UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended April 30, 2021
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)
UNITED STATES SECURITIES AND EXCHANGE COMMISSIONVirginia54-1138147
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 endedApril 30, 2019
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period fromto
Commission File Number:000-14798
American Woodmark Corporation
(Exact name of registrant as specified in its charter)
Virginia54-1138147
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
561 Shady Elm Road, Winchester, VirginiaWinchester,Virginia22602
(Address of principal executive offices)(Zip Code)

(540) 665-9100
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
(Registrant's telephone number, including area code)(540) 665-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Trading SymbolName of each exchange on which registered
Common Stock (no par value)AMWDAMWDNASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:  None

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 every Interactive Data File required to be submitted 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 such files).
Yes [X]☒  No [ ]☐
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"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”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 any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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, 2018,30, 2020, the last business day of the Company’sCompany's most recent second quarter was $1,043,079,866.$1,394,021,693.
As of June 21, 2019, 16,869,94918, 2021, 16,608,781 shares of the Registrant's Common Stock were outstanding.


DOCUMENTS INCORPORATED BY REFERENCE 


Portions of the Registrant’sRegistrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on August 22, 2019 (“26, 2021 ("Proxy Statement”Statement") are incorporated by reference into Part III of this Form 10-K.





American Woodmark Corporation
20192020 Annual Report on Form 10-K


TABLE OF CONTENTS
 
PART I
Item 1.
2
Item 1A.
6
Item 1B.
13
Item 2.
13
Item 3.14
Item 4.
14
14
PART III
Item 1.5.2
Item 1A.
Risk Factors
5
Item 1B.
Unresolved Staff Comments
12
Item 2.
Properties
12
Item 3.
Legal Proceedings
13
Item 4.
Mine Safety Disclosures
13
Executive Officers of the Registrant
13
PART II
Item 5.
Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
14
15
Item 6.
16
Item 7.17
Item 7A.
28
Item 8.
29
Item 9.6059
Item 9A.60
59
Item 9B.61
59
PART III
Item 10.61
59
Item 11.62
60
Item 12.62
60
Item 13.63
60
Item 14.63
60
PART IV
Item 15.63
61
Item 16.67
64
SIGNATURES6865

1



PART I
 
Item 1.        BUSINESS
 
Our Company


American Woodmark Corporation (“("American Woodmark,”" the “Company,” “we,” “our”"Company," "we," "our" or “us”"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 manufactureFrom design to installation, we believe we offer a higher level of service than our competitors, serving both national and distribute kitchen, bathregional markets with the most relevant options. This makes us the cabinetmaker of choice for homeowners, builders, designers, dealers, distributors, and home organization products for the remodeling and new home construction markets. Our products are sold on a national basis directly to home centers and builders and through a network of independent dealers and distributors. We presently operate 18 manufacturing facilities and eight primary service centersretailers across the countrycountry. Our customer base is expanding as we build our portfolio of brands and Mexico.reach new markets beyond kitchen and bath. Aspirational yet grounded, we've embraced an ambitious, strategic vision that will advance us boldly into the future.


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,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.


Our Business


Our business offers made-to-order cabinetryAmerican Woodmark celebrates the creativity in all of us. With over 550 different cabinet lines, ranging in price from relatively inexpensive to medium-priced styles. These cabinets are offered in10,000 employees and more than a broad range of sizes, construction and decorative options to achieve a wide array of design layouts. To satisfy the fashion and style needsdozen brands, we're one of the market placenation's largest cabinet manufacturers. From inspiration to installation, we offer over 100 door designshelp people find their unique style and turn their home into a space for self-expression. By partnering with a targeted range of painted or stained finishes, or engineered finishes under the Duraform® mark; on fronts made in a variety of wood species, including maple, cherry and oak as well as engineered materials. 

Additionally, we offer value-based assembled cabinet products for stock kitchen and bath, ready-to-assemble cabinetry for home organization, countertops and accessories.  These lines are available in a more targeted finish and door style assortment, and include hundreds of products appropriate formajor home centers, builders, and dealers, we spark the imagination of homeowners and remodeling contractors. designers and bring their vision to life. Across our service and distribution centers, our corporate office and manufacturing facilities, you'll always find the same commitment to customer satisfaction, integrity, teamwork, and excellence.

Our products are sold under the brand names of American Woodmark®, Timberlake®, Shenandoah Cabinetry®, Waypoint Living Spaces®, Estate by RSI®, Continental Cabinets®, VillaBath by RSI®, Stor-It-All® and Professional Cabinet Solutions®. Products are also sold under key customer’s private label brands, such as Hampton Bay®, Glacier Bay®, Style Selections®, Allen + Roth®, 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: made-to-order and stock. Stock products represent cash and carry products sold through home centers. Made-to-order products typically utilize higher grade materials with more options as compared to stock and are all special ordered and shipped directly to the home from the factory. Our home organization products are exclusively stock products. Our kitchen cabinetry and bath cabinetry are offered across all product categories (made-to-order and stock) and our office cabinetry is offered as stock. Our stock products represent cash and carry products and are sold through home centers, while our made-to-order products are sold through home centers, builders, and independent dealers and distributors.


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 and 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”&R") projects. Products for R&R projects are predominately purchased through home centers such as Home Depot and Lowe’s.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’sLowe's to distribute our products. During the fiscal year ended April 30, 2019 (“
2


2021 ("fiscal 2019”2021"), Home Depot and Lowe’sLowe's combined accounted for approximately 47.9%48.7% of net sales of the Company. The loss of either Home Depot or Lowe’sLowe'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. We also serve multi-family builders, primarily in the Southern California metro area.Southwest Region of the U.S. Our various service center locations serve the function of beingare close to this business and enable us to deliver exceptional service to our builder partners. During fiscal 2021, builders accounted for approximately 38.6% of net sales of the Company.


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 1,3001,800 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. Within our distributor channel we also sell our Timberlake® brand through a network of regional distributors who are focused on selling a complete variety of building materials to small and midsized builders and contractors within their local markets. During fiscal 2021, independent dealers and distributors accounted for approximately 12.7% of net sales of the Company.  


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 1817 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 arrangementarrangements with home centers, enable us to provide a “short"short supply chain”chain" to our U.S. customers. The ordering patterns of Home Depot and Lowe’s,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 criteria on us. 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 one stand-alone distribution center, distribution centers located in some of our manufacturing facilities, and other third party locations 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, our production of labor-intensive manufacturing and fabrication processes in our three Tijuana, Mexico facilities havehas enabled us to keep overall labor costs low while maintaining higher quality, greater speed-to-market and transportation cost advantage over Asian based manufacturers.


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


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, cherry, and beech 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 generally 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
3


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 and tariffs.


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 importers and 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 believe we are the second largesta top three manufacturer of kitchen, bath, and home organization products in the United States.States based on publicly available information.


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 liabilityliabilities 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 material patents in operating our business.


Seasonality


Our business has been subject to seasonal influences, with higher sales typically realized in our first and fourth fiscal quarters. General economic forces and changes in our customer mix have reduced seasonal fluctuations in revenue over the past few years.years and this trend is expected to continue. The costs of the Company’sCompany'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.


Human Capital Resources

Employees


As of April 30, 2019,2021, we employed approximately 9,300over 10,000 full-time employees, with approximately 210230 unionized employees in Anaheim, California. We believe that our employee relations and relationship with the union representing the employees in Anaheim are good.

Culture and Core Values

At American Woodmark, the way we conduct our business and interact with our customers, vendors, and the communities in which we operate is driven by our core principles of Customer Satisfaction, Integrity, Teamwork, and Excellence. These principles also guide our interactions with employees and serve as a basis for setting goals for and evaluating our employees. By living out these principles, we believe we will be best positioned to attract, develop, and promote a broad range of talent and
4


to conduct our business in a responsible, ethical, and professional manner. To that end, we have, among other things, established policies under which we strive to:
•Engage with our key stakeholders, including employees, to ensure their needs and concerns are heard and addressed, and if appropriate, incorporated into our strategy;
•Maintain a safe and enriching working environment where all employees are treated with respect and are able to achieve their full potential;
•Encourage employees to volunteer in our communities through internally or externally organized events;
•Fund the American Woodmark Foundation, which serves as a vehicle for our employees to serve the community; and
•Provide scholarship opportunities to family members for our employees.

Training

Training is an important part of attracting and retaining a qualified workforce. Through our training programs, we seek to ensure that each employee is treated equitably, is engaged, and has opportunities to succeed and advance his or her career. We invest a significant number of hours annually in onboarding, cultural, safety, supervisory, and managerial training activities. Through these activities, as well as our tuition reimbursement programs, executive development opportunities, formal and informal cross-training activities, and other operational training offerings, we strive to establish American Woodmark as an organization dedicated to providing the training and development opportunities necessary to maintain a well-qualified workforce connected to and invested in our continued operational success.

Our training is designed and developed at the corporate and local level in order to further our goals of enterprise alignment and local integration. We prefer a leader-led approach to training whenever possible in order to foster engagement, relationship building, networking, and shared learning experiences. Depending on the course, our training and development opportunities are offered on an on-demand, semi-annual, annual, or biannual basis.

Safety

We have established comprehensive safety programs throughout our operations to provide our employees with the tools they need to comply with the safety standards established under federal, state, and local laws and regulations or independently by us. Our safety leadership teams monitor our safety programs and related benchmarking with the goal of improving safety across the Company. Our rate of incidents recordable under the standards of the Occupational Safety and Health Administration (“OSHA”) per one hundred employees per year, also known as the OSHA recordable rate, was 1.44 during fiscal 2021.

In response to the COVID-19 pandemic, we enforced social distancing and enhanced health, safety and sanitation measures, and implemented necessary procedures and support to enable a significant portion of our office personnel to work remotely. We also imposed travel restrictions, transitioned meetings from in-person to virtual formats where possible, and made other operational adjustments in furtherance of the continued safety of our workforce.

Diversity and Inclusion

We are an equal opportunity employer and strive to create an environment free from discrimination and harassment and in which each employee is valued, treated with dignity and respect, and managed in an inclusive manner. We believe that a workplace that encourages the interaction of different perspectives and backgrounds creates superior solutions, approaches, and innovations. In 2017, we commissioned a team to investigate inclusion and diversity at American Woodmark that led to increased management training and learning opportunities. We also established Right Environment Councils in each of our locations in an attempt to more effectively engage and connect with employees of all levels. In 2019, we revised our employee engagement survey process to include an inclusion and diversity index and increase the frequency of formal employee feedback. In 2020, we partnered with an inclusion and diversity consultant and established an Inclusion, Diversity, Equity, and Awareness team to establish and refine an enterprise-wide inclusion and diversity strategy and propose specific initiatives to accelerate our efforts in this area. Going forward, we intend to implement this strategy with the goal of enhancing our inclusive culture and increasing the diversity of people, thought, and perspectives represented throughout our company.

Our Competitive Strengths


Market Leader with Nationwide Manufacturing and Distribution Network


We believe our company holds the number two or three market position in the United States cabinet market with an estimated 10% market share.share based on publicly available information. We are one of a select number of market participants with a national manufacturing and distribution footprint, including 18which includes seventeen manufacturing facilities in the United States and Mexico and eight primary service centers acrossand one distribution center located throughout the United States and Mexico.States. Our operating footprint provides us an ability to service our builder, dealer, and home center customers on a national basis, and we offer a broad set of products to serve our customers across a variety of price points. Our facilities are primarily located in or near major
5


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 MarketsEnd-Markets


We believe that the diversity of our product portfolio across categories, channels, and end marketsend-markets benefits our financial performance, both in periods of growth and cyclicality. Our made-to-order 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 theOur stock offering allows us to further serve our existing end marketsend-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 plus years with our top 10 customers, including long-standing relationships with Home Depot and Lowe’s.Lowe's. We believe our customers value our national manufacturing and distribution footprint, which allows us to meet demanding logistics and performance criteria. 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 1817 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. Our labor-intensive manufacturing and fabrication processes in Mexico offer a low cost alternative to Asian based 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 ChairmanPresident and Chief Executive Officer, Cary Dunston,M. Scott Culbreth, joined our team in 20062014 as the Chief Financial Officer and was named Chief Executive Officer in 2015 and elected Chairman2020. Mr. Culbreth's career in 2017. Mr. Dunstonthe manufacturing industry has a broad rangebeen highlighted with multiple leadership roles in finance. Our other senior executives all have over twenty plus years of experience working for multi-national companies, with individual backgrounds in manufacturing, finance, 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.marketing.

Item 1A.    RISK FACTORS
 
There are a number of risks and uncertainties that may affect the Company’sCompany's business, results of operations, and financial condition. These risks and uncertainties could cause future results to differ from past performance or expected results, including results described in statements elsewhere in this report that constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Additional risks and uncertainties not presently known to the Company or currently believed to be immaterial also may adversely impact the Company’sCompany's business. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the Company’sCompany'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’sCompany's business, results of operations, and financial condition are discussed elsewhere in this report, including in Item 7. “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" under the headings “Forward-Looking"Forward-Looking Statements,” “Seasonality,”" "Seasonality," and “Outlook"Outlook for Fiscal 2020”2022" and Item 7A,7A. "Quantitative and Qualitative Disclosures about Market Risk."  
 
Risks related to our business and industry

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’sLowe's collectively accounted
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for approximately 47.9%48.7% of total net sales during the fiscal year 2019.2021. We do not typically enter into long-term sales contracts with Home Depot or Lowe’sLowe's and our sales usually occur on a “purchase order”"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,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’sLowe'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 criteria.criteria and fines. 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,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’sLowe'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 generally improved over the past 3 to 5 years, 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.


COVID-19 has adversely affected our business, financial performance, and operating results and its continuing and future impacts as well as the impacts from other future pandemics could adversely affect our business, financial performance, and operating results. COVID-19 has negatively impacted the global and U.S. economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption in financial markets. We have experienced some disruptions to our business operations and this pandemic could have additional or continuing material adverse effects on our business, financial performance, employees, suppliers, and customers. The extent of the impact of the COVID-19 pandemic on our business and financial performance will depend on future developments, many of which are outside of our control.

We have been negatively impacted by the COVID-19 pandemic as demand for our products significantly decreased at the initial height of the pandemic in the fourth quarter of fiscal 2020 and first quarter of fiscal 2021, "stay at home" orders and other work disruptions created disruptions to our business operations and our supply chain has been negatively impacted by rising materials and logistics costs.In addition to these past and current dynamics, the COVID-19 pandemic or future pandemics may create or exacerbate risks related to our operations and regulatory matters, including, but not limited to:
•Supply chain and shipping interruptions and constraints, volatility in demand for our products caused by sudden and significant changes in production levels by our suppliers or other restrictions affecting our business could adversely impact our planning and forecasting, our revenues, and our operations.
•Disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other product components, transportation, work force, force majeure
7


events, or other manufacturing and distribution capabilities, like the temporary suspension of our Mexican operations in April 2020, could result in our inability to meet our customer needs and achieve cost targets.
•Significant changes in the conditions of markets in which we manufacture, sell or distribute our products, including from governmental guidance or requirements such as additional or expanded quarantines or "stay at home" orders, closures, or other restrictions that further limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our suppliers or customers from sufficiently staffing operations, could adversely impact operations necessary for the production, distribution, sale, and support of our products.
•Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of the impact of COVID-19. If any of our customers suffer significant financial difficulties, they may be unable to pay amounts due to us timely or at all. If we are unable to collect our accounts receivable as they come due, there may be a material adverse effect on our financial condition, results of operations, and cash flows.
•Disruptions to our operations related to COVID-19 as a result of absenteeism by infected or ill employees, or absenteeism by employees who elect not to come to work due to the illness affecting others at our facilities, or due to quarantines, or as a result of the tight labor market we are currently experiencing worsening or lasting into the future.
•The COVID-19 pandemic has led to and could continue to lead to severe disruption and volatility in the United States and global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices in the public equity markets, including prices of our common stock, have been highly volatile as a result of the COVID-19 pandemic.
•Sustained adverse impacts to the Company, certain suppliers, and customers may also affect the Company's future valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, long-lived intangible assets, property and equipment, inventories, accounts receivable, tax assets, and other assets.

The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows remains highly uncertain and cannot be predicted, including but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, including the availability and efficacy of vaccines, and how quickly and to what extent normal economic and operating conditions can resume. The continued impact on our business as a result of the COVID-19 pandemic (directly or indirectly) could materially adversely affect our results of operations, financial condition, cash flows, prospects, and the trading prices of our common stock.

The U.S. cabinetry industry is highly competitive, and market share losses could occur. We operate within thea 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,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 may 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. 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 also face competition with respect to some of our products from competitors in countries with lower regulatory, safety, environmental, and other costs, such as China.China, Vietnam and Malaysia. These competitors may also benefit from certain local government subsidies or other incentives that are not available to us.


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.


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Changes to consumer shopping habits and potential trends toward “online”"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 home center, dealer multi-family and homebuilder channels. Part of our growth strategy depends on expanding our business in the dealer multi-family 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 home center, 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’smanagement'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.programs, such as our closure of the Humboldt, Tennessee manufacturing plant in fiscal 2021. 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 thisany added capacity.


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 (including tariffs), 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.


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.costs, and
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we have also experienced higher shipping costs and shipping delays. Our international operations and sourcing of materials (including from Asia and Mexico) could be harmed by a variety of factors including:including, but not limited to:
•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, tariffs and tariffs;other regulations including those related to the COVID-19 pandemic such as the temporary suspension of our operations in Mexico in April 2020;
•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.

For example, with respect to the Section 301 tariffs from China ("301 tariffs") on goods imported from China, assuming the tariffs are maintained at the 25% levels, we could be exposed to approximately $5-6 million of potential annual direct cost increases in addition to the original 10% tariffs. Our teams are working to mitigate the impact through supplier negotiations, supply chain repositioning, internal productivity measures and pricing action if required. Should the 301 tariffs expand to additional categories we would have an additional exposure of approximately $4.0 million annually.


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.


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.costs as we experienced in fiscal 2021 and are continuing to experience. Further, increases in energy costs increase our production 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. FailureTransportation and container delays may adversely impact our supply chain. Additionally, 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”"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. As an example, in fiscal 2020, we are currently dealing withexperienced several of the adverse impacts set forth above related to a particleboard supplier as more fully described in Item 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations - “Particleboard Supply”"Particleboard Supply" herein.


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
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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.

Risks related to indebtedness

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. 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.

The credit agreement that governs our credit facility imposes 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 imposes operating and financial restrictions on us. These restrictions limit our ability and the ability of our subsidiaries to, among other things, to incur additional indebtedness, create additional liens on its assets, make certain investments, dispose of 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 ability of the Company and certain of its subsidiaries to make certain restricted payments, including, in the case of the Company, the payment of dividends, and the repurchase of common stock, in certain limited circumstances.

As a result of these restrictions, each of which is subject to certain exceptions and qualifications, we may 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 us 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.

Other general risks applicable to us and our business

We may incur future goodwill impairment charges or other asset impairment charges which could negatively impact our future results of operations and financial condition.We recorded significant goodwill as a result of the acquisition of RSI Home Products, Inc. (the "RSI Acquisition" or "RSI") in fiscal year 2018. 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.
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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. Additionally, in fiscal 2021 the Company began the implementation of a new cloud-based ERP system and may not be successful in this implementation.


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.


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.internationally, including regulations due to the COVID-19 pandemic. 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. For example, our manufacturing locations enhanced cleaning processes, established health screening procedures, modified work centers and material flows with established social distancing practices in response to the COVID-19 pandemic in accordance with guidelines provided by the U.S. Centers for Disease Control and Prevention, as well as local and state health departments. 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 our 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
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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. AThe COVID-19 pandemic has put significant pressure on our ability to employ, train, and retain qualified personnel at a competitive cost. Further, 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.


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 reputation, 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.


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, hurricanes, 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.


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. Although we believe we made good progress in integrating RSI's operations during fiscal year 2019, 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.

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.

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 Officecorporate office located in Winchester, Virginia. In addition, we lease eight manufacturing facilities, and one manufacturing facility/service center, and one distribution center in the United States and Mexico and own nineeight manufacturing facilities located primarily in the eastern and southern United States. We also lease seven primary service centers, 12ten satellite service centers, and four 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, 2019 include:


13
LOCATIONDESCRIPTION
Allegany County, MDManufacturing Facility
Anaheim, CAOffice/ Manufacturing Facility*
Austin, TXSatellite Service Center*
Berryville, VAService Center*
Commerce City, COSatellite Service Center*
Coppell, TXService Center*
Dallas, TXManufacturing Facility*
Dallas, TXManufacturing Facility
Fort Myers, FLSatellite Service Center*
Gas City, INManufacturing Facility
Hamlet, NCManufacturing Facility*
Hardy County, WVManufacturing Facility*
Houston, TXSatellite Service Center*
Humboldt, TNManufacturing Facility
Huntersville, NCService Center*
Jackson, GAManufacturing Facility
Jacksonville, FLSatellite Service Center*
Kingman, AZManufacturing Facility
Kennesaw, GAService Center*
Las Vegas, NVSatellite Service Center*
Lincolnton, NCManufacturing Facility*
Mira Loma, CAManufacturing Facility/ Service Center*
Mooresville, NCOffice (Sales)*
Montgomeryville, PASatellite Service Center*
Monticello, KYManufacturing Facility
Morrisville, NCSatellite Service Center*
Orange, VAManufacturing Facility
Orlando, FLService Center*
Phoenix, AZService Center*
Rancho Cordova, CAService Center*




LOCATIONDESCRIPTION
Roswell, GAOffice (Sales)*
San Antonio, TXSatellite Service Center*
Sarasota, FLSatellite Service Center*
Tampa, FLSatellite Service Center*
Tijuana, MexicoManufacturing Facility*
Tijuana, MexicoManufacturing Facility*
Tijuana, MexicoManufacturing Facility*
Toccoa, GAManufacturing Facility
Tucson, AZSatellite Service Center*
Winchester, VACorporate Office
*Leased facility.
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”"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, 2019.2021. 


Item 4.        MINE SAFETY DISCLOSURES
 
None.
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
Executive officers of the Company are elected by the Board of Directors and generally hold office until the next annual election of officers. There are no family relationships between any executive officer and any other officer or director of the Company or any arrangement or understanding between any executive officer and any other person pursuant to which such officer was elected. The executive officers of the Company are as follows: 
NameAgePosition(s) Held During Past Five Years
S. Cary DunstonM. Scott Culbreth5450Company Chairman from August 2017 to present; Company President and Chief Executive Officer from August 2015July 2020 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.
M. Scott Culbreth48Company 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.
R. Perry Campbell54Company 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.
July 2020.
NamePaul JoachimczykAge49Position(s) Held During Past Five YearsCompany Vice President and Chief Financial Officer from July 2020 to present; Vice President, Financial Planning and Analysis, from February 2019 to July 2020; Vice President of Finance and Corporate Controller at TopBuild Corp. from October 2016 to June 2018; CFO - Functional Transformation at Stanley Black & Decker, Inc. from May 2014 to July 2016.
Robert J. Adams, Jr.5355Company Senior Vice President, of Value StreamManufacturing and Technical 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; 2012.
Teresa M. May56Company Senior Vice President and Chief Marketing Officer from April 2020 to present; Senior Vice President and Chief Marketing Officer of Asurion from May 2018 to April 2020; Vice President of EngineeringOwens Corning from July 2008March 2012 to April 2012.March 2018.




14


PART II
 
Item 5.        MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
American Woodmark Corporation common stock is listed on The NASDAQ Global Select Market under the “AMWD”"AMWD" symbol.
 
As of June 17, 201918, 2021 there were approximately 20,00016,500 total shareholders of the Company's common stock, including 5,0006,200 shareholders of record and 15,00010,300 beneficial owners whose shares are held in "street" name by securities broker-dealers or other nominees.,nominees. The Company's shareholders also include approximately 50%55% 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.does not currently pay cash dividends and has no current intention to do so in the near future. 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.


PurchasesPurchase of Equity Securities by the Issuer


The following table details share repurchases by the Company during the fourth quarter of fiscal 2019:2021:

Share Repurchases
Total Number of Shares PurchasedAverage Price PaidTotal Number of Shares Purchased as Part of Publicly AnnouncedApproximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (000)
(1)Per SharePrograms(1)
February 1 - 28, 2021— N/A— $50,000 
March 1 - 31, 202155,084 $95.31 55,084 $44,750 
April 1 - 30, 2021144,962 $101.77 144,962 $30,000 
Quarter ended April 30, 2021200,046 $99.98 200,046 $30,000 
(1)Under a stock repurchase authorization approved by its Board on August 22, 2019, the Company was authorized to purchase up to $50 million of the Company's common shares. Management funded share repurchases using available cash and cash generated from operations. Repurchased shares became authorized but unissued common shares. At April 30, 2021, $30.0 million of funds remained from the amounts authorized by the Board to repurchase the Company's common shares. The Company purchased a total of 200,046 common shares, for an aggregate purchase price of $20.0 million, during the fourth quarter of fiscal 2021 under the authorization pursuant to a repurchase plan intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. On May 25, 2021, the Board authorized a stock repurchase program of up to $100 million of the Company's outstanding common shares. In conjunction with this authorization the Board cancelled the remaining portion of the $50 million existing authorization.


15

Share Repurchases

Total Number of Shares PurchasedAverage Price PaidTotal Number of Shares Purchased as Part of Publicly AnnouncedApproximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (000)

(1)Per SharePrograms(1)
February 1 - 28, 2019111,845
$77.31
111,845
$403
March 1 - 31, 20194,673
$86.26
4,673
$—
April 1 - 30, 2019—
N/A
—
$—
Quarter ended April 30, 2019116,518
$77.67
116,518
$—



(1) Under a stock repurchase authorization approved by its Board on November 30, 2016, the Company was authorized to purchase up to $50 million of the Company's common shares. The Board suspended the Company's stock repurchase program in conjunction with the RSI Acquisition. On August 23, 2018, the Board reinstated the program. On November 28, 2018, the Board of the Company authorized an additional stock repurchase program of up to $14 million of the Company's common shares. This authorization is in addition to the stock repurchase program authorized on November 30, 2016. Management funded share repurchases using available cash and cash generated from operations. Repurchased shares became authorized but unissued common shares. At April 30, 2019, no funds remained from the amounts authorized by the Board to repurchase the Company’s common shares. The Company purchased a total of 745,232 common shares, for an aggregate purchase price of $50.0 million, during fiscal 2019 under the authorizations pursuant to a repurchase plan intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended.



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’sPoor's Household Durables Index for the period from April 30, 20142016 through April 30, 2019.2021. 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.
chart-f9f5b653ae0e52dc95c.jpg
amwd-20210430_g1.jpg


2014
2015
2016
2017
2018
2019201620172018201920202021
American Woodmark Corporation
$100.00
$168.94
$242.72
$306.23
$273.90
$291.46American Woodmark Corporation$100.00$126.20$112.90$123.50$70.60$136.50
Russell 2000 Index
100.00
109.71
103.18
129.63
144.58

151.25Russell 2000 Index$100.00$125.60$140.10$146.60$122.60$214.40
S&P Household Durables Index
100.00
117.21
121.32
139.33
129.36

118.86S&P Household Durables Index$100.00$114.80$106.60$98.00$91.90$180.80


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.





Item 6.        SELECTED FINANCIAL DATA
 FISCAL YEARS ENDED APRIL 30
(Dollars in millions except per share data)
20191,2,3

20181,2

20172

2016
20154










FINANCIAL STATEMENT DATA 
 
 
 
 
Net sales$1,645.3

$1,250.3

$1,030.2

$947.0

$825.5
Operating income141.7

107.7

108.2

93.2

54.7
Net income83.7

63.1

71.2

58.7

35.5
Earnings per share:








Basic4.84

3.80

4.38

3.61

2.25
Diluted4.83

3.77

4.34

3.57

2.21
Depreciation and amortization expense94.4

45.0

18.7

16.5

14.5
Total assets1,529.9

1,645.3

501.3

466.4

398.8
Long-term debt, less current maturities689.2

809.9

15.3

22.1

21.4
Total shareholders' equity620.4

581.7

352.4

280.8

229.8
Average shares outstanding








Basic17.3

16.6

16.3

16.3

15.8
Diluted17.3

16.7

16.4

16.4

16.0










PERCENT OF SALES








Gross profit21.1%
20.4%
21.8%
21.1%
18.5%
Selling, general and administrative expenses12.4

11.8

11.3

11.2

11.9
Income before income taxes6.7

7.6

10.6

9.7

6.6
Net income5.1

5.1

6.9

6.2

4.3










RATIO ANALYSIS








Current ratio2.0

2.1

3.3

3.3

3.2
Inventory turnover5
12.2

13.5

19.6

19.8

19.9
Collection period - days6
35.3

33.6

32.5

31.2

31.6
Percentage of capital (long-term debt plus equity):








Long-term debt, less current maturities52.6%
58.2%
4.2%
7.4%
8.5%
Equity47.4

41.8

95.8

92.6

91.4
Return on equity7
13.9

13.5

22.5

23.0

16.9

1
The fiscal 2019 and 2018 year results include twelve and four months, respectively, of RSI activity. See Note B -- Acquisition of RSI Home Products, Inc. for further details.
2
The Company incurred corporate business development expenses. During fiscal 2019, these expenses decreased operating income, net income and earnings per share by $2.1 million, $1.6 million and $0.09, respectively. During fiscal 2018, these expenses decreased operating income, net income and earnings per share by $12.9 million, $8.6 million and $0.51, respectively. During fiscal 2017, these expense decreased operating income, net income and earnings per share by $2.7 million, $1.8 million and $0.11, respectively.
3
The Company announced a reduction in workforce in fiscal 2019. During fiscal 2019, the expenses related to the reduction in force decreased operating income, net income and earnings per share by $2.0 million, $1.5 million and $0.09, respectively.
4
The Company announced plans to realign its manufacturing network during fiscal 2012. 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.
5
Based on average beginning and ending inventory.
6
Based on the ratio of average monthly customer receivables to average sales per day.
7
Based on net income divided by average beginning and ending shareholders equity.
Part II, Item 6 is no longer required as the Company has adopted certain provisions within the amendments to Regulation S-K that eliminate Item 301.


16





Item 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
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
 202120202019
Net sales100.0 %100.0 %100.0 %
Cost of sales and distribution81.7 80.1 78.9 
Gross profit18.3 19.9 21.1 
Selling and marketing expenses5.1 5.1 5.5 
General and administrative expenses6.4 6.8 6.9 
Restructuring charges, net0.3 — 0.1 
Operating income6.5 8.0 8.6 
Interest expense, net/other (income) expense, net2.0 1.9 1.9 
Income before income taxes4.5 6.1 6.7 
Income tax expense1.1 1.6 1.6 
Net income3.4 4.5 5.1 
 PERCENTAGE OF NET SALES
 Fiscal Years Ended April 30
 2019
2018
2017
Net sales100.0%
100.0%
100.0 %
Cost of sales and distribution78.9

79.6

78.2
Gross profit21.1

20.4

21.8
Selling and marketing expenses5.5

6.2

6.9
General and administrative expenses6.9

5.6

4.4
Restructuring0.1

—

—
Operating income8.6

8.6

10.5
Interest expense/other (income) expense1.9

1.0

(0.1)
Income before income taxes6.7

7.6

10.6
Income tax expense1.6

2.5

3.7
Net income5.1

5.1

6.9


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’sCompany's expectations, plans, objectives, future financial performance, and other statements that are not historical facts.  These statements may be “forward-looking statements”"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”"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"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 macro-economic factors that impact our performance such as the U.S. housing market, or general economy, unemployment rates, and consumer sentiment and the impact of such developments on our and our customers’customers' business, operations, and access to financing;
•competition from other manufacturers and the impact of such competition on pricing and promotional levels;
•the impact of COVID-19 on our business, the global and U.S. economy, and our employees, customers, and suppliers;
•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, transportation, 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;
17


•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, including the imposition of tariffs or duties on those products;
•unexpected costs resulting from a failure to maintain acceptable quality standards;
•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; and
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"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" and under Item 1A. “Risk"Risk Factors,”" and Item 7A. “Quantitative"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 and builders and through a network of independent dealers and distributors.  At April 30, 2019,2021, the Company operated 1817 manufacturing facilities in the United States and Mexico and eight primary service centers and one distribution center located throughout the United States.
On December 29, 2017, we completed the acquisition of RSI, a leading manufacturer of kitchen, bath
COVID-19

The COVID-19 pandemic impacted our business operations and home organization products. For the fiscal year ended April 30, 2019, the consolidatedfinancial results include 12 months of RSI activity andbeginning in the priorfourth quarter of fiscal year ended April 30, 2018, only four months2020 and continued to impact us in fiscal 2021. All of RSI activity is included.our manufacturing facilities qualified as essential operations (or the equivalent) under applicable federal and state orders and were able to continue operating. We were negatively impacted by the COVID-19 pandemic as demand for our products significantly decreased during the fourth quarter of fiscal 2020 and first quarter of fiscal 2021, "stay at home" orders and other work disruptions created disruptions to our business operations and our supply chain has been negatively impacted. Additionally, COVID-19 continues to impact our overall business, including hiring and retaining employees and through challenges caused by material availability and transportation delays. Refer to Item 1A. "Risk Factors" for a disclosure of risk factors related to COVID-19.

Particleboard Supply

Due to a catastrophic fire at a key Southeast supplier plant in May 2019 (fiscal 2020) and the supplier's subsequent decision to shutter operations over the next 90-days at two additional plants, the Company experienced a temporary disruption in supply of particleboard, a key input component of our cabinetry. This disruption resulted in net expense of $4.2 million during fiscal 2020. Management was successful in containing the situation as to not impact our customers in fiscal 2021.

Financial Overview

A number of general market factors impacted the Company's business in fiscal 2019,2021, including:
 
•The unemployment rate improveddecreased by 8%59% compared to April 2018, falling2020, to 3.6%6.1% as of April 20192021 according to data provided by the U.S. Department of Labor; however, the unemployment rate remained well above levels prior to the COVID-19 pandemic;    
Decreases
18


•Increase in single family housing starts during the Company’sCompany's fiscal 20192021 of 1%11%, as compared to the Company’sCompany's fiscal 2018,2020, according to the U.S. Department of Commerce;
•Mortgage interest rates decreased with a 30-year fixed mortgage rate of 4.14%3.06% in April 2019,2021, a decrease of approximately 3325 basis points compared to April 2018;2020;
•The median price of existing homes sold in the U.S. rose by 3.6%12.2% during the Company’sCompany's fiscal 2019,2021, according to data provided by the National Association of Realtors;
•Consumer sentiment, as reported by the University of Michigan, averaged the same15.6% lower during the Company’sCompany's fiscal 2019 as2021 than in its prior fiscal year; and
•Cabinet sales, as reported by members of the Kitchen Cabinet Manufacturers Association (KCMA), increased by 2.4%8.7% during fiscal 20192021 versus the prior fiscal year.
 
The Company’sCompany's largest remodeling customers and competitors continued to utilize sales promotions in the Company’sCompany's product category during fiscal 20192021 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 lower promotional levels during fiscal 2019 that were higher2021 than those experienced in its prior fiscal year. Sales in the remodel channel increased 46%22% during the fiscal year due to growth in the made- to-order framed business and eight incremental months of results from the Company’s acquisition of RSI.year.




Sales in the new construction channel increased 13%0.7% during the fiscal year2021 due to share penetration witha rise in new housing starts and a shift to the opening price point cabinets in our builder partners, the health of the markets where we concentrated our business during fiscal 2019 and eight incremental months of results from the Company's acquisition of RSI.Origins by Timberlake brand.


The Company increased its net sales by 32%5.7% during fiscal 2019,2021, which management believes was driven primarily by a risegrowth in overall market activitythe home center, builder and eight incremental months of results from the Company's acquisition of RSI.independent dealers and distributors channels.
 
Gross margin for fiscal 20192021 was 21.1%18.3%, an increasea decrease from 20.4%19.9% in fiscal 2018.2020.  The increasedecrease in gross profit margin was due primarily to higher sales volumes, price, mix and overhead cost leverage due to higher volumes. These favorable impacts werematerial and logistics costs, investments made to establish our distribution center in Texas, and increases related to wage and retention programs. This was partially offset by higher transportation costs, tariffs and raw material inflation.the increase in sales creating leverage of our fixed expenses in our operating platforms.
 
The Company regularly considers the need for a valuation allowance against its deferred tax assets.  The Company has been profitable for the last 79 years.  As of April 30, 2019,2021 and 2020, the Company had total deferred tax assets of $14.3$45.9 million net of valuation allowance, down from $17.8 million of deferred tax assets net of valuation allowance at April 30, 2018.allowance. 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”("ITC") carryforwards.  These credits expire in various years beginning in fiscal 2020.2028.  The Company believes based on positive evidence of the housing industry improvement along with 79 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, 2019.2021. 


Results of Operations
 FISCAL YEARS ENDED APRIL 30
(Dollars in thousands)2021202020192021 vs. 2020 PERCENT
 CHANGE		2020 vs. 2019 PERCENT
 CHANGE
Net sales$1,744,014 $1,650,333 $1,645,319 5.7 %0.3 %
Gross profit319,275 329,186 346,473 (3.0)%(5.0)%
Selling and marketing expenses89,464 83,608 89,875 7.0 %(7.0)%
General and administrative expenses112,283 113,334 112,917 (0.9)%0.4 %
Interest expense, net23,128 29,027 35,652 (20.3)%(18.6)%

19
 FISCAL YEARS ENDED APRIL 30










(Dollars in thousands)2019
2018
2017
2019 vs. 2018 PERCENT
CHANGE
2018 vs. 2017 PERCENT
CHANGE















Net sales$1,645,319

$1,250,274

$1,030,248

32%
21 %
Gross profit346,473

255,403

224,636

36

14
Selling and marketing expenses89,875

77,843

70,979

15

10
General and administrative expenses112,917

69,855

45,419

62

54
Interest expense (income), net35,652

13,054

(521)
173

(2,606)



Net Sales
 
Net sales for the 2019 fiscal year2021 increased 32%5.7% to $1,645.3$1,744.0 million from the prior fiscal year. The current fiscal year results include eight incremental months of results from the RSI Acquisition. Excluding the impact of the RSI Acquisition, the Company experienced growth in all channels during fiscal year 2019 versus the comparable prior year period.home center, builder and independent dealers and distributors channels.


Net sales for the 2018 fiscal year2020 increased 21%0.3% to $1,250.3$1,650.3 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, theThe Company experienced growth in both the buildersbuilder channel which was partially offset by declines in the home center and independent dealerdealers and distributor channels during the fiscal year.distributors channels.
 
Gross Profit


Gross profit as a percentage of sales increased to 21.1% in fiscal 2019 as compared with 20.4% in fiscal 2018. The increase in gross profit margin was due primarily to higher sales volumes, price, mix and overhead cost leverage due to higher volumes. These favorable impacts were partially offset by higher transportation costs, newly enacted tariffs and raw material inflation.

Gross profit as a percentage of sales decreased to 20.4%18.3% in fiscal 20182021 as compared with 21.8%19.9% in fiscal 2017.2020. The decrease in gross profit margin was primarily due primarily to higher transportationmaterial and logistics costs, raw material inflation, higher healthcareinvestments made to establish our distribution center in Texas, and increases related to wage and retention programs. This was partially offset by the increase in sales creating leverage of our fixed expenses in our operating platforms.

Gross profit as a percentage of sales decreased to 19.9% in fiscal 2020 as compared with 21.1% in fiscal 2019. The decrease in gross profit margin was primarily due to tariffs of $6.4 million, net cost impacts related to our particleboard supply disruption of $4.2 million, duplicate rent/move costs related to our California facility move of $2.4 million, and $6.3 million, or 50 bps, of inventory step-up amortizationexpenses related to the RSI Acquisition. 

temporary suspension of operations in our component plants in Mexico in April 2020.


Selling and Marketing Expenses
 
Selling and marketing costs increased by $5.9 million or 7% during fiscal 2021 versus the prior year.  Selling and marketing expenses in fiscal 20192021 and fiscal 2020 were 5.5%both 5.1% of net sales. 
Selling and marketing expenses in fiscal 2020 were 5.1% of net sales, compared with 6.2%5.5% of net sales in fiscal 2018.2019.  Selling and marketing costs increaseddecreased by only 15%7% despite a 32%0.3% increase in net sales.sales in fiscal 2020.  The improvement in the percentage of selling and marketing costs in relation to net sales was due to favorable leverage from increased saleslower displays and on-going expense control.incentive costs.

GeneralandAdministrative Expenses
 
SellingGeneral and marketingadministrative expenses decreased by $1.1 million or 0.9% during fiscal 2021 versus the prior fiscal year. General and administrative costs decreased to 6.4% of net sales in fiscal 2018 were 6.2%2021 compared with 6.8% of net sales in fiscal 2020.
General and administrative expenses increased by $0.4 million or 0.4% during fiscal 2020 versus the prior fiscal year. General and administrative costs decreased to 6.8% of net sales in fiscal 2020 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 selling 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.2019.


GeneralandAdministrative Expenses
General and administrative expenses increased by $43.1 million or 62% during fiscal 2019 versus the prior fiscal year. The increase was related to intangible amortization and higher compensation incentive costs. General and administrative costs increased to 6.9% of net sales in fiscal 2019 compared with 5.6% of net sales in fiscal 2018.
General and administrative expenses increased by $24.4 million or 54% 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.

Effective Income Tax Rates
 
The Company generated pre-tax income of $110.9$77.4 million during fiscal 2019.2021.  The Company’sCompany's effective tax rate decreased from 33.4%25.5% in fiscal 20182020 to 24.1% in fiscal 2021 primarily due to the benefit from federal income tax credits.  The Company's effective tax rate increased from 24.5% in fiscal 2019.2019 to 25.5% in fiscal 2020. The lowerhigher effective tax rate was primarily due to the overall benefit from the reduction in thelower federal income tax rate enacted in connection with the Tax Cuts and Jobs Act of 2017 (H.R. 1) (the “Tax Act”). The Company’s effective tax rate decreased from 34.6% in fiscal 2017 to 33.4% in fiscal 2018. The lower effective tax rate in fiscal 2018 was primarily due to the overall benefit from the reduction in the tax rate enacted in connection with the Tax Act, partially offset by non-deductible acquisition costs. credits.


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 is set forth below.


Management believes these non-GAAP financial measures provide an additional means of analyzing the current period’speriod's results against the corresponding prior period’speriod's results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’sCompany'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.



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EBITDA, Adjusted EBITDA and Adjusted EBITDA margin


We use EBITDA, 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 EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin allow us to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. Additionally, Adjusted EBITDA is a key measurement used in our Term Loans to determine interest rates and financial covenant compliance.


We define EBITDA as net income adjusted to exclude (1) income tax expense, (2) interest (income) expense, net, (3) depreciation and amortization expense, and (4) amortization of customer relationship intangibles and trademarks. We define Adjusted EBITDA as EBITDA adjusted to exclude (1) expenses related to the RSI Acquisition and the subsequent restructuring charges (2) inventory step-up amortization duethat the Company incurred related to the increase in the fair value of inventory acquired through the RSI Acquisition,acquisition, (2) non-recurring restructuring charges, (3) net gaingain/loss on debt forgiveness and modification, (4) stock-based compensation expense, (5) gain/loss on asset disposals, and (6) change in fair value of foreign exchange forward contracts. 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.


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’sCompany'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 and the subsequent restructuring charges (2) inventory step-up amortization duethat the Company incurred related to the increase in the fair value of inventory acquired through the RSI Acquisition,acquisition, (2) non-recurring restructuring charges, (3) the amortization of customer relationship intangibles and trademarks, (4) net gaingain/loss on debt forgiveness and modification, and (5) the tax benefit of RSI Acquisition expenses and subsequent restructuring charges, the inventory step-up amortization, the net gaingain/loss on debt forgiveness and modification, and the amortization of customer relationship intangibles and trademarks. The amortization of intangible assets is driven by the RSI Acquisition and will recur in future periods. Management has determined that excluding amortization of intangible assets from our definition of Adjusted EPS per diluted share will better help it evaluate the performance of our business and profitability and we have also received similar feedback from some of our investors regarding the same.
Free cash flow


To better understand trends in our business, we believe that it is helpful to subtract amounts for capital expenditures consisting of cash payments for property, plant and equipment and cash payments for investments in displays from cash flows from continuing operations which is how we define free cash flow. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It also provides a measure of our ability to repay our debt obligations.


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:
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Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA marginReconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA marginReconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin


      


 FISCAL YEARS ENDED APRIL 30,FISCAL YEARS ENDED APRIL 30,
(Dollars in thousands) 2019 2018 2017(Dollars in thousands)202120202019
      
Net income (GAAP) $83,688
 $63,141
 $71,199
Net income (GAAP)$58,763 $74,861 $83,688 
Add back:      Add back:
Income tax expense 27,200
 31,619
 37,726
Income tax expense18,672 25,687 27,200 
Interest expense (income), net 35,652
 13,054
 (521)
Interest expense, netInterest expense, net23,128 29,027 35,652 
Depreciation and amortization expense 45,446
 28,671
 18,682
Depreciation and amortization expense51,100 49,513 45,446 
Amortization of customer relationship intangibles and trademarks 49,000
 16,333
 —
Amortization of customer relationship intangibles and trademarks47,889 49,000 49,000 
EBITDA (Non-GAAP) $240,986
 $152,818
 $127,086
EBITDA (Non-GAAP)$199,552 $228,088 $240,986 
Add back:      Add back:
Acquisition related expenses (1) 4,118
 12,902
 2,686
Inventory step-up amortization (2) —
 6,334
 —
Net gain on debt forgiveness and modification (3) (5,266) —
 —
Acquisition and restructuring related expenses (1)Acquisition and restructuring related expenses (1)174 221 4,118 
Non-recurring restructuring charges, net (2)Non-recurring restructuring charges, net (2)5,848 — — 
Change in fair value of foreign exchange forward contracts (3)Change in fair value of foreign exchange forward contracts (3)(1,102)1,102 — 
Net loss (gain) on debt forgiveness and modification (4)Net loss (gain) on debt forgiveness and modification (4)13,792 — (5,266)
Stock-based compensation expense 3,040
 3,097
 3,469
Stock-based compensation expense4,598 3,989 3,040 
Loss on asset disposal 1,973
 615
 444
Loss on asset disposal384 2,629 1,973 
Adjusted EBITDA (Non-GAAP) $244,851
 $175,766
 $133,685
Adjusted EBITDA (Non-GAAP)$223,246 $236,029 $244,851 
      
Net Sales $1,645,319
 $1,250,274
 $1,030,248
Net Sales$1,744,014 $1,650,333 $1,645,319 
Net income margin (GAAP)Net income margin (GAAP)3.4 %4.5 %5.1 %
Adjusted EBITDA margin (Non-GAAP) 14.9% 14.1% 13.0%Adjusted EBITDA margin (Non-GAAP)12.8 %14.3 %14.9 %


(1) Acquisition and restructuring related expenses are comprised of expenses related to the RSI Acquisition and the subsequent restructuring charges that the Company incurred.


incurred related to the acquisition.
(2) Non-recurring restructuring charges are comprised of expenses incurred related to the permanent layoffs due to COVID-19 and the closure of the manufacturing plant in Humboldt, Tennessee. Fiscal year 2021 includes accelerated depreciation expense of $1.3 million and gain on asset disposal of $2.2 million related to Humboldt.
(3) In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange rates. The inventory step-amortization isCompany manages these risks through the increaseuse of foreign exchange forward contracts. The changes in the fair value of inventory acquired through the RSI Acquisition that was fully expensed when the inventory was soldforward contracts are recorded in other (income) expense, net in the quarter ended January 31, 2018.operating results.
(3)(4) The Company recognized net loss on debt modification totaling $13.8 million for fiscal year 2021 related to the restructuring of its debt. The Company had loans and interest forgiven relating to four separate economic development loans totaling $5.5 million for fiscal year 2019 and the Company incurred $0.3 million in loan modification expense with an amendment to the credit agreement during fiscal year 2019.


A reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin as projected for fiscal 20202022 is not provided because we do not forecast net income as we cannot, without unreasonable effort, estimate or predict with certainty various components of net income.
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Adjusted EPS per diluted shareAdjusted EPS per diluted shareAdjusted EPS per diluted share


      


 FISCAL YEARS ENDED APRIL 30,FISCAL YEARS ENDED APRIL 30,
(Dollars in thousands, except share and per share data) 2019 2018 2017(Dollars in thousands, except share and per share data)202120202019
      
Net income (GAAP) $83,688
 $63,141
 $71,199
Net income (GAAP)$58,763 $74,861 $83,688 
Add back:      Add back:
Acquisition related expenses 4,118
 12,902
 2,686
Amortization of intangibles 49,000
 16,333
 —
Inventory step-up amortization —
 6,334
 —
Net gain on debt forgiveness and modification (5,266) —
 —
Acquisition and restructuring related expensesAcquisition and restructuring related expenses174 221 4,118 
Non-recurring restructuring charges, netNon-recurring restructuring charges, net5,848 — — 
Amortization of customer relationship intangibles and trademarksAmortization of customer relationship intangibles and trademarks47,889 49,000 49,000 
Net loss (gain) on debt forgiveness and modificationNet loss (gain) on debt forgiveness and modification13,792 — (5,266)
Tax benefit of add backs (11,824) (10,970) (969)Tax benefit of add backs(17,467)(12,305)(11,824)
Adjusted net income (Non-GAAP) $119,716
 $87,740
 $72,916
Adjusted net income (Non-GAAP)$108,999 $111,777 $119,716 
      
Weighted average diluted shares 17,330,419
 16,744,705
 16,398,240
Weighted average diluted shares17,036,730 16,952,480 17,330,419 
EPS per diluted share (GAAP)EPS per diluted share (GAAP)$3.45 $4.42 $4.83 
Adjusted EPS per diluted share (Non-GAAP) $6.91
 $5.24
 $4.45
Adjusted EPS per diluted share (Non-GAAP)$6.40 $6.59 $6.91 
EPS per diluted share (GAAP) $4.83
 $3.77
 $4.34

Free cash flow




FISCAL YEARS ENDED APRIL 30,
(Dollars in thousands)202120202019
Cash provided by operating activities$151,763 $177,542 $190,845 
Less: Capital expenditures (1)46,318 40,739 39,385 
Free cash flow$105,445 $136,803 $151,460 
(1) Capital expenditures consist of cash payments for property, plant and equipment and cash payments for investments in displays.
Free cash flow


      
  FISCAL YEARS ENDED APRIL 30,
(Dollars in thousands) 2019 2018 2017
       
Cash provided by operating activities $190,845
 $86,775
 $77,080
Less: capital expenditures (1) 39,385
 49,893
 25,531
Free cash flow $151,460
 $36,882
 $51,549


Outlook for Fiscal 20202022
 
The Company tracks several metrics, including but not limited to housing starts, existing home sales, mortgage interest rates, new jobs growth, GDP growthWhile we are optimistic about fiscal 2022, the impact on our financial results from the COVID-19 pandemic as well as material constraints 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 2020, it willlabor impacts continue to be below historical averages.

The Company expects that industry-wide cabinet remodelinguncertain. While the Company's net sales will continue to be challenged until economic trends remain consistently favorable.  Growth is expected at roughly low to mid-single digit ratewere up 18.6% during the Company’s fiscal 2020. The Company’s home center market share is expected to remain at normalized levels for fiscal 2020, however this is heavily dependent upon competitive promotional activity. The Company expects to continue to gain market share in its growing independent dealer and distributor channel.



Based on available information, it is expected that new residential construction starts will grow approximately 3 to 5% during fiscal 2020. The Company’s new residential construction direct business is expected to increase at a faster rate than the market rate for single family housing starts due to continued share gains.

In total, the Company expects that it will grow sales at a mid-single digit rate in fiscal 2020.  Margins will be challenged with increases in labor costs, raw materials, tariffs and transportation rates.  With respect to the 301 Tariffs on goods imported from China, assuming the tariffs are maintained at the 25% levels, we could be exposed to approximately $5-6 million of potential annual direct cost increases in addition to the original 10% tariffs. Our teams are working to mitigate the impact through supplier negotiations, supply chain repositioning, internal productivity measures and pricing action if required. Should the 301 tariffs expand to additional categories we would have an additional exposure of approximately $4.0 million annually. The Company will also be negatively impacted by the move of one of our California facilities and incremental merchandising expenses. The Company expects adjusted EBITDA margins to decrease slightly for fiscal 2020.

Particleboard Supply

Due to a catastrophic fire at a key Southeast supplier plant in May 2019 and the supplier’s subsequent decision to shutter operations over the next 90-days at two additional plants, the Company is currently experiencing a temporary disruption in supply of particleboard, a key input component to the build of our cabinetry. The Company is working diligently to qualify alternate and additional suppliers, and our product engineering team is working on acceptable product substitutions where performance of other materials will meet or exceed that of particleboard.

We expect stable supply lines for particleboard will once again be established around the end of the secondfourth quarter of fiscal 2020. In2021 compared to the interim,same period in the prior year, we may experience extended lead times on particleboard cabinet orders in our Northeast, Mid-Atlantic, Southeast and Gulf Regions. Management’s current expectation on increased lead times is one to two weeks.

Management currently expects that these events will have a negative impact on at least ourexpect net sales for the first and second quartersquarter of fiscal 20202022 to be up in the mid to upper teens compared with the same period in the prior year. For the first quarter of fiscal 2022 we expect margins to improve sequentially as the pricing actions take effect. This trend could continue as we expectstill do not know the increased lead timesfull impact of the pandemic and are waiting for macro-economic factors to impact sales and our use of substituted materials instead of particleboard will increase our costs. Our results could be negatively impacted by product substitution costs and incremental transportation costs of $1-$3 million per quarter until fully resolved.

stabilize. The Company maintains property insurance, includinghas taken actions to improve our cash position and as of April 30, 2021 had $91.1 million of cash on hand and access to $236.0 million of additional availability under our revolver. In fiscal 2022, the Company may intentionally reduce our cash position to historical norms through debt repayments and share repurchases. We plan to continue our investment back into the business interruption/dependent property coverage with a limitby increasing our capital investment rate to approximately 4.0% of $5 million and extra expense with a limit of $10 million that we believe will provide substantial coveragenet sales for certain of the losses arising from these events.  The Company is working with its insurance carrier on this matter and the magnitude and timing of the ultimate settlement is currently unknown. We expect the level of insurance proceeds will cover a substantial portion of the losses we incur due to these events, but there can be no assurance that we will ultimately be able to collect such amounts and such collection may occur in a different reporting period from the reporting period where we experience losses due to these events.full fiscal year.


Additional risks and uncertainties that could affect the Company’sCompany's results of operations and financial condition are discussed elsewhere in this annual report, including under “Forward-Looking"Forward-Looking Statements,”" and elsewhere in “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" as well as under Item 1A. “Risk Factors”"Risk Factors" and Item 7A. “Quantitative"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. (the “RSI Acquisition”) for a table detailing the purchase price. The Company’sCompany's cash and cash equivalents and investments in certificates of deposit totaled $59.2$91.1 million at April 30, 2019,2021, representing a $28.7$6.0 million decrease from its April 30, 20182020 levels.  At April 30, 2019,2021, total long-term debt (including current maturities) was $691.5$521.8 million, a decrease of $122.5$75.4 million from itsthe balance at April 30, 2018.2020.  The Company’sCompany's ratio of long-term debt to total capital was 52.6%40.9% at April 30, 2019,2021, compared with 58.2%45.9% at April 30, 2018.2020.  The Company’sCompany'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$500 million under the Revolving
23


Facility. Approximately $93.3$236.0 million was available under this facility as of April 30, 2019.  2021.  See Note F — Loans Payable and Long-Term Debt for further discussion on our indebtedness.


The Company added significant indebtedness with the RSI Acquisition in fiscal 2018. Under the Prior Credit Agreement, the Company borrowed $250 million under the Initial Term Loan on December 29, 2017 in connection with the closing of the RSI Acquisition and borrowed an additional $250 million under the Delayed Draw Term Loan on February 12, 2018 in connection with the refinancing of the RSI Notes. Amounts outstanding under the Prior Credit Facilities bearAgreement incurred interest based on a fluctuating rate measured by reference to either, at the Company’sCompany'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’sCompany's then-current “Total"Total Funded Debt to EBITDA Ratio.” The Company also incurs 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.” As of April 30, 2019, the applicable margin with respect to base rate loans and LIBOR loans was 0.75% and 1.75%, respectively, and the commitment fee was 0.20%."


The Company began repaying the aggregate outstanding amounts under its initial term loan facility and the delayed draw term loan facility in certain specified quarterly installments on April 30, 2018. The Credit Facilities mature on December 29, 2022.

On February 12, 2018, the Company issued $350 million in aggregate principal amount of the Senior Notes and utilized the proceeds of such issuance, together with the borrowings under the Delayed Draw Term Loan as discussed above and cash on hand, to fund the refinancing of the RSI Notes, which were acquired as part of the RSI Acquisition - See Note B -- Acquisition of RSI Home Products, Inc. (the “RSI Acquisition”).Acquisition.


On April 22, 2021, the Company amended and restated the Prior Credit Agreement.The amended and restated credit agreement governing(the "A&R Credit Agreement") provides for a $500 million revolving loan facility with a $50 million sub-facility for the Company'sissuance of letters of credit facilities(the "Revolving Facility") and a $250 million term loan facility (the "Term Loan Facility").Also on April 22, 2021, the Company borrowed the entire $250 million under the Term Loan Facility and approximately $264 million under the Revolving Facility to fund, in part, the repayment in full of the amounts then outstanding under the Prior Credit Agreement and the indenture governingredemption of the Senior NotesNotes.The Company is required to repay the Term Loan Facility in specified quarterly installments.The Revolving Facility and Term Loan Facility mature on April 22, 2026.

The A&R Credit Agreement includes certain financial covenants that require the Company to maintain (i) a "Consolidated Interest Coverage Ratio" of no less than 2.00 to 1.00 and (ii) a "Total Net Leverage Ratio" of no greater than 4.00 to 1.00, subject, in each case, to certain limited exceptions.

The A&R Credit Agreement includes certain additional covenants, including negative covenants that restrict the ability of the Company and certain of the Company’sits subsidiaries to among other things, incur additional indebtedness, create additional liens on its assets, make certain investments, dispose of its assets or engage in a merger or consolidation,other similar transaction or 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 agreementA&R Credit Agreement. The negative covenants further restrict the ability of the Company and certain of its subsidiaries to make certain restricted payments, including, in the case of the Company, the payment of dividends and the indenture.repurchase of common stock, in certain limited circumstances. See Note G --NotesF — Loans Payable and Long-Term Debt for a discussion of interest rates under the new A&R Credit Agreement and our compliance with the covenants in the credit agreement and the indenture.agreement.
 
OPERATING ACTIVITIES
 
Cash provided by operating activities in fiscal 20192021 was $190.8$151.8 million, compared with $86.8$177.5 million in fiscal 2018.2020.  The increasedecrease in the Company’sCompany's cash from operating activities was driven primarily by a decrease in net income and decreased cash flows from customer receivables and inventories, which were partially offset by an increase in net income excluding non-cash items (primarily depreciationcash flows from accounts payable and amortization), lower pension contributionsaccrued marketing expenses.

Cash provided by operating activities in excess of expense, andfiscal 2020 was $177.5 million, compared with $190.8 million in fiscal 2019.  The decrease in the Company's cash from operating activities was driven primarily by a decrease in customer receivablesnet income and decreased cash flows from income taxes receivable and accrued compensation and related expenses, which was partially offset by an increase in inventoriescash flows from customer receivables and other accrued marketing expenses.

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.


On November 28, 2018, the Board approved up to $5.0 million of discretionary funding to reduce its defined benefit pension liabilities. The Company made aggregate contributions of $7.3 million to its pension plans during fiscal 2019, including the $5.0 million of discretionary funding.

On August 24, 2017, the Board approved up to $13.6 million of discretionary funding to reduce its defined benefit pension liabilities. The Company made aggregateno contributions to its pension plan in fiscal 2021 and made contributions of $19.3$0.5 million to its pension plans during fiscal 2018, including the $13.6 million of discretionary funding.2020.

On August 25, 2016, the Board 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’sCompany's investing activities primarily consist of capital expenditures and investments in promotional displays. Net cash used by investing activities in fiscal 20192021 was $37.9$42.4 million, compared with $44.3$38.9 million in fiscal 20182020 and $53.7$37.9 million in fiscal 2017.2019. Investments in property, plant and equipment for fiscal 20192021 were $32.1$35.7 million, compared with $47.6$31.7 million in
24


fiscal 2020 and $32.1 million in fiscal 2018 and $21.8 million in fiscal 2017.2019. Investments in promotional displays were $10.6 million in fiscal 2021, compared with $9.1 million in fiscal 2020 and $7.3 million in fiscal 2019, compared with $2.3 million in fiscal 2018 and $3.7 million in fiscal 2017.2019.
On November 30, 2016 the Board 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. During fiscal 2019, 2018 and 2017, approximately $6.7 million, $21.1 million and $3.0 million, respectively, was spent related to the new corporate headquarters.



During fiscal 2019, the Company’s decrease in net cash used for investing activities was primarily driven by lower payments to acquire property, plant and equipment.


FINANCING ACTIVITIES
 
The Company realized a net outflow of $173.7$115.3 million from financing activities in fiscal 20192021 compared with a net outflow of $141.0$99.2 million in fiscal 2018,2020, and a net outflow of $20.8$173.7 million in fiscal 2017.2019.  During fiscal 2019, $122.22021, $82.5 million, net, was used to repay long-term debt, compared with approximately $96.6$98.5 million in fiscal 20182020 and $11.7$122.2 million in fiscal 2017.2019.  
 
Under a stock repurchase authorization approved by its Board on November 30, 2016, the Company was authorized to purchase up to $50 million of the Company's common shares. The Board suspended the Company's stock repurchase program in conjunction with the RSI Acquisition. On August 23, 2018, the Board reinstated the program. On November 28, 2018, the Board authorized an additional stock repurchase program of up to $14 million of the Company's common shares. This authorization is in addition to the stock repurchase program authorized on November 30, 2016. ManagementThe Company funded share repurchases using available cash and cash generated from operations. Repurchased shares became authorized but unissued common shares. At April 30, 2019, no funds remained from the amounts authorized by the Board to repurchase the Company’sCompany's common shares. On August 22, 2019, the Board authorized a stock repurchase program of up to $50 million of the Company's common shares. The Company purchased a total of 745,232 common shares, for an aggregate purchase price ofrepurchased $20.0 million during fiscal 2021 and $50.0 million during fiscal 2019 under the authorizations pursuant to a repurchase plan intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended.2019. The Company alsodid not repurchase any of its shares during the fiscal year ended April 30, 2020. On May 25, 2021, the Board authorized a stock repurchase program of up to $100 million of the Company's outstanding common shares. In conjunction with this authorization the Board cancelled the remaining portion of the $50 million existing authorization, of which the Company had repurchased $29.0$20 million duringin the fourth quarter of fiscal 2018 and $13.4 million during fiscal 2017.2021.


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 2020.2022.


The timing of the Company’sCompany's contractual obligations (excluding interest) as of April 30, 20192021 is summarized in the table below:
 FISCAL YEARS ENDED APRIL 30
(in thousands)Total Amounts20222023-20242025-20262027 and Thereafter
Term Loans$250,000 $6,250 $18,750 $225,000 $— 
Revolving credit264,000 — — 264,000 — 
Capital lease obligations5,494 2,072 2,982 440 — 
Other long-term debt6,659 — 299 515 5,845 
Operating lease obligations144,308 23,761 43,756 35,910 40,881 
Total$670,461 $32,083 $65,787 $525,865 $46,726 
 FISCAL YEARS ENDED APRIL 30










(in thousands)Total Amounts
2020
2021-2022
2023-2024
2025 and Thereafter















Term Loans$340,000

$—

$27,500

$312,500

$—
The Senior Notes350,000

—

—

—

350,000
Capital lease obligations6,645

2,285

2,825

1,369

166
Other long-term debt6,660

—

—

76

6,584
Operating lease obligations107,388

17,943

30,084

20,490

38,871















Total$810,693

$20,228

$60,409

$334,435

$395,621


SEASONALITY
 
Our business has been subject to seasonal influences, with higher sales typically realized in our first and fourth fiscal quarters.quarters, however sales were down in the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021 due to the COVID-19 pandemic. General economic forces and changes in our customer mix have reduced seasonal fluctuations in revenue over the past few years. The costs of the Company’sCompany'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.


For additional discussion of risks that could affect the Company and its business, see “Forward-Looking Statements”"Forward-Looking Statements" above, as well as Item 1A. “Risk Factors”"Risk Factors" and Item 7A. “Quantitative"Quantitative and Qualitative Disclosures About Market Risk.”"    
 
OFF-BALANCE SHEET ARRANGEMENTS
 
As of April 30, 20192021 and 2018,2020, the Company had no off-balance sheet arrangements.


25


CRITICAL ACCOUNTING POLICIES
 
Management has chosen accounting policies that are necessary to give reasonable assurance that the Company’sCompany'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.


Revenue Recognition. The Company utilizes signed sales agreements that provide for transfer of title to the customer at the time of shipment or upon delivery based on the contractual terms. The Company must estimate the amount of sales that have been transferred to third-party carriers but not delivered to customers as the carriers are not able to report real-time what has been delivered and thus there is a delay in reporting to the Company. 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’scustomer'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. ThePensions. Prior to April 30, 2020, 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 sheets.
Pensions. The Company hashad two non-contributory defined benefit pension plans covering many of the Company’sCompany's employees hired prior to April 30, 2012. Effective April 30, 2012, the Company froze all future benefit accruals under the Company’sCompany's hourly and salaried defined benefit pension plans. Effective April 30, 2020, these plans were merged into one plan.

On November 16, 2020 the Company filed an application with the Internal Revenue Service to terminate the Pension Plan with an effective date of December 31, 2020 (the "Plan Termination Date"), in a standard termination and the Company expects to incur approximately $1.6 million to terminate the Pension Plan, $0.4 million of which was incurred in fiscal 2021. In connection with the Pension Plan termination and in addition to the Pension Plan termination costs, the Company may be required to make an additional funding contribution to the Pension Plan in order to ensure the Pension Plan is fully funded on a termination basis as of the Benefit Distribution Date, with the amount of such contribution still to be determined. The Benefit Distribution Date will be determined once the Company receives approval from certain regulatory agencies. The additional funding contribution is expected to be funded from cash on hand and the amount will vary depending on the lump sum distribution take rate and the interest rate on the Benefit Distribution Date. 

The estimated expense, benefits and pension obligations of these plans arethe pension plan is 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)IMPACT OF 1% INCREASEIMPACT OF 1% DECREASE
(decrease) increase  
Effect on annual pension expense$(1.7)$1.5 
(in millions)IMPACT OF 1% INCREASE
IMPACT OF 1% DECREASE
(decrease) increase 
 




Effect on annual pension expense$(1.6)
$1.5




Effect on projected pension benefit obligation$(21.1)
$26.4


Pension expense for fiscal 20192021 and the assumptions used in that calculation are presented in Note JI of the Consolidated Financial Statements.  At April 30, 2019,2021, the weighted average discount rate was 4.02%2.80% compared with 4.18%3.16% at April 30, 2018.2020. The expected return on plan assets was 5.5%3.25% for the year ended April 30, 20192021 and 6.5%5.0% for the year ended April 30, 2018.2020. 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.
 
26


The projected performance of the Company’sCompany's pension plansplan is largely dependent on the assumptions used to measure the obligations of the plansplan and to estimate future performance of the plans’plan's 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’plan's 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’plans' active participants. The actual rates of return on plan assets realized, net of investment manager fees, were 7.0%3.2%, 3.5%15.6% and 10.3%7.0% for fiscal 2019, 20182021, 2020, and 2017,2019, respectively.
 
The fair value of plan assets at April 30, 20192021 was $169.5$193.6 million compared with $156.5$190.7 million at April 30, 2018.2020. The Company’s plan assets exceeded the projected benefit obligation by $0.7 million in fiscal 2019 and theCompany's projected benefit obligation exceeded plan assets by $7.0$3.0 million in fiscal 2018.2021 and $0.4 million in fiscal 2020. The $7.7$2.6 million decreaseincrease in the Company’sCompany's unfunded position during fiscal 20192021 was primarily driven by the Company’s $7.3 million contributions.  The Company expects its pension benefit to increase from $0.6 million in fiscal 2019 to $0.7 million in fiscal 2020, due primarily to a decrease in the expected interest cost, partially offset by a decrease in the expected long-termdiscount rate of return from 5.5%3.16% to 5.0%2.80%.  The Company expects to contribute $0.5 million to its pension plans in fiscal 2020, which represents discretionary funding.  The Company made contributions of $7.3 million to its pension plans in fiscal 2019. 
 
Goodwill and Other Intangible Assets.Goodwill.  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 20192021 and 2018.2020.


Other Intangible Assets. Other 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 three to six years, unless such lives are deemed indefinite. The Company reviews its intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no impairment charges related to other intangible assets for the fiscal years ended 20192021 and 2018.2020.


RECENT ACCOUNTING PRONOUNCEMENTS
 
In May 2014,February 2016, the Financial Accounting Standards Board (the "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. Thea new 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 adopted ASU 2014-09 as of May 1, 2018 and for periods thereafter using the modified retrospective approach, which was applied to all contracts not completed as of May 1, 2018. The cumulative effect of adopting the new revenue standard was not material. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of this standard did not have a material impact on the twelve month periods ended April 30, 2019 and the Company does not expect it to have a material impact on revenue or net income on an ongoing basis. See Note A -- Summary of Significant Account Policies for further information.

In February 2016, the FASB issued ASU 2016-02,leases, ASC 842, which requires lessees to recognize almost all leases on their balance sheet as a “right-of-use”right-of-use ("ROU") asset and lease liability but recognize related expenses in a manner similar to current accounting. The guidance also eliminates current real estate-specific provisions for all entities. In January 2018, the FASB issued ASU 2018-01, which clarifies the application of the new leases guidance to land easements. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, which clarify certain guidance included in ASU 2016-02 and introduces a new optional transition method.liability. The standard is effective for annual periods beginning after December 15, 2018. The standard provides for the option to elect a package of practical expedients upon adoption. The Company intends to adoptadopted the standard on May 1, 2019 using the modified retrospective transition approach and plans to electelected the package of practical expedients that allows it to forgo reassessment of lease classification for leases that have already commenced. The Company also elected the practical expedients to the new standard without restating comparative prior period financial information and to not reassess prior conclusions related to contracts containing leases, lease classificationrecognize ROU assets and initial direct costs and is evaluating the other practical expedients available under the guidance. The Company expects expanded financial statement note disclosure in addition to recognizing a right-of-use asset and lease liabilityliabilities for its operating leases on the balance sheet. In preparation for the adoption of the standard, the Company has procured a third-party software to track and manage the leases. Based on leases outstanding at April 30,with shorter than 12-month terms. On May 1, 2019, the Company estimates therecognized operating lease right-of-use assetassets and operating lease liability would have been in the rangeliabilities of $95 million to $115$80.4 million. The Company continuesnew standard did not have a material impact on the Company's results of operations, cash flows or opening retained earnings, or on its debt covenant calculations. ASC 842 also requires entities to evaluatedisclose certain qualitative and quantitative information regarding the impactsamount, timing, and uncertainty of the pending adoption. As such, the Company’s preliminary assessmentscash flows arising from leases. Such disclosures are subject to change.included in Note N — Leases.




In March 2017,December 2019, the FASB issued ASU No.  2017-07, "Compensation—Retirement Benefits2019-12, "Income Taxes (Topic 715)740): ImprovingSimplifying the Presentation of Net Periodic Pension CostAccounting for Income Taxes," which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod tax allocations 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 presentedcalculating income taxes in the income statement separately from the service cost component and outside of operating income.interim periods. The amendments also allow only the service cost componentimprove consistent application of net benefit (income) cost to be eligibleand simplify GAAP for capitalization. The amendments in thisother areas of Topic 740 by clarifying and amending existing guidance. ASU are2019-12 is effective for fiscal yearsthe Company 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.May 1, 2021. The Company adopted ASU 2017-07 ashas reviewed the provisions of May 1, 2018this new pronouncement and for periods thereafter using the retrospective approach. The adoption of this standard resultedguidance is not expected to have an impact on financial position or results of operations.

In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." These amendments provide temporary optional guidance to ease the potential burden in immaterial reclassificationsaccounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that
27


reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022 and can be adopted as of any date from operating income in prior periods.the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company has identified loans and other financial instruments that are directly or indirectly influenced by LIBOR and does not expect the adoption of this standardASU 2020-04 to have a material effectimpact on ourits consolidated financial statements on an ongoing basis..


Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
The costs of the Company’sCompany'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, 20192021 would increase our annual interest expense by approximately $3.4$5.1 million.
 
The Company doeshas historically not currently useused commodity or interest rate derivatives or similar financial instruments to manage its commodity price or interest rate risks.risks and had no such arrangements outstanding at the end of fiscal 2021. However, in April 2021 (fiscal 2021), we redeemed our fixed rate Senior Notes and entered into the A&R Credit Agreement which increased our exposure to variable interest rates. See Note F — Loans Payable and Long-Term Debt for further discussion. Due in part to this, in May 2021 (fiscal 2022), we entered into interest rate swaps to hedge approximately $200 million of our variable interest rate debt.




28


Item 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
APRIL 30 APRIL 30
(in thousands, except share and per share data)2019
2018(in thousands, except share and per share data)20212020




ASSETS 
 ASSETS  
Current Assets 
 Current Assets  
Cash and cash equivalents$57,656

$78,410
Cash and cash equivalents$91,071 $97,059 
Investments - certificates of deposit1,500

8,000
Customer receivables, net125,901

136,355
Customer receivables, net146,866 106,344 
Inventories108,528

104,801
Inventories140,282 111,836 
Income taxes receivable1,009

25,996
Prepaid expenses and other11,441

10,805
Prepaid expenses and other13,861 9,933 
Total Current Assets306,035

364,367
Total Current Assets392,080 325,172 






Property, plant and equipment, net208,263

218,102
Property, plant and equipment, net204,002 203,824 
Investments - certificates of deposit—

1,500
Operating lease right-of-use assetsOperating lease right-of-use assets123,118 127,668 
Customer relationships intangibles, net213,111

258,778
Customer relationships intangibles, net121,778 167,444 
Trademarks, net5,555

8,889
Trademarks, net0 2,222 
Goodwill, net767,612

767,451
Goodwill, net767,612 767,612 
Promotional displays, net13,058

12,189
Promotional displays, net14,554 13,966 
Deferred income taxes773

732
Deferred income taxes1,118 915 
Other assets15,524

13,337
Other assets12,252 13,983 
TOTAL ASSETS$1,529,931

$1,645,345
TOTAL ASSETS$1,636,514 $1,622,806 




LIABILITIES AND SHAREHOLDERS' EQUITY 
 LIABILITIES AND SHAREHOLDERS' EQUITY  




Current Liabilities 
 Current Liabilities  
Accounts payable$61,277

$71,096
Accounts payable$91,622 $56,342 
Current maturities of long-term debt2,286

4,143
Current maturities of long-term debt8,322 2,216 
Short-term lease liability - operatingShort-term lease liability - operating19,994 18,896 
Accrued compensation and related expenses54,906

48,682
Accrued compensation and related expenses58,577 49,064 
Accrued marketing expenses12,979

19,289
Accrued marketing expenses20,019 12,361 
Other accrued expenses18,142

27,245
Other accrued expenses21,913 16,727 
Total Current Liabilities149,590

170,455
Total Current Liabilities220,447 155,606 






Long-term debt, less current maturities689,205

809,897
Long-term debt, less current maturities513,450 594,921 
Deferred income taxes64,749

71,563
Deferred income taxes38,348 52,935 
Defined benefit pension liabilities—

6,960
Long-term lease liability - operatingLong-term lease liability - operating109,628 112,454 
Other long-term liabilities6,034

4,805
Other long-term liabilities11,745 6,352 






Shareholders' Equity 
 Shareholders' Equity 
Preferred stock, $1.00 par value; 2,000,000 shares authorized, none issued—

—
Preferred stock, $1.00 par value; 2,000,000 shares authorized, none issued0 0 
Common stock, no par value; 40,000,000 shares authorized; issued and outstanding shares: at April 30, 2019: 16,849,026, at April 30, 2018: 17,503,922352,424

361,158
Common stock, no par value; 40,000,000 shares authorized; issued and outstanding shares: at April 30, 2021: 16,801,101, at April 30, 2020: 16,926,537Common stock, no par value; 40,000,000 shares authorized; issued and outstanding shares: at April 30, 2021: 16,801,101, at April 30, 2020: 16,926,537362,524 359,430 
Retained earnings317,420

269,576
Retained earnings434,940 392,281 
Accumulated other comprehensive loss - Defined benefit pension plans(49,491)
(49,069)Accumulated other comprehensive loss - Defined benefit pension plans(54,568)(51,173)
Total Shareholders' Equity620,353

581,665
Total Shareholders' Equity742,896 700,538 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,529,931

$1,645,345
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,636,514 $1,622,806 
See notes to consolidated financial statements.


29


CONSOLIDATED STATEMENTS OF INCOME
 
 FISCAL YEARS ENDED APRIL 30
(in thousands, except per share data)202120202019
Net sales$1,744,014 $1,650,333 $1,645,319 
Cost of sales and distribution1,424,739 1,321,147 1,298,846 
Gross Profit319,275 329,186 346,473 
Selling and marketing expenses89,464 83,608 89,875 
General and administrative expenses112,283 113,334 112,917 
Restructuring charges, net5,848 (18)1,987 
Operating Income111,680 132,262 141,694 
Interest expense, net23,128 29,027 35,652 
Other (income) expense, net11,117 2,687 (4,846)
Income Before Income Taxes77,435 100,548 110,888 
Income tax expense18,672 25,687 27,200 
Net Income$58,763 $74,861 $83,688 
SHARE INFORMATION   
Earnings per share   
Basic$3.46 $4.43 $4.84 
Diluted$3.45 $4.42 $4.83 
 FISCAL YEARS ENDED APRIL 30
(in thousands, except per share data)2019
2018
2017









Net sales$1,645,319

$1,250,274

$1,030,248
Cost of sales and distribution1,298,846

994,871

805,612
Gross Profit346,473

255,403

224,636









Selling and marketing expenses89,875

77,843

70,979
General and administrative expenses112,917

69,855

45,419
Restructuring charges, net1,987

—

—
Operating Income141,694

107,705

108,238









Interest expense (income), net35,652

13,054

(521)
Other (income) expense(4,846)
(109)
(166)
Income Before Income Taxes110,888

94,760

108,925









Income tax expense27,200

31,619

37,726









Net Income$83,688

$63,141

$71,199






SHARE INFORMATION 
 
 
Earnings per share 
 
 
Basic$4.84

$3.80

$4.38
Diluted$4.83

$3.77

$4.34


See notes to consolidated financial statements.
 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 FISCAL YEARS ENDED APRIL 30
(in thousands)202120202019
Net income$58,763 $74,861 $83,688 
Other comprehensive (loss) net of tax:
Change in pension benefits, net of deferred taxes
of $(1,156), $(573), and $190 respectively(3,395)(1,682)(422)
Total Comprehensive Income$55,368 $73,179 $83,266 
 FISCAL YEARS ENDED APRIL 30
(in thousands)2019
2018
2017









Net income$83,688

$63,141

$71,199









Other comprehensive income (loss) net of tax:




Change in pension benefits, net of deferred taxes




of $(190), $(50), and $(4,391) respectively(422)
88

6,868









Total Comprehensive Income$83,266

$63,229

$78,067


See notes to consolidated financial statements.




30


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    ACCUMULATED   
    OTHERTOTAL
 COMMON STOCKRETAINEDCOMPREHENSIVESHAREHOLDERS'
(in thousands, except share data)SHARESAMOUNTEARNINGSLOSSEQUITY
Balance, April 30, 201817,503,922 $361,158 $269,576 $(49,069)$581,665 
Net income— — 83,688 — 83,688 
Other comprehensive income, net of tax— — — (422)(422)
Stock-based compensation— 3,040 — — 3,040 
Exercise of stock-based compensation awards, net of amounts withheld for taxes48,928 (1,241)— — (1,241)
Stock repurchases(745,232)(14,156)(35,844)— (50,000)
Employee benefit plan contributions41,408 3,623 — — 3,623 
Balance, April 30, 201916,849,026 $352,424 $317,420 $(49,491)$620,353 
Net income— — 74,861 — 74,861 
Other comprehensive loss, net of tax— — — (1,682)(1,682)
Stock-based compensation— 3,989 — — 3,989 
Exercise of stock-based compensation awards, net of amounts withheld for taxes31,790 (755)— — (755)
Employee benefit plan contributions45,721 3,772 — — 3,772 
Balance, April 30, 202016,926,537 $359,430 $392,281 $(51,173)$700,538 
Net income— — 58,763 — 58,763 
Other comprehensive loss, net of tax— — — (3,395)(3,395)
Stock-based compensation— 4,598 — — 4,598 
Exercise of stock-based compensation awards, net of amounts withheld for taxes29,019 (1,351)— — (1,351)
Stock repurchases(200,046)(3,896)(16,104)— (20,000)
Employee benefit plan contributions45,591 3,743 — — 3,743 
Balance, April 30, 202116,801,101 $362,524 $434,940 $(54,568)$742,896 
  
 
 
ACCUMULATED  
 
  
 
 
OTHER
TOTAL
 COMMON STOCK
RETAINED
COMPREHENSIVE
SHAREHOLDERS'
(in thousands, except share data)SHARES
AMOUNT
EARNINGS
LOSS
EQUITY
Balance, May 1, 201616,244,041

$163,290

$164,756

$(47,285)
$280,761
          
Net income—

—

71,199

—

71,199
Other comprehensive income, net of tax—

—

—

6,868

6,868
Stock-based compensation—

3,469

—

—

3,469
Exercise of stock-based compensation awards, net of amounts withheld for taxes122,772

633

—

—

633
Stock repurchases(178,118)
(1,483)
(11,924)
—

(13,407)
Employee benefit plan contributions44,080

2,926

—

—

2,926
Balance, April 30, 201716,232,775

$168,835

$224,031

$(40,417)
$352,449
          
Net income—

—

63,141

—

63,141
Adoption of ASU 2018-02—

—

8,740

(8,740)
—
Other comprehensive income, net of tax—

—

—

88

88
Stock-based compensation—

3,097

—

—

3,097
Exercise of stock-based compensation awards, net of amounts withheld for taxes86,927

(1,513)
—

—

(1,513)
Stock issuance related to acquisition1,457,568

189,849

—

—

189,849
Stock repurchases(309,612)
(2,664)
(26,336)
—

(29,000)
Employee benefit plan contributions36,264

3,554

—

—

3,554
Balance, April 30, 201817,503,922

$361,158

$269,576

$(49,069)
$581,665
          
Net income—

—

83,688

—

83,688
Other comprehensive loss, net of tax—

—

—

(422)
(422)
Stock-based compensation—

3,040

—

—

3,040
Exercise of stock-based compensation awards, net of amounts withheld for taxes48,928

(1,241)
—

—

(1,241)
Stock repurchases(745,232)
(14,156)
(35,844)
—

(50,000)
Employee benefit plan contributions41,408

3,623

—

—

3,623
Balance, April 30, 201916,849,026

$352,424

$317,420

$(49,491)
$620,353


See notes to consolidated financial statements.

31



CONSOLIDATED STATEMENTS OF CASH FLOWS
 FISCAL YEARS ENDED APRIL 30
(in thousands)202120202019
OPERATING ACTIVITIES   
Net income$58,763 $74,861 $83,688 
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Depreciation and amortization100,289 98,513 94,446 
Net (gain) loss on disposal of property, plant and equipment(1,859)2,629 1,973 
Reduction in carrying amount of operating lease right-of-use assets27,192 25,405 0 
Amortization of debt issuance costs2,501 2,603 2,724 
Unrealized (gain) loss on foreign exchange forward contracts(1,102)1,102 0 
Loss on extinguishment of debt13,792 0 0 
Gain on insurance recoveries0 0 (580)
Stock-based compensation expense4,598 3,989 3,040 
Deferred income taxes(13,668)(11,499)(7,805)
Pension contributions in excess of expense(2,007)(1,130)(7,875)
Net gain on debt forgiveness and modification0 0 (5,266)
Contributions of employer stock to employee benefit plan3,743 3,772 3,623 
Other non-cash items4,140 672 916 
Changes in operating assets and liabilities (net of acquired assets and liabilities):
Customer receivables(42,829)21,018 9,719 
Inventories(31,196)(4,486)(4,852)
Income taxes receivable488 1,162 26,357 
Prepaid expenses and other assets(6,456)(3,165)(5,172)
Accounts payable32,752 (6,237)(4,775)
Accrued compensation and related expenses1,226 (5,843)6,225 
Operating lease liabilities(24,371)(22,595)0 
Marketing and other accrued expenses25,767 (3,229)(5,541)
Net Cash Provided by Operating Activities151,763 177,542 190,845 
INVESTING ACTIVITIES   
Payments to acquire property, plant and equipment(35,734)(31,670)(32,128)
Proceeds from sales of property, plant and equipment3,889 323 64 
Proceeds from insurance recoveries0 0 580 
Acquisition of business, net of cash acquired0 0 (7,182)
Maturities of certificates of deposit0 1,500 8,000 
Investment in promotional displays(10,584)(9,069)(7,257)
Net Cash Used by Investing Activities(42,429)(38,916)(37,923)
FINANCING ACTIVITIES   
Payments of long-term debt(432,508)(98,468)(122,205)
Proceeds from long-term debt350,000 0 0 
Proceeds from issuance of common stock and other0 295 500 
Repurchase of common stock(20,000)0 (50,000)
32


 FISCAL YEARS ENDED APRIL 30
(in thousands)2019
2018
2017






OPERATING ACTIVITIES 
 
 
Net income$83,688

$63,141

$71,199
Adjustments to reconcile net income to net cash and




cash equivalents provided by operating activities:




Depreciation and amortization94,446

45,004

18,682
Net loss on disposal of property, plant and equipment1,973

615

444
Amortization of debt issuance costs2,724

—

—
Loss on extinguishment of debt—

257

—
Gain on insurance recoveries(580)
—

—
Stock-based compensation expense3,040

3,097

3,469
Deferred income taxes(7,805)
21,404

9,899
Pension contributions in excess of expense(7,875)
(20,928)
(27,840)
Net gain on debt forgiveness and modification(5,266)
—

—
Contributions of employer stock to employee benefit plan3,623

3,554

2,926
Other non-cash items916

14

318
Changes in operating assets and liabilities (net of acquired assets and liabilities):




Customer receivables9,719

(18,786)
(7,780)
Inventories(4,852)
2,802

(4,925)
Income taxes receivable26,357

(7,295)
—
Prepaid expenses and other assets(5,172)
(7,492)
(207)
Accounts payable(4,775)
(858)
6,301
Accrued compensation and related expenses6,225

(2,525)
773
Marketing and other accrued expenses(5,541)
4,771

3,821
Net Cash Provided by Operating Activities190,845

86,775

77,080






INVESTING ACTIVITIES 
 
 
Payments to acquire property, plant and equipment(32,128)
(47,590)
(21,811)
Proceeds from sales of property, plant and equipment64

27

37
Proceeds from insurance recoveries580

—

—
Acquisition of business, net of cash acquired(7,182)
(57,200)
—
Purchases of certificates of deposit—

(25,000)
(85,000)
Maturities of certificates of deposit8,000

87,750

56,750
Investment in promotional displays(7,257)
(2,303)
(3,720)
Net Cash Used by Investing Activities(37,923)
(44,316)
(53,744)






FINANCING ACTIVITIES 
 
 
Payments of long-term debt(122,205)
(96,572)
(11,731)
Proceeds from long-term debt—

734

3,477
Proceeds from issuance of common stock and other500

1,289

2,366
Repurchase of common stock(50,000)
(29,000)
(13,407)
Withholding of employee taxes related to stock-based compensation(1,739)
(2,803)
(1,734)
 FISCAL YEARS ENDED APRIL 30
(in thousands)202120202019
Withholding of employee taxes related to stock-based compensation(1,351)(1,050)(1,739)
Debt issuance cost(2,930)0 (232)
Premium paid on debt extinguishment(8,533)0 0 
Net Cash Used by Financing Activities(115,322)(99,223)(173,676)
Net (Decrease) Increase in Cash and Cash Equivalents(5,988)39,403 (20,754)
Cash and Cash Equivalents, Beginning of Year97,059 57,656 78,410 
Cash and Cash Equivalents, End of Year$91,071 $97,059 $57,656 

Supplemental cash flow information:   
     Non-cash investing and financing activities:
          Property, plant and equipment$2,527 $1,303 $1,331 
    Cash paid during the period for:
         Interest$22,981 $27,654 $35,908 
       Income taxes$33,055 $36,154 $22,035 

 FISCAL YEARS ENDED APRIL 30
(in thousands)2019
2018
2017






Debt issuance cost(232)
(14,675)
—
Notes receivable, net—

—

208
Net Cash Used by Financing Activities(173,676)
(141,027)
(20,821)









Net (Decrease) Increase in Cash and Cash Equivalents(20,754)
(98,568)
2,515









Cash and Cash Equivalents, Beginning of Year78,410

176,978

174,463









Cash and Cash Equivalents, End of Year$57,656

$78,410

$176,978
Supplemental cash flow information: 
   
     Non-cash investing and financing activities:


 
          Long-term debt related to funding acquisition$—

$300,000
 $—
          Long-term debt issued to satisfy outstanding debt$—

$600,000
 $—
          Long-term debt satisfied from issuance of debt$—

$(602,750) $—
          Stock issuance in connection with acquisition$—

$189,849
 $—
          Property, plant and equipment$1,331

$5,530
 $—
          Net other assets and liabilities related to acquisition$—

$7,169
 $—




 
    Cash paid during the period for:


 
         Interest$35,908

$5,919
 $596
       Income taxes$22,035

$18,219
 $27,302


See notes to consolidated financial statements.

33



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note A --— Summary of Significant Accounting Policies
 
American Woodmark Corporation (“("American Woodmark,”" the “Company,” “we,” “our”"Company," "we," "our" or “us”"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, and 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’sCompany'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. Intercompany accounts and transactions have been eliminated in consolidation.
 
Revenue Recognition:  Our principal performance obligations are the sale of kitchen, bath, and home organization products. The Company recognizes revenue as control of our products is transferred to our customers, which is at the time of shipment or upon delivery based on the contractual terms with our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods to our customers. Payment terms on our product sales normally range from 30 to 90 days. Taxes assessed by a governmental authority that we collect are excluded from revenue. The expected costs associated with our contractual warranties will continue to beare recognized as expense when the products are sold. See Note M--K — Commitments and Contingencies for further discussion.


When revenue is recognized, we record estimates to reduce revenue for customer programs and incentives in order to determine thatthe amount of consideration the Company will ultimately be entitled to receive. Customer programs and incentives are considered variable consideration, and include price discounts, volume-based incentives, promotions, and cooperative advertising. The Company includes variable consideration in revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. This determination is made based upon known customer programprograms and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period. In addition, for certain customer program incentives, we receive an identifiable benefit (goods or services) in exchange for the consideration given and record the associated expenditure in selling, general and administrative expenses.


We account for shipping and handling costs that occur before the customer has obtained control of a product as a fulfillment activity rather than as a promised service. These costs are classified within costs of sales and distribution.
 
Cost of Sales and Distribution:  Cost of sales and distribution includes all costs associated with the manufacture and distribution of the Company’sCompany's products including the costs of shipping and handling.
 
Advertising Costs:  Advertising costs are expensed as incurred. Advertising expenses for fiscal years 2021, 2020, and 2019 2018were $34.1 million, $33.9 million, and 2017 were $38.9 million, $40.1 million and $41.0 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.

Investments in Certificates of Deposit: Certificates of deposit 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 bycalculated using 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 capitalfinancing leases are amortized over the shorter of their estimated useful lives or the term of the related lease.



34


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 2019, 20182021, 2020, and 2017,2019, the Company concluded no0 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 more likely than not impaired, the entity is not required to take further action. However, if an entity concludes otherwise, 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 2019, 20182021, 2020, and 2017,2019, the Company concluded no0 impairment existed.


Other Intangible Assets: 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 three to six years, unless such lives are deemed indefinite. The Company reviews its intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During fiscal years 2019, 20182021, 2020, and 2017,2019, the Company concluded no0 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 bycalculated using the straight-line method on an individual display basis over periods of 24 to 60 months (the estimated period of benefit). Promotional display amortization expense for fiscal years 2021, 2020, and 2019 2018 and 2017 was $6.4$10.0 million, $4.5$8.2 million, and $3.4$6.4 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:  ThePrior to April 30, 2020, the Company hashad two non-contributory defined benefit pension plans covering many of the Company’sCompany's employees hired beforeprior to April 30, 2012. BothEffective April 30, 2012, the Company froze all future benefit accruals under the Company's hourly and salaried defined benefit pension plans. Effective April 30, 2020, these plans were frozen effective April 30, 2012.merged into one plan. 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),loss, net of tax. On November 16, 2020 the Company filed an application with the Internal Revenue Service to terminate the pension plan with an effective date of December 31, 2020. 
 
Stock-Based Compensation: The Company recognizes stock-based compensation expense based on the grant date fair value over the requisite service period.  The Company records the expense for stock-based compensation awards subject to performance-based criteria vesting over the remaining service period when the Company determines that achievement of the performance criteria is probable. The Company evaluates when the achievement of performance-based criteria is probable based on the expected satisfaction of the performance criteria at each reporting date.
 
Self Insurance: The Company is self-insured for certain costs related to employee medical coverage, workers’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’sCompany'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 consolidated balance sheet.sheets.


Recent Accounting Pronouncements: Foreign Exchange Forward Contracts: In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2014-09, “Revenuenormal course of business, the Company is subject to risk from Contracts with Customers: Topic 606.” ASU 2014-09 supersedes the revenue recognition requirementsadverse fluctuations in “Accounting Standard Codification 605 - Revenue Recognition” and most industry-specific guidance.foreign exchange rates. 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 permitsCompany manages these risks through 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 interimforeign exchange forward

35



reporting periods within that period.contracts. The Company adopted ASU 2014-09 as of May 1, 2018 and for periods thereafter using the modified retrospective approach, which was applied to allrecognizes its outstanding forward contracts not completed as of May 1, 2018. The cumulative effect of adopting the new revenue standard was not material. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of this standard did not have a material impact on the twelve month period ended April 30, 2019 and the Company does not expect it to have a material impact on revenue or net income on an ongoing basis. See “Revenue Recognition” above for further information.

In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a “right-of-use” asset and lease liability but recognize related expenses in a manner similar to current accounting. The guidance also eliminates current real estate-specific provisions for all entities. In January 2018, the FASB issued ASU 2018-01, which clarifies the application of the new leases guidance to land easements. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, which clarify certain guidance included in ASU 2016-02 and introduces a new optional transition method. The standard is effective for annual periods beginning after December 15, 2018. The standard provides for the option to elect a package of practical expedients upon adoption. The Company intends to adopt the standard on May 1, 2019 and plans to elect the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and is evaluating the other practical expedients available under the guidance. The Company expects expanded financial statement note disclosure in addition to recognizing a right-of-use asset and lease liability for its operating leases on the balance sheet. In preparation for the adoption of the standard, the Company has procured a third-party software to track and manage the leases. Based on leases outstanding at April 30, 2019, the Company estimates the operating lease right-of-use asset and lease liability would have been in the range of $95 million to $115 million. The Company continues to evaluate the impacts of the pending adoption. As such, the Company’s preliminary assessments are subject to change.

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 adopted ASU 2017-07 as of May 1, 2018 and for periods thereafter using the retrospective approach. The adoption of this standard resulted in immaterial reclassifications from operating income in prior periods.consolidated balance sheets at their fair values. The Company does not expectdesignate the adoptionforward contracts as accounting hedges. The changes in the fair value of this standard to have a material effect on our financialthe forward contracts are recorded in other (income) expense, net in the consolidated statements on an ongoing basis.of income.


At April 30, 2021, the Company held 0 forward contracts.

Use of Estimates:  The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principlesGAAP 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.

ReclassificationsRecent Accounting Pronouncements: Certain reclassificationsIn February 2016, the Financial Accounting Standards Board (the "FASB") issued a new standard for leases, ASC 842, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use ("ROU") asset and lease liability. The standard is effective for annual periods beginning after December 15, 2018. The standard provides for the option to elect a package of practical expedients upon adoption. The Company adopted the standard on May 1, 2019 using the modified retrospective transition approach and elected the package of practical expedients that allows it to forgo reassessment of lease classification for leases that have been madealready commenced. The Company also elected the practical expedients to the new standard without restating comparative prior period balancesfinancial information and to conform to the current year presentation.
Note B -- Acquisition of RSI Home Products, Inc. (the "RSI Acquisition")

not recognize ROU assets and liabilities for operating leases with shorter than 12-month terms. On November 30, 2017, American Woodmark, Alliance Merger Sub, Inc. ("Merger Sub"), 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"),May 1, 2019, the Company consummatedrecognized operating lease assets and operating lease liabilities of $80.4 million. The new standard did not have a material impact on the RSI Acquisition pursuantCompany's results of operations, cash flows or opening retained earnings, or on its debt covenant calculations. ASC 842 also requires entities to disclose certain qualitative and quantitative information regarding the termsamount, timing, and uncertainty of cash flows arising from leases. Such disclosures are included in Note N — Leases.

In December 2019, the Merger Agreement. As a resultFASB issued ASU No.  2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. The amendments also improve consistent application of the mergerand simplify GAAP for other areas of Merger Sub withTopic 740 by clarifying 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. RSIamending existing guidance. ASU 2019-12 is a leading manufacturer of kitchen and bath cabinetry and home organization products.

In connection with the RSI Acquisition, on December 29, 2017,effective for 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, 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"). On February 12, 2018, the Company issued $350 million in aggregate principal amount of the Senior Notes and utilized the proceeds of such issuance, together with the borrowings under the Delayed Draw Term Loan and cash on hand, to fund the refinancing of the RSI Notes. (See Note G--Loans Payable and Long-Term Debt).

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 reflects the adjustment to the estimated working capital reflected in the consideration paid at the Acquisition Date.

The Company accounted for the RSI Acquisition 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.beginning May 1, 2021. The Company has obtainedreviewed the appraisals necessary to assess the fair valuesprovisions of the tangible and intangible assets acquired and liabilities assumedthis new pronouncement and the amountadoption of goodwill to be recognized as of the Acquisition Date. During the quarter ended October 31, 2018, the Company finalized the purchase price allocation for the RSI Acquisition.
The following table summarizes the allocation of the 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):
Goodwill  $767,612
Customer relationship intangibles   274,000
Property, plant and equipment   86,275
Inventories   66,293
Customer receivables   54,649
Income taxes receivable   18,926
Trademarks   10,000
Prepaid expenses and other   4,571
Leasehold interests   151
Total identifiable assets and goodwill acquired   1,282,477
     
Debt   602,313
Deferred income taxes   67,542
Accrued expenses   30,240
Accounts payable   25,113
Notes payable   2,988
Income taxes payable   49
Total liabilities assumed   728,245
     
Total accounting consideration  $554,232

The fair value of the assets acquired and liabilities assumed were 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. The 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 purchase price allocation resulted in the recognition of $767.6 million of goodwill, whichthis guidance is not expected to be amortizable for tax purposes. The goodwill recognized is attributable to expected revenue synergies generated byhave an impact on financial position or results of operations.

In March 2020, the integrationFASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Company’s products with RSI's, cost synergies resultingEffects of Reference Rate Reform on Financial Reporting." These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022 and can be adopted as of any date from purchasingthe beginning of an interim period that includes or is subsequent to March 12, 2020. The Company has identified loans and manufacturing activities,other financial instruments that are directly or indirectly influenced by LIBOR and intangible assets that dodoes not qualify for separate recognition, such asexpect the assembled workforceadoption 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 basedASU 2020-04 to have a material impact 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.

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

RSI’s financial results have been included in ourits consolidated financial results of fiscal 2018 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.statements.


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 expenseson 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:
  FISCAL YEARS ENDED APRIL 30,
(in thousands) 2018 2017
 Net Sales $1,613,663
 $1,623,441
 Net Income (1) $67,388
 $93,798
 Net earnings per share - basic $3.83
 $5.30
 Net earnings per share - diluted $3.80
 $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 of $20.0 million and $27.2 million for the fiscal years ended April 30, 2018 and 2017, respectively, related to acquired intangible assets (net of historical amortization expense of RSI) and additional net interest expense of $2.4 million and $4.4 million for the fiscal years ended April 30, 2018 and 2017, respectively, related to the $300 million borrowed under the Credit Agreement to finance the acquisition. Transaction expenses, net of tax, of $8.5 million and $1.6 million for the fiscal years ended April 30, 2018 and 2017, respectively, and inventory fair value step-up expense, net of tax of $4.1 million for the fiscal year ended April 30, 2018 were also excluded from net income.

There were no proforma adjustments for the fiscal year ended April 30, 2019.

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.

Note C --B — Customer Receivables
 
The components of customer receivables were:
 APRIL 30
(in thousands)20212020
Gross customer receivables$156,187 $112,528 
Less:
Allowance for doubtful accounts(331)(472)
Allowance for returns and discounts(8,990)(5,712)
Net customer receivables$146,866 $106,344 


 APRIL 30
(in thousands)2019
2018
Gross customer receivables$132,145

$142,622
Less:


Allowance for doubtful accounts(249)
(259)
Allowance for returns and discounts(5,995)
(6,008)






Net customer receivables$125,901

$136,355
36



Note D --C — Inventories
 
The components of inventories were:
 APRIL 30
(in thousands)20212020
Raw materials$63,384 $51,460 
Work-in-process51,176 42,381 
Finished goods43,526 32,572 
Total FIFO inventories158,086 126,413 
Reserve to adjust inventories to LIFO value(17,804)(14,577)
Total inventories$140,282 $111,836 
 APRIL 30
(in thousands)2019
2018
Raw materials$46,054

$41,728
Work-in-process43,794

44,905
Finished goods34,873

34,111






Total FIFO inventories124,721

120,744
Reserve to adjust inventories to LIFO value(16,193)
(15,943)






Total inventories$108,528

$104,801


Of the total inventory of $108.5$140.3 million, $58.6$80.3 million is carried under the FIFO method and $49.9 is carried under the LIFO method of accounting as of April 30, 2019. Of the total inventory of $104.8 million, $56.6 million is carried under the FIFO method and $48.2$60.0 million is carried under the LIFO method of accounting as of April 30, 2018.2021. Of the total inventory of $111.8 million, $66.0 million is carried under the FIFO method and $45.8 million is carried under the LIFO method of accounting as of April 30, 2020.





Note E --D — Property, Plant and Equipment
 
The components of property, plant and equipment were:
 APRIL 30
(in thousands)20212020
Land$4,431 $4,431 
Buildings and improvements116,103 120,819 
Buildings and improvements - financing leases11,636 11,636 
Machinery and equipment315,371 312,806 
Machinery and equipment - financing leases31,386 30,911 
Construction in progress22,669 8,164 
501,596 488,767 
Less accumulated amortization and depreciation(297,594)(284,943)
Total$204,002 $203,824 
 APRIL 30
(in thousands)2019
2018
Land$4,751

$4,751
Buildings and improvements114,421

112,757
Buildings and improvements - capital leases11,202

11,202
Machinery and equipment294,993

274,723
Machinery and equipment - capital leases30,574

30,270
Construction in progress7,002

10,931

462,943

444,634
Less accumulated amortization and depreciation(254,680)
(226,532)






Total$208,263

$218,102


Amortization and depreciation expense on property, plant and equipment amounted to $36.2$38.3 million, $21.9$36.9 million, and $14.2$36.2 million in fiscal years 2019, 20182021, 2020, and 2017,2019, respectively.  Accumulated amortization on capitalfinancing leases included in the above table amounted to $30.8$33.0 million and $30.0$32.3 million as of April 30, 20192021 and 2018,2020, respectively.
 
Note F --E — Intangible Assets and Trademarks
 
The components of customer relationships intangibles were:
 APRIL 30
(in thousands)20212020
Customer relationship intangibles$274,000 $274,000 
Less accumulated amortization(152,222)(106,556)
Total$121,778 $167,444 


37
 APRIL 30
(in thousands)2019 2018
Customer relationship intangibles$274,000
 $274,000
Less accumulated amortization(60,889) (15,222)
    
Total$213,111
 $258,778



The components of trademarks were:
 APRIL 30
(in thousands)20212020
Trademarks$10,000 $10,000 
Less accumulated amortization(10,000)(7,778)
Total$0 $2,222 
 APRIL 30
(in thousands)2019 2018
Trademarks$10,000
 $10,000
Less accumulated amortization(4,445) (1,111)
    
Total$5,555
 $8,889


Customer relationship intangibles and trademarks are amortized over the estimated useful lives on a straight-line basis over six and three years, respectively. Amortization expense on customer relationship intangibles and trademarks amounted to $47.9 million and $49.0 million and $16.3 million for each of the years ended April 30, 20192021 and 2018,2020, respectively.




Note G --F — Loans Payable and Long-Term Debt
 
Maturities of long-term debt are as follows:
 FISCAL YEARS ENDING APRIL 30
(in thousands)202220232024202520262027 AND THERE-
 AFTER		TOTAL OUTSTANDING AS OF APRIL 30, 2021TOTAL OUTSTANDING AS OF APRIL 30, 2020
Term loans$6,250 $6,250 $12,500 $18,750 $206,250 $0 $250,000 $244,000 
Revolving credit0 0 0 0 264,000 0 264,000 0 
The Senior Notes0 0 0 0 0 0 0 350,000 
Finance lease obligations2,072 1,660 1,322 332 108 0 5,494 5,687 
Other long-term debt0 46 253 256 259 5,845 6,659 6,659 
Total$8,322 $7,956 $14,075 $19,338 $470,617 $5,845 $526,153 $606,346 
Debt issuance costs$(4,381)$(9,209)
Current maturities    $(8,322)$(2,216)
Total long-term debt      $513,450 $594,921 
 FISCAL YEARS ENDING APRIL 30  














(in thousands)2020
2021
2022
2023
2024
2025 AND THERE-
AFTER
TOTAL OUTSTANDING





















Term loans$—

$—

$27,500

$312,500

$—

$—

$340,000





















The Senior Notes—

—

—

—

—

350,000

350,000





















Capital lease obligations2,285

1,860

965

679

690

166

6,645





















Other long-term debt—

—

—

12

64

6,584

6,660





















Total$2,285

$1,860

$28,465

$313,191

$754

$356,750

$703,305















Debt issuance costs            $(11,814)
              
Current maturities



 
 
 
 
$(2,286)















Total long-term debt 
 
 
 
 
 
$689,205


Term Loans and Revolving Credit Facility


On December 29, 2017, the Company entered into thea credit agreement (the "Prior Credit Agreement") with a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent. The Prior Credit Agreement which providesprovided for a $100 million revolving loan facility with a $25 million sub-facility for the Revolving Facility,issuance of letters of credit, a $250 million initial term loan facility and a $250 million delayed draw term loan facility. The Company borrowed the Initial Term Loanentire $250 million under the
38


initial term loan facility, the entire $250 million under the delayed draw term loan facility and approximately $50 million under the revolving loan facility in connection with the acquisition of RSI Home Products, Inc. ("RSI") and the Delayed Draw Term Loan. Alsorefinancing of certain senior notes assumed from RSI (the "RSI Notes"). The facilities under the Prior Credit Agreement were scheduled to mature on December 29, 2017,2022.

On April 22, 2021, the Company amended and restated the Prior Credit Agreement. The amended and restated credit agreement (the "A&R Credit Agreement") provides for a $500 million revolving loan facility with a $50 million sub-facility for the issuance of letters of credit (the "Revolving Facility") and a $250 million term loan facility (the "Term Loan Facility"). Also on April 22, 2021, the Company borrowed the entire $250 million available under the Initial Term Loan Facility and approximately $50$264 million under the Revolving Facility to fund, in part, the cash portionrepayment in full 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 then outstanding under the Revolving Facility. In connection with its entry into thePrior Credit Agreement and the Company terminated its prior $35 million revolving credit facility with Wells Fargo.redemption of the Senior Notes (as defined below). The Company is required to makerepay the Term Loan Facility in specified quarterly installments on both the Initialinstallments. The Revolving Facility and Term Loan and the Delayed Draw Loan. Facility mature on April 22, 2026.

As of April 30, 2019, $1702021, $250 million was outstanding on each of the Initial Term Loan and Delayed Draw Term Loan forFacility as compared to a total of $340 million.$244 million outstanding on the term loans under the Prior Credit Agreement as of April 30, 2020. As of April 30, 2018, $2302021, $264 million was outstanding on each ofunder the Initial Term Loan and Delayed Draw Term Loan for a total of $460 million. The outstanding balance approximates fair valueRevolving Facility as the Term Loans have a floating interest rate. There were nocompared to 0 amounts outstanding onunder the revolving credit facility under the Prior Credit Agreement as of April 30, 2020. Outstanding letters of credit under the Revolving Facility were $8.3 million as of April 30, 2021, leaving approximately $227.7 million in available capacity under the Revolving Facility as of April 30, 2019 and 2018.2021. The Credit Facilities mature on December 29, 2022.outstanding balances noted above approximate fair value as the facilities have a floating interest rate.


Amounts outstanding under the Credit FacilitiesTerm Loan Facility and the Revolving Facility bear interest based on a fluctuating rate measured by reference to either, at the Company’sCompany'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’sCompany's then-current “Total Funded Debt to EBITDA"Secured Net Leverage Ratio.”" The Company also incurs 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’sCompany's then-current “Total Funded Debt to EBITDA"Secured Net Leverage Ratio.”" In addition, a letter of credit fee will accrueaccrues 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. On January 25, 2019, the Company entered into an amendment to the Credit Agreement (the “Amendment”) that reduced the applicable margin for both base rate and LIBOR rate loans and reduced the commitment fee incurred on unused portions of the Revolving Facility. As of April 30, 2019,2021, the applicable margin with respect to base rate loans and LIBOR loans was 0.75%0.25% and 1.75%1.25%, respectively, and the commitment fee was 0.20%0.125%. The A&R Credit Agreement includes provisions providing for the transition from LIBOR to a replacement benchmark upon the occurrence of certain events. The Company does not currently expect any such transition to materially impact its financing costs.




The A&R Credit Agreement includes certain financial covenants.  The Amendment amended these covenants by (i) removingthat require the requirementCompany to maintain (i) a “Total Secured Debt to EBITDA Ratio”"Consolidated Interest Coverage Ratio" of no moreless than 2.502.00 to 1.00 and (ii) setting a maximum “Total Funded Debt to EBITDA Ratio”  as of the last day of any fiscal quarter ending through January 31, 2020"Total Net Leverage Ratio" of no moregreater than 3.504.00 to 1.00, and thereafter, of no more than 3.25subject, in each case, to 1.00 (with an increase to 3.75 to 1.00 for a certain period upon the consummation of a “Qualified Acquisition”). The Credit Agreement also requires that the Company maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.25 to 1.00.limited exceptions.

The A&R Credit Agreement includes certain additional covenants, including negative covenants that restrict the ability of the Company and certain of 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 anotherother similar transaction or engage in transactions with affiliates, subject, in each case, to the various exceptions and conditions described in the A&R Credit Agreement. The negative covenants further restrict the Company’s ability of the Company and certain of its subsidiaries to make certain restricted payments, including, in the case of the Company, the payment of dividends and the repurchase of common stock, in certain limited circumstances. In September 2018, the Company entered into an amendment to the Credit Agreement that amended the restricted payments covenant to (i) permit unlimited restricted payments so long as the “Total Funded Debt to EBITDA Ratio” would be less than or equal to 2.50 to 1.00 after giving effect to any such payment and no default or event of default has occurred and is continuing or would result from any such payment and (ii) permit up to an aggregate of $50 million in restricted payments not otherwise permitted under the Credit Agreement so long as no default or event of default has occurred and is continuing or would result from any such payment. The Amendment further amended the restricted payments covenant to increase the “Total Funded Debt to EBITDA Ratio” applicable to the exception permitting unlimited restricted payments discussed above to 2.75 to 1.00.  The negative covenants in the Credit Agreement also include a covenant restricting the Company’s ability to make certain investments. 


As of April 30, 2019,2021, the Company was in compliance with theall covenants included in the A&R Credit Agreement.


The Company’sCompany's obligations under the A&R Credit Agreement are guaranteed by the Company’sCompany's domestic subsidiaries and the obligations of the Company and its domestic subsidiaries under the A&R Credit Agreement and their guarantees, respectively, are 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”"Senior Notes"). and utilized the proceeds, together with the proceeds from the delayed draw term loan under the Prior Credit Agreement, to refinance the RSI Notes. The Senior Notes were guaranteed by the Company's domestic subsidiaries and were scheduled to mature on March 15, 2026 and interest on2026.

On April 26, 2021, the Company redeemed in full the Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year, which payments began on September 15, 2018. The Senior Notes are, and will be, fully and unconditionally guaranteed by eachat a redemption price equal to 102.438% 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, 2019, the Company and its restricted subsidiaries were in compliance with all covenants under the indenture governing the Senior Notes.

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"). On February 12, 2018, the Company utilized the proceedsprincipal amount of the Senior Notes, together withplus accrued and unpaid interest to the borrowings underredemption date.

39


The Company recognized a net loss on debt modification related to the Delayed Draw Term LoanA&R Credit Agreement and cash on hand, to fund the refinancing of the RSI Acquisition - See Note B -- Acquisition of RSI Home Products, Inc. (the “RSI Acquisition”).

At April 30, 2019, the book valueredemption of the Senior Notes was $350of $13.8 million, andwhich is included in other (income) expense, net in the fair value was $347 million, based on Level 1 inputs. consolidated statements of income.


CapitalFinancing Lease Obligations


From 2015 through 2017, theThe Company entered into a total of eight capitalized lease agreements in the aggregate amount of $1.5 million with First American Financial Bancorp related tohas various 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, 2019 and 2018 was $0.5 million and $0.9 million, respectively.
From 2015 through 2019, the Company entered into a total of 19 capitalized lease agreements in the aggregate amount of $4.3 million with e-Plus Group related to financing computer equipment.  There are eight leases with a term of 36 months, 10 leases


with a term of 51 monthsinterest rates between 2.0% and one lease with a term of 60 months. All leases have an interest rate between 3.5% and 6.5%4.5%.  The leases require monthly rental payments.  The aggregate outstanding amount under all of these leases as of April 30, 2019payments and 2018 was $2.7 million and $2.2 million, respectively. 

In 2004, the Company entered into a lease agreement with the West Virginia Economic Development Authority as part of the Company’s capital investment and operations at the South Branch plant located in Hardy County, West Virginia. This capital lease agreement is a $10 million term obligation, which expires June 30, 2024, bearing interest at a fixed rate of 2% per annum. The lease requires monthly rental payments.expire by March 15, 2026.  The outstanding amounts owed as of April 30, 20192021 and 20182020 were $3.3$5.5 million and $3.8$5.7 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, 20192021 and 2018,2020, the Company had drawn $6.7 million of the loan proceeds, which is included in long-term debt in the accompanying consolidated balance sheets. The NMTC is subject to recapture for a period of seven years, the compliance period. During the compliance period, the Company is required to comply with various regulations and contractual provisions that apply to the NMTC arrangement.  We do not anticipate any credit recaptures will be required in connection with this arrangement. This transaction also includes a put/call feature which becomes enforceable at the end of the compliance period whereby we may be obligated or entitled to repurchase the Investors’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).

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.  The loan agreements expired on December 31, 2018.  Based on the employment levels maintained and the terms of the loan agreements, the aggregate principal under these loan agreements of $2.2 million and accrued interest of $0.9 million was forgiven.

The Company had two loan agreements 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 loans expired on December 31, 2018 and the aggregate principal under these loan agreements of $2.3 million and accrued interest of $0.2 million was forgiven as the Company complied with certain employment levels at the facility.


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’sCompany'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 capitalfinancing leases at April 30, 2019.2021.





Note H --G — Earnings Per Share
 
The following table summarizes the computations of basic and diluted earnings per share:
 FISCAL YEARS ENDED APRIL 30
(in thousands, except per share amounts)202120202019
Numerator used in basic and diluted earnings per common share:  
Net income$58,763 $74,861 $83,688 
Denominator:  
Denominator for basic earnings per common share -  
weighted-average shares16,970 16,908 17,289 
Effect of dilutive securities:
Stock options and restricted stock units67 44 41 
Denominator for diluted earnings per common share -   
weighted-average shares and assumed conversions17,037 16,952 17,330 
Net earnings per share   
Basic$3.46 $4.43 $4.84 
Diluted$3.45 $4.42 $4.83 

40
 FISCAL YEARS ENDED APRIL 30
(in thousands, except per share amounts)2019
2018
2017
Numerator used in basic and diluted earnings per common share: 
 
 
Net income$83,688

$63,141

$71,199
Denominator: 
 
 
Denominator for basic earnings per common share - 
 
 
weighted-average shares17,289

16,631

16,259
Effect of dilutive securities:




Stock options and restricted stock units41

114

139
Denominator for diluted earnings per common share - 
 
 
weighted-average shares and assumed conversions17,330

16,745

16,398
Net earnings per share 
 
 
Basic$4.84

$3.80

$4.38
Diluted$4.83

$3.77

$4.34



An immaterial amount of anti-dilutive securities for the fiscal year ended April 30, 2019 were excluded from the calculation of net earnings per share. There were no0 anti-dilutive securities for the fiscal years ended April 30, 20182021 and 2017,2020, which were excluded from the calculation of net earnings per share.


Under a stock repurchase authorization approved by its Board of Directors (the "Board") on November 30, 2016, the Company was authorized to purchase up to $50 million of the Company's common shares. The Board suspended the Company's stock repurchase program in conjunction with the RSI Acquisition. On August 23, 2018, the Board reinstated the program. On November 28, 2018, the Board of Directors of the Company authorized an additional stock repurchase program of up to $14 million of the Company's common shares. This authorization was in addition to the stock repurchase program authorized on November 30, 2016. ManagementNaN funds remained from the amount authorized by the Board to repurchase the Company's common shares. On August 22, 2019, the Board authorized an additional stock repurchase program of up to $50 million of the Company's common shares. $30.0 million remained from the amount authorized by the Board to repurchase the Company's common shares. The Company funded share repurchases using available cash and cash generated from operations. Repurchased shares became authorized but unissued common shares. At April 30, 2019, no funds remained from the amount authorized by the Board toThe Company did not repurchase the Company’s common shares.any of its shares during fiscal 2020. The Company purchased a total of 200,046 common shares, for an aggregate purchase price of $20.0 million and a total of 745,232 common shares, for an aggregate purchase price of $50.0 million a total of 309,612 common shares for an aggregate purchase price of $29.0 million and a total of 178,118 common shares for an aggregate purchase price of $13.4 million during fiscal 2019, 20182021 and 20172019, respectively, under the authorizations pursuant to a repurchase plan intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. On May 25, 2021, the Board authorized a stock repurchase program of up to $100 million of the Company's outstanding common shares. In conjunction with this authorization the Board cancelled the $30 million remaining from the August 2019 authorization.
 
Note I --H — Stock-Based Compensation
 
The Company has twohad 2 types of stock-based compensation awards in effect for its employees and directors. The Company issued stock options from 1986 tountil fiscal 2015 and has issued restricted stock units ("RSUs") since fiscal 2010. Total compensation expense related to stock-based awards for the fiscal years ended April 30, 2021, 2020, and 2019 2018 and 2017 was $3.0$4.6 million, $3.1$4.0 million, and $3.5$3.0 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, 2019,2021, the Company had stock option and RSU awards outstanding under two2 different plans: (1) second amended and restated 20042016 employee stock incentive plan for employees;plan; and (2) 2015 non-employee directors equity ownership plan.  As of April 30, 2019,2021, there were 798,328632,666 shares of common stock available for future stock-based compensation awards under the Company’sCompany's stock incentive plans.



Methodology Assumptions
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’sCompany'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.
 
Stock Option Activity
 
Stock options granted and outstanding under each of the Company’sCompany's plans vest evenly over a three-yearthree-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’sCompany's common stock on the option grant date.


The Company did not0t grant stock options during the fiscal years ended April 30, 2019, 20182021, 2020, and 2017.2019. There were 0 stock options outstanding at April 30, 2021.
 

41


The following table presents a summary of the Company’sCompany's stock option activity for the fiscal years ended April 30, 2019, 20182021, 2020, and 20172019 (remaining contractual term in years and exercise prices are weighted-averages):
 NUMBER OF OPTIONSWEIGHTED AVERAGE REMAINING CONTRACTUAL TERMWEIGHTED AVERAGE EXERCISE PRICEAGGREGATE INTRINSIC VALUE
(in thousands)
Outstanding at April 30, 201817,968 4.5$44.23$682 
Exercised(12,801)039.04651 
Outstanding at April 30, 20195,167 6.1$57.11$170 
Exercised(5,167)057.110 
Outstanding at April 30, 20200 0$0$0 
Exercised0 000 
Outstanding at April 30, 20210 0$0$0 
Vested and expected to vest in the future at April 30, 20210 0$0$0 
Exercisable at April 30, 20210 0$0$0 
 NUMBER OF OPTIONS
WEIGHTED AVERAGE REMAINING CONTRACTUAL TERM
WEIGHTED AVERAGE EXERCISE PRICE
AGGREGATE INTRINSIC VALUE
(in thousands)
Outstanding at April 30, 2016126,633
 5.8 $35.15 $4,773

       
Exercised(71,715) — $33.00 2,597
Outstanding at April 30, 201754,918
 5.6 $37.95 $2,963

       
Exercised(36,950) — $34.90 1,748
Outstanding at April 30, 201817,968
 4.5 $44.23 $682










Exercised(12,801)
—
$39.04
651
Outstanding at April 30, 20195,167

6.1
$57.11
$170










Vested and expected to vest in the future at April 30, 20195,167

6.1
$57.11
$170
Exercisable at April 30, 20195,167

6.1
$57.11
$170

The aggregate intrinsic value in the previous table of the outstanding options on April 30, 2019 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 2019 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, 2019. 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, 2019, 2018 and 2017 was immaterial

Cash received from option exercises for the fiscal years ended April 30, 2019, 20182021, 2020, and 2017,2019, was an aggregate of $0.5$0.0 million, $1.3$0.3 million, and $2.4$0.5 million, respectively.  The actual tax benefit realized for the tax deduction from option exercises of stock option awards was immaterial for the fiscal years ended April 30, 2019, 20182021, 2020, and 2017,2019, respectively.
 
Restricted Stock Unit Activity:
 
The Company’sCompany's RSUs granted to employees cliff-vest over a three-yearthree-year period from date of grant, while RSUs granted to non-employee directors vest daily over a two-yeartwo-year period from date of grant.  Directors were granted service-based RSUs only, while employees were awarded both service-based and performance-based RSUs ("PBRSUs") in fiscal years 2019, 20182021, 2020, and 2017.2019.  The PBRSUs granted in fiscal 2019, 20182021, 2020, and 20172019 are earned based on achievement of a number of goals pertaining to the Company’sCompany's financial performance during three one-year3 one-year performance periods and the achievement of certain cultural goals for the three-year


three-year period. Employees who satisfy the vesting criteria will receive a proportional amount of PBRSUs based upon the Compensation Committee’sCommittee's assessment of the Company’sCompany's achievement of the performance criteria.


42


The following table contains a summary of the Company’sCompany's RSU activity for the fiscal years ended April 30, 2019, 20182021, 2020, and 2017:2019:
 PERFORMANCE-BASED RSUsSERVICE-BASED RSUsTOTAL RSUsWEIGHTED AVERAGE GRANT
DATE FAIR VALUE
Issued and outstanding, April 30, 201897,651 55,059 152,710 $73.34
Granted45,615 30,335 75,950 $104.10
Cancelled due to non-achievement of performance goals(10,352)0 (10,352)$80.26
Settled in common stock(34,475)(18,778)(53,253)$60.50
Forfeited(9,257)(5,347)(14,604)$79.49
Issued and outstanding, April 30, 201989,182 61,269 150,451 $76.91
Granted61,379 42,691 104,070 $53.95
Cancelled due to non-achievement of performance goals(11,305)0 (11,305)$85.13
Settled in common stock(18,628)(21,521)(40,149)$67.03
Forfeited(2,941)(3,229)(6,170)$86.68
Issued and outstanding, April 30, 2020117,687 79,210 196,897 $66.68
Granted124,374 76,846 201,220 $66.00
Cancelled due to non-achievement of performance goals(17,461)0 (17,461)$89.31
Settled in common stock(19,058)(27,208)(46,266)$88.57
Forfeited(73,858)(37,377)(111,235)$71.63
Issued and outstanding, April 30, 2021131,684 91,471 223,155 $64.81
 PERFORMANCE-BASED RSUs
SERVICE-BASED RSUs
TOTAL RSUs
WEIGHTED AVERAGE GRANT
DATE FAIR VALUE
Issued and outstanding, April 30, 2016140,767

75,712

216,479

$40.88











Granted36,058

25,322

61,380

$66.58
Cancelled due to non-achievement of performance goals(4,270)
—

(4,270)
$64.55
Settled in common stock(45,509)
(32,300)
(77,809)
$37.09
Forfeited(1,979)
(1,280)
(3,259)
$49.40
Issued and outstanding, April 30, 2017125,067

67,454

192,521

$50.09











Granted33,080

22,250

55,330

$95.62
Cancelled due to non-achievement of performance goals—

—

—

$—
Settled in common stock(51,191)
(28,447)
(79,638)
$32.96
Forfeited(9,305)
(6,198)
(15,503)
$71.91
Issued and outstanding, April 30, 201897,651

55,059

152,710

$73.34











Granted45,615

30,335

75,950

$104.10
Cancelled due to non-achievement of performance goals(10,352)
—

(10,352)
$80.26
Settled in common stock(34,475)
(18,778)
(53,253)
$60.50
Forfeited(9,257)
(5,347)
(14,604)
$79.49
Issued and outstanding, April 30, 201989,182

61,269

150,451

$76.91


As of April 30, 2019,2021, there was $5.5$11.1 million of total unrecognized compensation expense related to unvested RSUs granted under the Company’sCompany's stock-based compensation plans.  This expense is expected to be recognized over a weighted-average period of 1.61.8 years.
 
For the fiscal years ended April 30, 2019, 20182021, 2020, and 20172019 stock-based compensation expense was allocated as follows:
(in thousands)202120202019
Cost of sales and distribution$1,461 $809 $691 
Selling and marketing expenses982 1,006 649 
General and administrative expenses2,155 2,174 1,700 
Stock-based compensation expense, before income taxes$4,598 $3,989 $3,040 
(in thousands)2019
2018
2017
Cost of sales and distribution$691

$667

$665
Selling and marketing expenses649

756

1,066
General and administrative expenses1,700

1,674

1,738
Stock-based compensation expense, before income taxes$3,040

$3,097

$3,469


Restricted Stock Tracking Units:
 
During fiscal 2019,2021, the Board approved grants of 4,05711,456 cash-settled performance-based restricted stock tracking units ("RSTUs") and 2,2436,229 cash-settled service-based RSTUs for more junior level employees who previously received RSU grants under the Company’s shareholder approved plan.employees.  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’sCompany's common stock as of the payment date if 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.  TheAll of 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 $0.5$0.9 million, $0.4$0.0 million, and $0.8$0.5 million related to RSTUs for the fiscal years ended April 30, 2019, 20182021, 2020, and 2017,2019, respectively. A liability for payment of the RSTUs is included in the Company's balance sheets in the amount of $0.7$1.0 million and $1.0$0.4 million as of April 30, 20192021 and 2018,2020, respectively. 

43


Note J --I — Employee Benefit and Retirement Plans
 
Retirement Savings Plans
 
In fiscal 1990, the Company instituted the American Woodmark Investment Savings Stock Ownership Plan and effective January 1, 2016 the plan name was changed toUnder the American Woodmark Corporation Retirement Savings Plan (the "Plan"). Under the 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 $3.8$2.9 million, $3.7 million, and $3.6$3.8 million in fiscal years 2019, 20182021, 2020, and 2017,2019, respectively.  
 
The Company matches 100% of an employee’semployee's annual 401(k) contributions to the Plan up to 4% of annual compensation. 

Through December 31, 2018, RSI had the RSI Home Products 401K Retirement Savings Plan (the “RSI Plan”) for all non-union employees. Employees were eligible to contribute to the RSI Plan 60 days after starting employment. The Company elected to make safe harbor matching contributions of up to 4% of each participant’s eligible compensation. The Company’s safe harbor contributions vested immediately.


On January 1, 2019, the Plan merged with the RSI Plan to transfer all assets of the RSI Plan into the Plan. 

Effective January 1, 2019, all new eligible participants will be automatically enrolled in the Plan at a contribution rate of 3% with the option of opting out.  Beginning January 1, 2021, the contribution rate for the eligible participants as of January 1, 2019 and thereafter will automatically escalate by 1%.  The automatic escalation will continue at the rate of 1% per calendar year, up to a contribution rate cap of 8%.

Participants who transferred from the RSI Plan effective January 1, 2019 will be eligible for a profit sharing contribution as of April 30, 2020.


The expense for 401(k) matching contributions for both plans was $9.9$11.9 million, $8.0$10.1 million, and $7.2$9.9 million, in fiscal years 2019, 20182021, 2020, and 2017,2019, respectively.


Pension Benefits
 
ThePrior to April 30, 2020, the Company has twohad 2 defined benefit pension plans covering many of the Company’sCompany's employees hired prior to April 30, 2012. TheseEffective April 30, 2012, the Company froze all future benefit accruals under the Company's defined benefit pension plans.

Effective April 30, 2020, these plans providewere merged into one plan and the plan name was changed to the American Woodmark Corporation Employee Pension Plan (the "Pension Plan"). The Pension Plan provides defined benefits based on years of service and final average earnings (for salaried employees) or benefit rate (for hourly employees).
 
Effective April 30, 2012,On November 16, 2020 the Company froze all future benefit accruals underfiled an application with the Company’s hourlyInternal Revenue Service to terminate the Pension Plan with an effective date of December 31, 2020 (the "Plan Termination Date"), in a standard termination and salaried defined benefit pension plans.the Company expects to incur approximately $1.6 million to terminate the Pension Plan, $0.4 million of which was incurred in fiscal 2021. In connection with the Pension Plan termination and in addition to the Pension Plan termination costs, the Company may be required to make an additional funding contribution to the Pension Plan in order to ensure the Pension Plan is fully funded on a termination basis as of the Benefit Distribution Date, with the amount of such contribution still to be determined. The Benefit Distribution Date will be determined once the Company receives approval from certain regulatory agencies. The additional funding contribution is expected to be funded from cash on hand and the amount will vary depending on the lump sum distribution take rate and the interest rate on the Benefit Distribution Date.
 
Included in accumulated other comprehensive loss at April 30, 20192021 is $66.3$73.1 million ($49.554.6 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 $1.7$1.2 million ($1.30.9 million net of tax) in net actuarial losses in net periodic pension benefit costs during fiscal 2020.2022.   The Company uses an April 30 measurement date for its benefit plans.Pension Plan.



44



The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company’sCompany's non-contributory defined benefit pension plansPension Plan as of April 30:
 APRIL 30
(in thousands)20212020
CHANGE IN PROJECTED BENEFIT OBLIGATION  
Projected benefit obligation at beginning of year$191,184 $168,788 
Interest cost4,662 5,974 
Actuarial gains6,759 22,293 
Benefits paid(6,068)(5,871)
Projected benefit obligation at end of year$196,537 $191,184 
CHANGE IN PLAN ASSETS  
Fair value of plan assets at beginning of year$190,743 $169,471 
Actual return on plan assets8,877 26,674 
Company contributions0 469 
Benefits paid(6,068)(5,871)
Fair value of plan assets at end of year$193,552 $190,743 
Funded status of the plan$(2,985)$(441)
 APRIL 30
(in thousands)2019
2018
CHANGE IN PROJECTED BENEFIT OBLIGATION 
 
Projected benefit obligation at beginning of year$163,423

$165,173
Interest cost6,269

5,727
Actuarial gains4,850

(2,596)
Benefits paid(5,754)
(4,881)
Projected benefit obligation at end of year$168,788

$163,423




CHANGE IN PLAN ASSETS 
 
Fair value of plan assets at beginning of year$156,463

$137,141
Actual return on plan assets11,479

4,884
Company contributions7,283

19,319
Benefits paid(5,754)
(4,881)
Fair value of plan assets at end of year$169,471

$156,463






Funded status of the plans$683

$(6,960)


The accumulated benefit obligation for both pension plansthe Pension Plan was $168.8$196.5 million and $163.4$191.2 million at April 30, 20192021 and 2018,2020, respectively.
 APRIL 30
(in thousands)202120202019
COMPONENTS OF NET PERIODIC PENSION BENEFIT COST   
Interest cost$4,662 $5,974 $6,269 
Expected return on plan assets(8,430)(8,327)(8,509)
Recognized net actuarial loss1,761 1,692 1,648 
Pension benefit cost$(2,007)$(661)$(592)
 APRIL 30
(in thousands)2019
2018
2017






COMPONENTS OF NET PERIODIC PENSION BENEFIT COST 
 
 
Interest cost$6,269

$5,727

$5,772
Expected return on plan assets(8,509)
(8,936)
(8,079)
Recognized net actuarial loss1,648

1,601

1,771
Pension benefit cost$(592)
$(1,608)
$(536)


The components of net periodic pension benefit cost do not include service costs or prior service costs due to the plansPension Plan 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:Pension Plan follows:
 FISCAL YEARS ENDED APRIL 30
 20212020
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE BENEFIT OBLIGATIONS  
Discount rate2.80 %3.16 %
 FISCAL YEARS ENDED APRIL 30
 202120202019
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC PENSION BENEFIT COST   
Discount rate3.16 %4.02 %4.18%
Expected return on plan assets3.25 %5.0 %5.5 %
45
 FISCAL YEARS ENDED APRIL 30
 2019
2018




WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE BENEFIT OBLIGATIONS 
 
Discount rate4.02 %
4.18 %


 FISCAL YEARS ENDED APRIL 30
 2019
2018
2017






WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC PENSION BENEFIT COST 
 
 
Discount rate4.18 %
4.12 %
4.06%
Expected return on plan assets5.5 %
6.5 %
7.5 %


The Company bases the discount rate on a current yield curve developed from a portfolio of high-quality fixed-income investments with maturities consistent with the projected benefit payout period. The long-term rate of return on assets is determined based on consideration of historical and forward-looking returns and the current and expected asset allocation strategy.


The method used to determine the service and interest costs is known as the spot rate approach, under which individual spot rates along the yield curve that correspond with the timing of each benefit payment are used.


In developing the expected long-term rate of return assumption for the assets of the defined benefit pension plans,Pension Plan, 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 employees expected to receive benefits under the active participants.Pension Plan.
 
Contributions: The Company funds the pension plansPension Plan 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 $0.5$2.5 million to its pension plansPension Plan in fiscal 2020, which represents discretionary funding.2022.  The Company made no contributions to its Pension Plan in fiscal 2021 and made contributions of $7.3$0.5 million and $19.3 million to its pension plans in fiscal 2019 and 2018, respectively.2020. 
 
Estimated Future Benefit Payments: The following benefit payments are expected to be paid: 
FISCAL YEARBENEFIT PAYMENTS (in thousands)
  
2022$199,685 
FISCAL YEARBENEFIT PAYMENTS (in thousands)
  
2020$6,612
20216,970
20227,287
20237,696
20248,069
Years 2025-202945,465


Plan Assets: Pension assets by major category and the type of fair value measurement as of April 30, 20192021 and 20182020 are presented in the following tables:

FAIR VALUE MEASUREMENTS AT APRIL 30, 2021
(in thousands)TOTALQUOTED PRICES IN ACTIVE MARKETS (LEVEL 1)SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)SIGNIFICANT UNOBSERVABLE INPUTS         (LEVEL 3)
Cash Equivalents$80,524 $80,524 $0 $0 
Fixed Income Funds:  
Investment Grade Fixed Income113,028 113,028 0 0 
Total plan assets193,552 193,552 $0 $0 
FAIR VALUE MEASUREMENTS AT APRIL 30, 2020
(in thousands)TOTALQUOTED PRICES IN ACTIVE MARKETS (LEVEL 1)SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)SIGNIFICANT UNOBSERVABLE INPUTS         (LEVEL 3)
Cash Equivalents$490 $490 $— $0 
Equity Funds: 
US Equity37,569 37,569 0 0 
International Equity24,578 24,578 — 
Fixed Income Funds: 
Investment Grade Fixed Income128,106 128,106 0 0 
Total plan assets$190,743 $190,743 $0 $0 

46


FAIR VALUE MEASUREMENTS AT APRIL 30, 2019
        
(in thousands)TOTAL QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1) SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) SIGNIFICANT UNOBSERVABLE INPUTS         (LEVEL 3)
Cash Equivalents$469
 $469
 —
 —
Equity Funds:       
US Equity31,143
 31,143
 —
 —
International Equity20,553
 20,553
 —
 

Fixed Income Funds:    
  
Investment Grade Fixed Income117,306
 117,306
 —
 —
Total plan assets$169,471
 $169,471
 —
 —



FAIR VALUE MEASUREMENTS AT APRIL 30, 2018
FAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS ATFAIR VALUE MEASUREMENTS AT
(in thousands)TOTAL
QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1)
SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)
SIGNIFICANT UNOBSERVABLE INPUTS         (LEVEL 3)
Cash Equivalents$448

$448

—

—
Equity Funds: 
 
 
 
US Equity37,421

37,421

—

—
International Equity25,135

25,135



 
Fixed Income Funds: 

 

—

—
Investment Grade Fixed Income93,459

93,459

—

—
Total plan assets$156,463

$156,463

—

—

Investment Strategy:  The Company has established formal investment policies for the assets associated with its pension plans.Pension Plan.  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’sCompany'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’Company's Pension Plan's weighted-average asset allocations at April 30, 20192021 and 2018,2020, by asset category, were as follows:
PLAN ASSET ALLOCATION PLAN ASSET ALLOCATION
2019
2019
2018 202120212020
APRIL 30TARGET
ACTUAL
ACTUALAPRIL 30TARGETACTUALACTUAL


Cash EquivalentsCash Equivalents— %42.0 %— %
Equity Funds30.0 %
31.0 %
40.0 %Equity Funds0 %0 %33.0 %
Fixed Income Funds70.0 %
69.0 %
60.0 %Fixed Income Funds100.0 %58.0 %67.0 %
Total100.0 %
100.0 %
100.0 %Total100.0 %100.0 %100.0 %
 
Note K --J — Income Taxes
 
Comprehensive tax legislation enacted throughIn response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act on December 22,of 2017 significantly modified U.S. corporate income tax law.(the "2017 Tax Act"). Among other provisions, the CARES Act makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. In addition, the Consolidated Appropriations Act (the "2021 Tax Act") enacted a temporary exception to the law's corporate income tax rate reduction, several otherlimitation for meals and entertainment paid or incurred after December 31, 2020. This and the CARES Act provisions are pertinentapplicable to the Company's financial statements and related disclosures forCompany have been applied to the current year endedending April 30, 20192021.

Additionally, the Taxpayer Certainty and future years.

The Company recognizedDisaster Tax Relief Act of 2020 (the "2020 Tax Act") was signed into law December 27, 2020 and provides a temporary exception to the income50% business deduction for certain business meals. The tax effects of the 20172020 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”) which provides SEC guidance on the application of ASC 740, Income Taxes,to business meals are not significant and have been recognized in the reporting period in which the 2017 Tax Act was signed into law. Our analysis of the Tax Act and associated regulations was completed as of January 31, 2019.current period.





47


Income tax expense was comprised of the following:
 FISCAL YEARS ENDED APRIL 30
(in thousands)202120202019
CURRENT   
Federal$25,683 $29,072 $25,649 
State5,639 7,581 8,231 
Foreign1,018 533 1,125 
Total current expense32,340 37,186 35,005 
DEFERRED   
Federal(11,426)(7,167)(4,498)
State(2,039)(4,190)(3,266)
Foreign(203)(142)(41)
Total deferred benefit(13,668)(11,499)(7,805)
Total expense18,672 25,687 27,200 
Other comprehensive income (loss)(1,156)(573)190 
Total comprehensive income tax expense$17,516 $25,114 $27,390 
 FISCAL YEARS ENDED APRIL 30
(in thousands)2019
2018
2017






CURRENT EXPENSE 
 
 
Federal$25,649

$8,668

$23,638
State8,231

1,290

4,189
Foreign1,125

257

—
Total current expense35,005

10,215

27,827






DEFERRED EXPENSE 
 
 
Federal(4,498)
17,833

8,607
State(3,266)
3,642

1,292
Foreign(41)
(71)
—
Total deferred expense(7,805)
21,404

9,899
Total expense27,200

31,619

37,726
Other comprehensive income (loss)190

50

4,391
Total comprehensive income tax expense$27,390

$31,669

$42,117


The Company's effective income tax rate varied from the federal statutory rate as follows: 
 FISCAL YEARS ENDED APRIL 30
 202120202019
Federal statutory rate21.0 %21.0 %21.0 %
Effect of:
Federal income tax credits(1.2)%(0.9)%(1.4)%
Stock compensation0.2 (0.1)(0.5)
Effect of 2017 Tax Act0 0 (1.1)
Meals and entertainment0.1 0.3 0.3 
Valuation allowance for deferred taxes0 0.7 0.6 
Foreign0.6 0.4 0.8 
Other0.2 0.7 1.2 
Total(0.1)%1.1 %(0.1)%
Effective federal income tax rate20.9 %22.1 %20.9 %
State income taxes, net of federal tax effect3.2 3.4 3.6 
Effective income tax rate24.1 %25.5 %24.5 %


48
 FISCAL YEARS ENDED APRIL 30
 2019
2018
2017
Federal statutory rate21.0 %
30.4 %
35.0 %
Effect of: 
 
 
Federal income tax credits(1.4)%
(0.5)%
(0.2)%
Acquisition and integration costs—

1.2

—
Stock compensation(0.5)
(2.4)
(1.3)
Meals and entertainment0.3

0.3

0.3
Effect of Tax Act(1.1)
1.2

—
Domestic production deduction—

(0.8)
(2.2)
Valuation allowance for deferred taxes0.6

—

—
Foreign0.8

—

—
Other1.2

0.4

(0.3)
Total(0.1)%
(0.6)%
(3.7)%









Effective federal income tax rate20.9 %
29.8 %
31.3 %
State income taxes, net of federal tax effect3.6

3.6

3.3
Effective income tax rate24.5 %
33.4 %
34.6 %





The significant components of deferred tax assets and liabilities were as follows:
 APRIL 30
(in thousands)20212020
Deferred tax assets:  
Accounts receivable$1,781 $1,730 
Pension benefits815 0 
Inventory692 0 
Product liability1,321 862 
Employee benefits5,746 5,189 
Tax credit carryforwards5,433 4,995 
Operating leases32,975 33,258 
Other2,086 4,330 
Gross deferred tax assets, before valuation allowance50,849 50,364 
Valuation allowance(4,914)(4,415)
Gross deferred tax assets, after valuation allowance45,935 45,949 
Deferred tax liabilities:  
Inventory0 125 
Depreciation22,116 24,147 
Intangibles29,123 40,677 
Operating leases31,320 32,325 
Other606 695 
Gross deferred tax liabilities83,165 97,969 
Net deferred tax liability$37,230 $52,020 
 APRIL 30
(in thousands)2019
2018
Deferred tax assets: 
 
Accounts receivable$1,852

$4,772
Product liability2,133

2,180
Employee benefits6,192

6,513
Tax credit carryforwards4,439

3,937
Other3,272

2,865
Gross deferred tax assets, before valuation allowance17,888

20,267
Valuation allowance(3,630)
(2,467)
Gross deferred tax assets, after valuation allowance14,258

17,800




Deferred tax liabilities: 
 
Pension benefits119

1,035
Inventory76

240
Depreciation23,721

21,076
Intangibles53,259

65,294
Other1,059

986
Gross deferred tax liabilities78,234

88,631






Net deferred tax liability$63,976

$70,831


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, 2019.2021.


The Company recorded a valuation allowance related to deferred tax assets for certain state investment tax credit ("ITC") carryforwards and foreign tax credit ("FTC") 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 2019, theThe Company determined that there will not be sufficient income in states for which an ITC deferred tax asset exists and that there will not be sufficient foreign source income to fully utilize the current year and carry forward FTCs.  Therefore, the Company has reassessedupdated the valuation allowance and recorded an additional valuation allowance infor the amountcurrent year activity of $0.5 million and $0.7 million related to ITCs and FTCs, respectively.FTCs.
The gross amount of state tax credit carryforwards related to state ITCs as of April 30, 20192021 and 20182020 was $4.6$3.8 million and $5.2 million.$3.9 million, respectively. These credits expire in various years beginning in fiscal 2020.2028. Net of the federal impact and related valuation allowance, the Company recorded $0.8$0.5 million and $1.5$0.6 million of deferred tax assets related to these credits as of April 30, 20192021 and 2018.2020, respectively. 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, 20192021 and 2018,2020, a deferred credit balance of $1.0$0.5 million and $1.3$0.8 million, respectively, is included in other liabilities on the consolidated balance sheet.sheets. 


The gross amount of foreign tax credit carryforwards as of April 30, 20192021 and 2020 is $0.7$1.7 million and $1.2 million, respectively, which expiresbegin to expire in fiscal 2029.




49




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:
 APRIL 30
(in thousands)20212020
 Change in Unrecognized Tax Benefits  
 Balance at beginning of year$2,305 $2,240 
 Additions based on tax positions related to the current year115 65 
 Reductions for tax positions of prior years settlements(929)0 
 Balance at end of year$1,491 $2,305 
 APRIL 30
(in thousands)2019
2018
 Change in Unrecognized Tax Benefits 
 
 Balance at beginning of year$928

$28
 Additions based on tax positions related to the current year120

—
 Additions for tax positions of prior years1,192

—
 Acquisitions, divestures, and other—

900
 Balance at end of year$2,240

$928


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, 2019,2021, federal tax years 20152017 through 20182020 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’sCompany's effective tax rate.

Note M --K — Commitments and Contingencies
 
Legal Matters
 
The Company is involved in suits and claims in the normal course of business, including without limitation product liability and general liability claims, and claims pending before the Equal Employment Opportunity Commission. On at least a quarterly basis, the Company consults with its legal counsel to ascertain the reasonable likelihood that such claims may result in a loss. As required by ASC Topic 450, “Contingencies”"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, 2019.2021.  


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’sCompany's warranty liability:
 APRIL 30
(in thousands)20212020
PRODUCT WARRANTY RESERVE  
Beginning balance$3,753 $4,616 
Accrual for warranties21,247 21,886 
Settlements(19,751)(22,749)
Ending balance at fiscal year end$5,249 $3,753 

 APRIL 30
(in thousands)2019
2018
PRODUCT WARRANTY RESERVE 
 
Beginning balance$4,045

$3,262
Acquisition—

119
Accrual for warranties24,994

21,374
Settlements(24,423)
(20,710)
Ending balance at fiscal year end$4,616

$4,045

Lease Agreements
The Company leases certain office buildings, manufacturing buildings, service centers and equipment. Total rental expenses under operating leases amounted to approximately $26.4 million, $17.0 million and $10.9 million, in fiscal years 2019, 2018 and 2017, respectively. Minimum rental commitments as of April 30, 2019, under non-cancellable leases with terms in excess of one year are as follows:
50
FISCAL YEAROPERATING               (in thousands)
CAPITAL                        (in thousands)
2020$17,943

$2,456
202117,649

1,953
202212,435

1,013
202310,636

705
20249,854

701
2025 (and thereafter)38,871

166
 $107,388

$6,994
Less amounts representing interest (2% - 6.5%) 
(349)
Total obligations under capital leases 
$6,645


Note N --L — Revenue Recognition


The Company disaggregates revenue from contracts with customers into major sales distribution channels as these categories depict the nature, amount, timing, and uncertainty of revenues and cash flows that are affected by economic factors. The following table disaggregates our consolidated revenue by major sales distribution channels for the years ended April 30, 2019, 20182021, 2020, and 2017:2019:
FISCAL YEARS ENDED APRIL 30
(in thousands)202120202019
Home center retailers$848,898 $768,043 $788,803 
Builders673,307 668,765 631,474 
Independent dealers and distributors221,809 213,525 225,042 
Net Sales$1,744,014 $1,650,333 $1,645,319 

FISCAL YEARS ENDED APRIL 30
(in thousands)2019
2018
2017
Home center retailers$788,803

$493,904

$352,583
Builders631,474

557,382

495,441
Independent dealers and distributors225,042

198,988

182,224
Net Sales$1,645,319

$1,250,274

$1,030,248


Note O --M — Credit Concentration


Financial instruments that potentially subject the Company to concentrations of risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with major financial institutions and such balances may, at times, exceed Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash.


Credit is extended to customers based on an evaluation of each customer's financial condition and generally collateral is not required. The Company's customers operate in the new home construction and home remodeling markets. 


 
The Company maintains an allowance for bad debt based upon management's evaluation and judgment of potential net loss. The allowance is estimated based upon historical experience, the effects of current developments and economic conditions and of each customer’scustomer'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, 2019,2021, the Company's two largest customers, Customers A and B, represented 28.2%34.3% and 25.9%22.1% of the Company's gross customer receivables, respectively. At April 30, 2018,2020, Customers A and B represented 30.8%26.4% and 25.5%22.9% of the Company’sCompany's gross customer receivables, respectively.


The following table summarizes the percentage of net sales to the Company's two largest customers for the last three fiscal years:
PERCENT OF ANNUAL NET SALES PERCENT OF ANNUAL NET SALES
2019
2018
2017 202120202019
Customer A29.3%
23.5%
18.5%Customer A30.8%29.3%29.3%
Customer B18.6%
16.0%
15.7%Customer B17.9%17.2%18.6%
 
Note N — Leases

Operating Leases - ROU assets related to operating leases are presented as Operating lease right-of-use assets on the consolidated balance sheet. Lease liabilities related to operating leases with lease terms greater than twelve months are presented in Short-term lease liability - operating and Long-term lease liability - operating on the consolidated balance sheet.

Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments is the rate implicit in the lease unless that rate cannot be readily determined, in which case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Operating lease ROU assets may also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. The Company has lease
51


arrangements with lease and non-lease components which are accounted for separately. Non-lease components of the lease payments are expensed as incurred and are not included in determining the present value.

Finance Leases - ROU assets related to finance leases are presented in Property, plant and equipment, net on the consolidated balance sheet. Lease liabilities related to finance leases are presented in Current maturities of long-term debt and Long-term debt, less current maturities on the consolidated balance sheet.

Finance lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments is the rate implicit in the lease unless that rate cannot be readily determined, in which case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The components of lease costs were as follows:
 FISCAL YEAR ENDED APRIL 30,
(in thousands)20212020
Finance lease cost:
Reduction in the carrying value of right-of-use assets$635 $2,582 
Interest on lease liabilities73 205 
Operating lease cost27,192 25,405 
Additional information related to leases was as follows:
 FISCAL YEAR ENDED APRIL 30,
(in thousands)20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases$73 $205 
Operating cash flows for operating leases24,371 22,595 
Financing cash flows for financing leases608 2,512 
Right-of-use assets obtained in exchange for new finance lease liabilities2,222 1,650 
Right-of-use assets obtained in exchange for new operating lease liabilities8,914 72,703 
Weighted average remaining lease term (years)
Weighted average remaining lease term - finance leases2.953.36
Weighted average remaining lease term - operating leases6.627.41
Weighted average discount rate
Weighted average discount rate - finance leases2.95 %3.19 %
Weighted average discount rate - operating leases3.23 %4.27 %


52


The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on the consolidated balance sheet as of April 30, 2021:
FISCAL YEAROPERATING (in thousands)FINANCING (in thousands)
2022$23,761 $2,199 
202322,875 1,732 
202420,881 1,352 
202518,058 339 
202617,852 109 
Thereafter40,881 0 
Total lease payments144,308 5,731 
Less imputed interest(14,686)(237)
Total lease liability$129,622 $5,494 
Current maturities(19,994)(2,072)
Lease liability - long-term$109,628 $3,422 
Lease assets$123,118 $10,037 

NOTE P --O — Restructuring Charges


OnDuring June 1, 2018,2020, the Company's Board approved the closure and eventual disposal of its manufacturing plant located in Humboldt, Tennessee. Operations ceased at the Humboldt plant in July 2020. During the third quarter of fiscal 2021, the Company sold the Humboldt plant and recognized a gain of $2.3 million on the sale. During fiscal 2021, the Company recognized pre-tax restructuring charges, net of $4.4 million related to the closure of the plant. Included in the $4.4 million of restructuring charges for fiscal 2021 were $0.9 million of severance and separation costs and $3.5 million for equipment, inventory and facilities-related expenses.

In the fourth quarter of fiscal 2020 and the first quarter of fiscal 2021, the Company implemented nationwide reductions in force, which were substantially completed in the fourth quarter of fiscal 2020 and first quarter of fiscal 2021. During fiscal 2021 and 2020, the Company recognized pre-tax restructuring charges, net of $1.4 million and $0.2 million, respectively, related to these reductions in force, which were primarily severance and separation costs.
In the first quarter of fiscal 2019, the Company implemented a nationwide reduction in force of approximately 53 employees nationwide.force.  Severance and outplacement charges relating to the reduction in force will totaltotaled approximately $2.0$1.8 million and the reduction in force was substantially completed during fiscal 2019.

During fiscal years 2021, 2020, and 2019, the Company recognized total pre-tax restructuring charges of $5.8 million, $18,000, and $2.0 million, respectively.

A reserve for restructuring charges of $0.4 million is included in accrued compensation and related expenses in the consolidated balance sheets.sheets as of April 30, 2021 and 2020 which relates to employee termination costs accrued but not yet paid as follows:
APRIL 30
(in thousands)20212020
Restructuring reserve balance at May 1$189 $387 
Expense1,739 (18)
Payments and adjustments(1,789)(180)
Restructuring reserve balance at April 30$139 $189 


53
(in thousands)  
Restructuring reserve balance as of May 1, 2018$—
Expense 1,987
Payments (1,600)
Restructuring reserve balance as of April 30, 2019$387



Note Q --P — Fair Value Measurements
 
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’sCompany's cash equivalents are invested in money market funds, mutual funds and certificates of deposit.  The Company’sCompany's mutual fund investment assets represent contributions made and invested on behalf of the Company’sCompany'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.  
 
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 measured on a recurring basis.


The fair value measurement of assets held by the Company’sCompany's defined benefit pension plans is discussed in Note J.I.


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 forward contracts were marked to market and therefore represent fair value. The fair values of these contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The following table summarizes the fair value of assets and liabilities that are recorded in the Company’sCompany's consolidated financial statements as of April 30, 20192021 and 20182020 at fair value on a recurring basis: 

 FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2021
(in thousands)LEVEL 1LEVEL 2LEVEL 3
ASSETS:   
Mutual funds$642 $0 $0 
 FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2020
(in thousands)LEVEL 1LEVEL 2LEVEL 3
ASSETS:   
Mutual funds$773 $0 $0 
LIABILITIES:
Foreign exchange forward contracts$0 $(1,102)$0 



54
 FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2019
(in thousands)LEVEL 1 LEVEL 2 LEVEL 3
ASSETS:     
Certificates of deposit$1,500
 $—
 $—
Mutual funds1,604
 —
 —
Total assets at fair value$3,104
 $—
 $—






 FAIR VALUE MEASUREMENTS AS OF APRIL 30, 2018
(in thousands)LEVEL 1
LEVEL 2
LEVEL 3
ASSETS: 
 
 
Certificates of deposit$9,500

$—

$—
Mutual funds1,057

—

—
Total assets at fair value$10,557

$—

$—


Note R -- Quarterly Financial Data (Unaudited)
FISCAL 201907/31/18
10/31/18
01/31/19
04/30/19
(in thousands, except per share amounts) 
 
 
 
Net sales$428,962

$424,878

$384,080

$407,399
Gross profit95,736

86,762

76,853

87,122
Income before income taxes32,539

25,409

24,126

28,814
Net income24,767

18,488

18,409

22,024
Earnings per share






Basic$1.41

$1.05

$1.07

$1.31
Diluted$1.41

$1.05

$1.07

$1.30








FISCAL 201807/31/17
10/31/17
01/31/18
04/30/18
(in thousands, except per share amounts) 
 
 
 
Net sales$276,827

$274,769

$292,791

$405,887
Gross profit58,494

57,335

50,379

89,195
Income before income taxes31,372

31,463

3,764

28,161
Net income22,281

19,755

1,996

19,109
Earnings per share






Basic$1.37

$1.22

$0.12

$1.09
Diluted$1.36

$1.21

$0.12

$1.08





Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
American Woodmark Corporation:


Opinion on the ConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of American Woodmark Corporation and subsidiaries (the Company) as of April 30, 20192021 and 2018,2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑yearthree-year period ended April 30, 2019,2021, 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, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the years in the three‑yearthree-year period ended April 30, 2019,2021, 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, 2019,2021, 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 28, 201929, 2021 expressed an adverseunqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note A to the consolidated financial statements, the Company has elected to change its method of accounting for leases as of May 1, 2019 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 842, Leases.

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.



Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of goodwill recoverability

As discussed in Note A to the consolidated financial statements and disclosed in the consolidated balance sheet, the carrying amount of goodwill as of April 30, 2021 was $767.6 million. The Company evaluates its goodwill for impairment annually on February 1, or whenever events or changes in circumstances indicate that it is more likely than not the carrying value of goodwill may not be recoverable. The Company performed a qualitative impairment test for goodwill which resulted in no impairment.
55


We identified the assessment of events or changes in circumstances that may indicate that the fair value of the reporting unit is below its carrying value as a critical audit matter. A higher degree of auditor judgement was required to evaluate these events or changes in circumstances as a result of uncertainty in the economy, including raw material costs. These events or changes in circumstances could have a significant effect on the Company’s qualitative impairment assessment and the determination of whether further quantitative analysis of goodwill impairment was required.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain controls related to the goodwill process. This included a control related to the Company’s assessment of events or changes in circumstances, including raw material costs, that may indicate the fair value of the reporting unit is below its carrying value. We evaluated the Company’s assessment of events or changes in circumstances that may indicate the fair value of the reporting unit is below its carrying value through comparison to the Company’s market capitalization and macroeconomic information contained in third party analyst reports on the Company and other third party information.


/s/ KPMG LLP
 
We have served as the Company’sCompany's auditor since 2004.
McLean,Richmond, Virginia
June 28, 201929, 2021




56


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, a system of 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, 2021. In making its assessment, Management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (the "COSO 2013 Framework"). Management concluded that based on its assessment, American Woodmark Corporation's internal control over financial reporting was effective as of April 30, 2021. The Company's internal control over financial reporting as of April 30, 2021 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/ M. SCOTT CULBRETH
M. Scott Culbreth
President and Chief Executive Officer


/s/ PAUL JOACHIMCZYK
Paul Joachimczyk
Vice President and Chief Financial Officer


57


Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
American Woodmark Corporation:


Opinion on Internal Control Over Financial Reporting

We have audited American Woodmark Corporation and subsidiaries’(thesubsidiaries' (the Company) internal control over financial reporting as of April 30, 2019,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of April 30, 2019,2021, 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, 20192021 and 2018,2020, 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, 2019,2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated June 28, 201929, 2021 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to ineffective general information technology controls related to user access, program change and computer operation controls related to the RSI IT operating systems, databases and IT applications and ineffective process level automated controls and certain manual controls due to ineffective risk assessment and monitoring activities related to automated processes and IT systems at RSI and the lack of compliance experience on the part of RSI’s Finance and IT personnel has been identified and included in management’s assessment. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
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’sManagement'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.
Disclaimer on Additional Information in Management’s Report
We do not express an opinion or any other form of assurance on management’s statements, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, referring to corrective actions taken relative to the aforementioned material weakness in internal control over financial reporting.


 
/s/ KPMG LLP
McLean,Richmond, Virginia
June 28, 201929, 2021





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Item 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
Item 9A.    CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures.  The Company’s managementSenior Management, including the Chief Executive Officer and Chief Financial Officer, evaluated with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’sdesign and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of April 30, 2019.2021. Based on this evaluation, Company management, including the principal executive officerChief Executive Officer and principal financial officer,Chief Financial Officer have concluded that the Company’sCompany's disclosure controls and procedures are not effective because of a material weakness in internal control over financial reporting described below.

Notwithstanding such material weakness in internal control over financial reporting, Company management, including our principal executive officer and principal financial officer, concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Annual Report, in conformity with U.S. generally accepted accounting principles.effective.
 
Management’sManagement's Annual Report on Internal Control over Financial Reporting.  Management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Management, under the supervision of our principal executive officer and principal financial officer, and under the oversight of the Audit Committee,had conducted an assessment of the Company’sCompany's internal control over financial reporting as of April 30, 2019 using2021. Management's report regarding that assessment is included with the criteria set forthConsolidated Financial Statements included in this report under Item 8, "Financial Statements and Supplementary Data," and is incorporated in this item by the Committeereference.

Report of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (the “COSO 2013 Framework”). Based on its assessment, our management has identified certain deficiencies in our internal control over financial reporting described below:

GITCs and Automated Controls at RSI
Registered Public Accounting Firm. The Company did not have effective general information technology controls (GITCs) related to RSI, a subsidiary acquired during fiscal year 2018. Specifically, the Company did not design and maintain effective user access controls that adequately restricted user and privileged access to RSI’s IT operating systems, databases and IT applications and did not retain evidentiary documentation of the operation of the controls. Further, program change and computer operation controls related to the IT operating systems, databases and IT applications, which are dependent upon the adequate design and effectiveness of user access controls, were also ineffective, because of the ineffective user access controls. As a result, process level automated controls and manual controls that are dependent on the completeness and accuracy of information derived from the affected IT systems were ineffective because they could have been adversely impacted. 

These deficiencies resulted from ineffective risk assessment and monitoring activities related to automated processes and IT systems at RSI and certain GITCs necessary to mitigate those risks and the lack of compliance experience on the part of RSI’s Finance and IT personnel.

We did not identify any misstatements because of these control deficiencies to the consolidated financial statements. However, these control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will


not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent a material weakness in our internal control over financial reporting and our internal control over financial reporting was not effective as of April 30, 2019.

The Company’sCompany's independent registered public accounting firm, KPMG LLP (KPMG), who auditedhas issued an audit report on the effectiveness of the Company's internal control over financial reporting. KPMG's report on the effectiveness of the Company's internal control over financial reporting is included with the Consolidated Financial Statements included in this report has issued an adverse audit report on the effectiveness of the Company’s internal control over financial reporting. KPMG LLP's report appears beginning on page 58 of this Annual Report.

Remediation Plan
We plan to implement several steps, as described below, to remediate the material weakness describedunder Item 8, "Financial Statements and Supplementary Data," and is incorporated in this Item 9A. Company management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively.item by reference.


Our remediation plan at RSI includes, but is not limited to:
Establish additional training for RSI Finance and IT personnel to ensure a clear understanding of risk assessment and monitoring activities related to automated processes and IT systems and general information technology controls
Document and execute robust policies and procedures over the GITC environment with a focus on user and privileged access controls and their impact on program change and computer operation controls
Define and document clear roles and responsibilities for Finance, Human Resources, IT and Operations to perform complete and timely user access reviews
Implement consistent documentation requirements and retention to evidence the operation of GITC access controls
Changes in Internal Control over Financial Reporting.  As part of the adoption of SOX 404 for RSI, the Company identified the following material weakness:

The Company did not take into account appropriate segregation of duties when we assigned roles and responsibilities to employees responsible for initiating, preparing and recording journal entries within our general ledger IT system utilized by RSI whereby the same employee could prepare and post a journal entry without independent authorization and verification affecting any financial statement account at RSI. We did not identify any misstatements as a result of these control deficiencies to the consolidated financial statements.

The Company took the following actions to remediate the material weakness during the year:
Implemented a review control over the completeness, existence and accuracy of all journal entries recorded in the general ledger at RSI during the fiscal year; and
Established appropriate segregation of duties controls in the general ledger IT system utilized by RSI to prevent the same employee from preparing and posting journal entries without proper approvals and verification.

Except for the material weaknesses discussed above and the remediation of the interim material weakness, thereThere has been no change in the Company’sCompany's internal control over financial reporting during the fiscal quarter ended April 30, 2019,2021, that has materially affected, or is reasonably likely to materially affect, the Company’sCompany'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’sCompany's directors is set forth under the caption “Item"Item 1 - Election of Directors - Information Regarding Nominees”Nominees" in the Company’sCompany's Proxy Statement for its Annual Meeting of Shareholders to be held on August 22, 2019 (“26, 2021 ("Proxy Statement”Statement") and is incorporated in this Item by reference;




(2)the information concerning the Company’sCompany's executive officers is set forth under the caption “Executive"Executive Officers of the Registrant”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"Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports" 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’sCompany's Chief Executive Officer, Chief Financial Officer, Controller, and Treasurer is set forth under the caption “Corporate"Corporate Governance – Codes of Business Conduct and Ethics”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’sCompany's Board of Directors is set forth under the caption “Corporate"Corporate Governance – Procedures for Shareholder Nominations of Directors”Directors" in the Proxy Statement and is incorporated in this Item by reference; and


(6)the information concerning the Audit Committee of the Company’sCompany's Board of Directors, including the members of the Audit Committee and the Board’sBoard's determination concerning whether certain members of the Audit Committee are “audit"audit committee financial experts”experts" as that term is defined under Item 407(d)(5) of Regulation S-K is set forth under the captions “Corporate
59


"Corporate Governance – Board of Directors and Committees – Audit Committee”Committee" in the Proxy Statement and is incorporated in this Item by reference.
 
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"Executive Compensation,” “Report of the Compensation" "Compensation Committee” Report," "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.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
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”"Security Ownership" in the Proxy Statement is incorporated in this Item by reference.


Equity Compensation Plans


The following table summarizes information about the Company’sCompany's equity compensation plans as of April 30, 2019:2021:
 Equity Compensation Plan Information
Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rightsWeighted average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 (a)(b)(c)
Equity compensation plans approved by security holders(1)
— $— 632,666 
Options— $— 
Performance-based restricted stock units131,684 N/A(2)
Service-based restricted stock units91,471 N/A(2)
Equity compensation plans not approved by security holders(3)
— $— — 
Total223,155 $— 632,666 
 Equity Compensation Plan Information






Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 (a)
(b)
(c)








Equity compensation plans approved by security holders(1)—

—
798,328
Options5,167

$57.11


—
Performance-based restricted stock units89,182

N/A
(2) 

—
Service-based restricted stock units61,269

N/A
(2) 

—
Equity compensation plans not approved by security holders(3)—

—
—
Total155,618

$57.11
798,328
(1)At April 30, 2021, the Company had restricted stock unit awards outstanding under two different plans: 2016 Employee Stock Incentive Plan and 2015 Non-Employee Directors Restricted Stock Unit Plan.
(2)Excludes exercise price for restricted stock units issued under the 2016 Employee Stock Incentive 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.



(1) At April 30, 2019, the Company had stock option and restricted stock unit awards outstanding under two different plans: Amended and Restated 2004 Stock Incentive Plan for Employees 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 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.      �� CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
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"Certain Related Party Transactions”Transactions" and “Corporate"Corporate Governance – Director Independence”Independence" in the Proxy Statement is incorporated in this Item by reference.
 
Item 14.        PRINCIPAL ACCOUNTING FEES AND SERVICES
 
In response to this Item, and in accordance with General Instruction G(3) of Form 10-K, the information concerning fees and services of the Company’sCompany's principal accounting firm set forth under the captions “Report"Report of the Audit Committee - Independent
60


Auditor Fee Information”Information" and “Report"Report of the Audit Committee - Pre-Approval Policies and Procedures”Procedures" in the Proxy Statement is incorporated in this Item by reference. 


PART IV
 
Item 15.        EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1.Financial Statements
(a)1. Financial Statements
The following consolidated financial statements of American Woodmark Corporation are incorporated by reference to Item 8 of this report:
Consolidated Balance Sheets as of April 30, 20192021 and 2018.2020.
Consolidated Statements of Income – for each year of the three-year period ended April 30, 2019.2021.
Consolidated Statements of Comprehensive Income – for each year of the three-year period ended April 30, 2019.2021.
Consolidated Statements of Shareholders’Shareholders' Equity – for each year of the three-year period ended April 30, 2019.2021.
Consolidated Statements of Cash Flows – for each year of the three-year period ended April 30, 2019.2021.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Management’s    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
(a)2.Financial Statement Schedules
The following financial statement schedule is filed as a part of this Form 10-K:
Schedule II – Valuation and Qualifying Accounts for each year of the three-year period ended April 30, 2019.2021.
Schedules other than the one listed above are omitted either because they are not required or are inapplicable.
 
(a)3.Exhibits
(a)3.
Exhibits
2.13.1
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)
3.1
Articles of Incorporation as amended effective August 12, 1987 (incorporated by reference to Exhibit 3.1 to the Registrant’sRegistrant's Form 10-Q for the quarter ended January 31, 2003; Commission File No. 000-14798).


3.1(b)
Articles of Amendment to the Articles of Incorporation effective September 10, 2004 (incorporated by reference to Exhibit 3.1 to the Registrant’sRegistrant's Form 8-K as filed on August 31, 2004; Commission File No. 000-14798).
3.2
Bylaws - as amended and restated effective November 27, 2018February 22, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K as filed on November 28, 2018;February 23, 2021; Commission File No. 000-14798).
4.1The Articles of Incorporation and Bylaws of the Registrant as currently in effect (incorporated by reference to Exhibits 3.1 and 3.2).
4.2(a)4.2
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).
4.2(b)
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).
4.2(c)
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).
4.3
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’sRegistrant's Form 8-K as filed on February 14, 2018; Commission File No. 000-14798).
4.44.3
Description of Capital Stock (Filed Herewith)(incorporated by reference to Exhibit 4.4 to the Registrant's Form 10-K for the fiscal year ended April 30, 2019; 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.
61


10.1(a)10.1(a)
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).
10.1(b)
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).
10.1(c)
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’sRegistrant's Form 8-K as filed on January 5, 2018; Commission File No. 000-14798).
10.1(d)10.1(b)
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’sRegistrant's Form 10-Q for the quarter ended January 31, 2018; Commission File No. 000-14798).
10.1(e)10.1 (c)
Amendment No. 1, dated as of September 7, 2018, to the Creditand Restatement Agreement, dated as of December 29, 2017,April 22, 2021, by and among American Woodmark Corporation, each Subsidiary of American Woodmark Corporation party thereto, the lenders from time to timeLenders party thereto and Wells Fargo Bank, National Association, as administrative agentAdministrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant’sRegistrant's Form 8-K as filed on September 11, 2018;April 26, 2021; Commission File No. 000-14798).
10.1(f)10.1 (d)
Amendment No. 2, dated as of January 25, 2019, to theAmended and Restated Credit Agreement, dated as of December 29, 2017,April 22, 2021, by and among American Woodmark Corporation, as Borrower, the lenders from timeLenders referred to time party theretotherein as Lenders and Wells Fargo Bank, National Association, as administrative agentAdministrative Agent, Swingline Lender and Issuing Lender (incorporated by reference to Exhibit 10.110.2 to the Registrant’sRegistrant's Form 8-K as filed on January 29, 2019;April 26, 2021; Commission File No. 000-14798).
10.6
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).


10.7 10.2(a)
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).*
10.7 (b)
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).*
10.7 (c)
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).*
10.7(d)
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).
10.8 (a)10.3(a)
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).*
10.8 (b)
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).*
10.8 (c)
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).*
10.8 (d)
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).*
10.8(e)
Employment Agreement for Mr. M. Scott Culbreth (incorporated by reference to Exhibit 10.1 to the Registrant’sRegistrant's Form 8-K8-K/A as filed on August 27, 2014;25, 2020; Commission File No. 000-14798).*
10.8(f)10.3(b)
Amendment to Employment Agreement for Mr. M. Scott Culbreth (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K as filed on May 29, 2019; Commission File No. 000-14798).
10.8(g)
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).*
10.8(h)
Amendment to Employment Agreement for Mr. R. Perry Campbell (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K as filed on May 29, 2019; Commission File No. 000-14798).
10.8(i)
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).*
10.8(j)
Amendment to Employment Agreement for Mr. S. Cary Dunston (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K as filed on May 29, 2019; Commission File No. 000-14798).
10.8(k)
Employment Agreement for Mr. Robert J. Adams, Jr. (incorporated by reference to Exhibit 10.3 to the Registrant’sRegistrant's Form 8-K as filed on August 31, 2015; Commission File No. 000-14798).*
10.8(l)10.3(c)
Amendment to Employment Agreement for Mr. Robert J. Adams, Jr. (incorporated by reference to Exhibit 10.4 to the Registrant’sRegistrant's Form 8-K as filed on May 29, 2019; Commission File No. 000-14798).*
10.10(a)10.3(d)
Employment Agreement for Mr. Paul Joachimczyk (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K/A filed on August 25, 2020; Commission File No. 000-14798).
10.3(e)
Employment Agreement for Ms. Teresa M. May (incorporated by reference to Exhibit 10.8(c) to the Registrant's Form 10-Q filed on August 26, 2020; Commission File No. 000-14798).
10.4(a)
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).
10.10(b)10.4(b)
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’sRegistrant's Form 10-Q for the quarter ended July 31, 2004; Commission File No. 000-14798).
10.1110.5
2016 Employee Stock Incentive Plan (incorporated by reference to Exhibit A to the Registrant’sRegistrant's Definitive Proxy Statement on Schedule 14A as filed on June 29, 2016; Commission File No. 000-14798).
10.11(a)10.5(a)
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’sRegistrant's Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).*


10.11(b)10.5(b)
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’sRegistrant's Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).*
10.11(c)10.5(c)
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’sRegistrant's Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).*
10.1221
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).
21
Subsidiaries of the Company (Filed Herewith).
23.1
Consent of KPMG LLP, Independent Registered Public Accounting Firm (Filed Herewith).
31.1
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).
31.2
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).
62


32.1
Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished Herewith).
101Interactive Data File for the Registrant’sRegistrant's Annual Report on Form 10-K for the year ended April 30, 20192021 formatted in Inline XBRL (eXtensible(Inline 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’Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements (Filed Herewith).
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
 
*Management contract or compensatory plan or arrangement.




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Schedule II - Valuation and Qualifying Accounts
 
AMERICAN WOODMARK CORPORATION
(In Thousands)
 
Description (a)Balance at Beginning of Year
Additions (Reductions) Charged to
Cost and Expenses		 Other
Deductions Balance at End of YearDescription (a)Balance at Beginning of YearAdditions (Reductions) Charged to
Cost and Expenses		 OtherDeductions Balance at End of Year
Year ended April 30, 2021:Year ended April 30, 2021:   
Allowance for doubtful accountsAllowance for doubtful accounts$472 $182  $0 $(323)(b)$331 
Reserve for cash discountsReserve for cash discounts$1,171 $19,109 (c)$0 $(18,444)(d)$1,836 
Reserve for sales returns and allowancesReserve for sales returns and allowances$4,541 $22,298 (c)$0 $(19,685) $7,154 
Year ended April 30, 2020:Year ended April 30, 2020:    
Allowance for doubtful accountsAllowance for doubtful accounts$249 $323 $0 $(100)(b)$472 
Reserve for cash discountsReserve for cash discounts$1,451 $16,810 (c)$0 $(17,090)(d)$1,171 
Reserve for sales returns and allowancesReserve for sales returns and allowances$4,545 $17,049 (c)$0 $(17,053)$4,541 










Year ended April 30, 2019: 
   
   Year ended April 30, 2019:    










Allowance for doubtful accounts$259

$72
 $—

$(82)(b)$249
Allowance for doubtful accounts$259 $72 $0 $(82)(b)$249 














Reserve for cash discounts$1,627

$16,994
(c)$—

$(17,170)(d)$1,451
Reserve for cash discounts$1,627 $16,994 (c)$0 $(17,170)(d)$1,451 














Reserve for sales returns and allowances$4,381

$11,867
(c)$—

$(11,703) $4,545
Reserve for sales returns and allowances$4,381 $11,867 (c)$0 $(11,703) $4,545 














Year ended April 30, 2018: 
   
   










Allowance for doubtful accounts$148

$169
 $78

$(136)(b)$259














Reserve for cash discounts$979

$11,999
(c)$584

$(11,935)(d)$1,627














Reserve for sales returns and allowances$2,131

$11,318
(c)$1,829

$(10,897) $4,381














Year ended April 30, 2017: 
   
   










Allowance for doubtful accounts$171

$200
 $—

$(223)(b)$148














Reserve for cash discounts$827

$10,027
(c)$—

$(9,875)(d)$979














Reserve for sales returns and allowances$1,782

$7,962
(c)$—

$(7,613) $2,131

(a)All reserves relate to accounts receivable.
(b)Principally write-offs, net of collections.
(c)Reduction of gross sales.
(d)Cash discounts granted.


(a)All reserves relate to accounts receivable.
(b)Principally write-offs, net of collections.
(c)Reduction of gross sales.
(d)Cash discounts granted.

Item 16. Form 10-K Summary


None.



64



SIGNATURES
 
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.
 
American Woodmark Corporation
(Registrant)
June 29, 2021American Woodmark Corporation/s/ M. SCOTT CULBRETH
(Registrant)
June 28, 2019/s/ S. CARY DUNSTON
S. Cary Dunston
ChairmanM. Scott Culbreth
President and Chief Executive Officer
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 
 
June 29, 2021/s/ M. SCOTT CULBRETHJune 29, 2021/s/ PAUL JOACHIMCZYK
M. Scott Culbreth President and Chief Executive Officer (Principal Executive Officer) DirectorPaul Joachimczyk
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
June 28, 201929, 2021/s/ S. CARY DUNSTONJune 28, 2019/s/ M. SCOTT CULBRETH
S. Cary Dunston Chairman and Chief Executive Officer (Principal Executive Officer) Director
M. Scott Culbreth
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
June 28, 2019/s/ ANDREW B. COGANJune 28, 201929, 2021/s/ JAMES G. DAVIS, JR.
Andrew B. Cogan

Director
James G. Davis, Jr.

Director
June 28, 201929, 2021/s/ MARTHA M. HAYESJune 28, 201929, 2021/s/ DANIEL T. HENDRIX
Martha M. Hayes

Director
Daniel T. Hendrix

Director
June 28, 201929, 2021/s/ TERESA M. MAYJune 28, 2019/s/ CAROL B. MOERDYKJune 29, 2021/s/ DAVID A. RODRIGUEZ
Teresa M. May
Director
Carol B. Moerdyk

Director
David A. Rodriguez
Director
June 28, 201929, 2021/s/ DAVID W. MOONJune 28, 2019/s/ VANCE W. TANGJune 29, 2021/s/ EMILY C. VIDETTO
David W. Moon
Director
Vance W. Tang

Director
Emily C. Videtto
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



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