as of November 30, 2017, by and among American Woodmark Corporation and 
the shareholders party thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the 
quarter ended January 31, 2018; Commission File No. 000-14798).

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, 2018 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.

67

 
Schedule II - Valuation and Qualifying Accounts

AMERICAN WOODMARK CORPORATION
(In Thousands)

Description (a)

Year ended April 30, 2018:

Allowance for doubtful accounts

Reserve for cash discounts

Reserve for sales returns and allowances

Year ended April 30, 2017:

Allowance for doubtful accounts

Reserve for cash discounts

Reserve for sales returns and allowances

Year ended April 30, 2016:

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

148

979

$

$

169  

$

78

11,999 (c) $ 584

$

$

(136) (b) $

259

(11,935) (d) $

1,627

2,131

$

11,318 (c) $ 1,829

$

(10,897)  

$

4,381

171

827

$

$

200  

$ — $

(223) (b) $

148

10,027 (c) $ — $

(9,875) (d) $

979

1,782

$

7,962 (c) $ — $

(7,613)  

$

2,131

173

746

$

$

108  

$ — $

(110) (b) $

171

9,570 (c) $ — $

(9,489) (d) $

827

1,594

$

7,833 (c) $ — $

(7,645)  

$

1,782  

(a) 
(b) 
(c) 
(d) 

All reserves relate to accounts receivable.
Principally write-offs, net of collections.
Reduction of gross sales.
Cash discounts granted.

Item 16.  Form 10-K Summary

None.

68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018

American Woodmark Corporation

(Registrant)

/s/ S. CARY DUNSTON

S. Cary Dunston
Chairman 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, 2018

June 29, 2018

June 29, 2018

June 29, 2018

June 29, 2018

June 29, 2018

June 29, 2018

June 29, 2018

June 29, 2018

/s/ S. CARY DUNSTON
S. Cary Dunston
Chairman and Chief
Executive Officer
(Principal Executive Officer)
Director

/s/ ANDREW B. COGAN
Andrew B. Cogan
Director

/s/ MARTHA M. HAYES
Martha M. Hayes
Director

/s/ CAROL B. MOERDYK
Carol B. Moerdyk
Director

/s/ VANCE W. TANG
Vance W. Tang
Director

/s/ M. SCOTT CULBRETH
M. Scott Culbreth
Senior Vice President and Chief 
Financial Officer
(Principal Financial Officer and 
Principal Accounting Officer)

/s/ JAMES G. DAVIS, JR.
James G. Davis, Jr.
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
Treasury Director
American Woodmark Corporation
P.O. Box 1980
Winchester, Virginia 22604-8090

69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
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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.

directors and executive officers
Robert J. Adams, Jr.
Senior Vice President of Value Stream Operations

R. Perry Campbell
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

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
Chairman and Chief Executive Officer

Martha M. Hayes
Director
Member of the Compensation Committee and Member of the 
Governance Committee 
Retired Vice President Customer Development of Sara Lee Corporation

Daniel T. Hendrix
Director
Member of the Audit Committee
Chairman 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 Compensation Committee
Former 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.

corporate information
annual meeting
The 2018 Annual Meeting of Shareholders will 
be held on Thursday, August 23, 2018, at 9:00 
a.m. at The George Washington Hotel, 103 East  
Piccadilly Street 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 ending on  
April 30, 2018, may be obtained free  
of charge on the Company’s website  
at americanwoodmark.com or by writing:
Kevin Dunnigan 
Treasury Director 
American Woodmark Corporation 
PO Box 1980 
Winchester, VA 22604-8090

corporate headquarters
American Woodmark Corporation 
561 Shady Elm Road 
Winchester, VA 22602 
(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 
561 Shady Elm Road 
Winchester, VA 22602 
(540) 665-9100 
americanwoodmark.com

Printed in the U.S.A. on recycled paper. © 2018 American Woodmark Corporation

AMERICAN WOODMARK

C O R P O R A T I O N

®

561 Shady Elm Road 
Winchester, Virginia 22602
(540) 665-9100
americanwoodmark.com

AMERICAN WOODMARK

C O R P O R A T I O N

®

2018 Annual Report