Company Quick10K Filing
American Woodmark
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 17 $1,430
10-Q 2019-11-26 Quarter: 2019-10-31
10-Q 2019-08-29 Quarter: 2019-07-31
10-K 2019-06-28 Annual: 2019-04-30
10-Q 2019-02-27 Quarter: 2019-01-31
10-Q 2018-11-30 Quarter: 2018-10-31
10-Q 2018-08-31 Quarter: 2018-07-31
10-K 2018-06-29 Annual: 2018-04-30
10-Q 2018-03-12 Quarter: 2018-01-31
10-Q 2017-12-05 Quarter: 2017-10-31
10-Q 2017-08-30 Quarter: 2017-07-31
10-K 2017-06-29 Annual: 2017-04-30
10-Q 2017-02-28 Quarter: 2017-01-31
10-Q 2016-12-01 Quarter: 2016-10-31
10-Q 2016-08-30 Quarter: 2016-07-31
10-K 2016-06-29 Annual: 2016-04-30
10-Q 2016-02-26 Quarter: 2016-01-31
10-Q 2015-11-25 Quarter: 2015-10-31
10-Q 2015-08-28 Quarter: 2015-07-31
10-K 2015-06-30 Annual: 2015-04-30
10-Q 2015-02-27 Quarter: 2015-01-31
10-Q 2014-11-26 Quarter: 2014-10-31
10-Q 2014-08-29 Quarter: 2014-07-31
10-K 2014-06-30 Annual: 2014-04-30
10-Q 2014-02-28 Quarter: 2014-01-31
10-Q 2013-11-27 Quarter: 2013-10-31
10-Q 2013-08-28 Quarter: 2013-07-31
10-K 2013-06-28 Annual: 2013-04-30
10-Q 2013-02-27 Quarter: 2013-01-31
10-Q 2012-11-30 Quarter: 2012-10-31
10-Q 2012-08-29 Quarter: 2012-07-31
10-K 2012-06-29 Annual: 2012-04-30
10-Q 2012-03-01 Quarter: 2012-01-31
10-Q 2011-12-01 Quarter: 2011-10-31
10-Q 2011-08-30 Quarter: 2011-07-31
10-K 2011-06-30 Annual: 2011-04-30
10-Q 2011-03-01 Quarter: 2011-01-31
10-Q 2010-12-01 Quarter: 2010-10-31
10-Q 2010-08-31 Quarter: 2010-07-31
10-K 2010-06-30 Annual: 2010-04-30
10-Q 2010-03-03 Quarter: 2010-01-31
8-K 2019-11-26 Earnings, Exhibits
8-K 2019-08-27 Earnings, Exhibits
8-K 2019-08-27 Shareholder Vote
8-K 2019-07-11 Regulation FD, Exhibits
8-K 2019-05-28 Earnings, Exhibits
8-K 2019-05-23 Officers, Exhibits
8-K 2019-04-12 Regulation FD, Exhibits
8-K 2019-02-26 Earnings, Exhibits
8-K 2019-01-25 Enter Agreement, Exhibits
8-K 2018-11-29 Earnings, Exhibits
8-K 2018-11-27 Officers, Amend Bylaw, Exhibits
8-K 2018-09-07 Enter Agreement, Other Events, Exhibits
8-K 2018-08-27 Earnings, Exhibits
8-K 2018-08-23 Shareholder Vote
8-K 2018-05-29 Earnings, Exhibits
8-K 2018-03-09 Earnings, Exhibits
8-K 2018-02-12 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-01-31 Enter Agreement, Other Events, Exhibits
8-K 2018-01-29 Regulation FD, Exhibits
8-K 2018-01-05 Enter Agreement, M&A, Off-BS Arrangement, Sale of Shares, Regulation FD, Exhibits
AMWD 2019-10-31
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 ex31120191031.htm
EX-31.2 ex31220191031.htm
EX-32.1 ex32120191031.htm

American Woodmark Earnings 2019-10-31

AMWD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
TREX 4,194 536 145 692 280 122 194 4,088 40% 21.0 23%
LPX 3,322 2,090 812 2,496 465 185 362 3,311 19% 9.2 9%
UFPI 2,228 1,851 667 4,489 637 165 301 2,394 14% 8.0 9%
JELD 2,123 3,414 2,625 4,358 918 107 283 3,570 21% 12.6 3%
AMWD 1,430 1,623 972 1,644 345 86 203 2,006 21% 9.9 5%
DOOR 1,324 1,926 1,311 2,179 447 69 231 1,997 21% 8.7 4%
PATK 1,081 1,331 872 2,328 423 103 232 1,664 18% 7.2 8%
KOP 629 1,598 1,495 1,773 332 32 168 1,606 19% 9.6 2%
OSB
EVA 960 706 639 81 10 91 521 13% 5.7 1%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2019
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)

Virginia
 
54-1138147
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
561 Shady Elm Road,
Winchester,
Virginia
 
22602
(Address of principal executive offices)
 
(Zip Code)
 

(540) 665-9100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
AMWD
NASDAQ

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  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    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 accelerated filer,”  “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer                 
 
Non-accelerated filer     
 
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.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes No
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
As of November 25, 201916,921,547 shares of the Registrant’s Common Stock were outstanding.





AMERICAN WOODMARK CORPORATION
 
FORM 10-Q
 
INDEX
 
 
PART I.
FINANCIAL INFORMATION
PAGE
NUMBER
 
 
 
Item 1.
Financial Statements (unaudited)
 
 
 
 
 
3
 
 
 
 
4
 
 
 
 
5
 
 
 
 
6
 
 
 
 
8
 
 
 
 
10-19
 
 
 
Item 2.
19-26
 
 
 
Item 3.
26
 
 
 
Item 4.
26
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
Item 1.
27
 
 
 
Item 1A.
27
 
 
 
Item 6.
27
 
 
 
28


2



PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
AMERICAN WOODMARK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) 
(Unaudited) 
 
October 31,
2019
 
April 30,
2019
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
51,435

 
$
57,656

Investments - certificates of deposit

 
1,500

Customer receivables, net
120,118

 
125,901

Inventories
119,758

 
108,528

Income taxes receivable
2,704


1,009

Prepaid expenses and other
15,009

 
11,441

Total current assets
309,024

 
306,035

Property, plant and equipment, net
206,899

 
208,263

Operating lease right-of-use assets
89,662



Customer relationship intangibles, net
190,278


213,111

Trademarks, net
3,889


5,555

Goodwill
767,612


767,612

Promotional displays, net
13,599

 
13,058

Deferred income taxes
766

 
773

Other assets
16,935

 
15,524

TOTAL ASSETS
$
1,598,664

 
$
1,529,931

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
62,850

 
$
61,277

Current maturities of long-term debt
2,320

 
2,286

Short-term lease liability - operating
19,453



Accrued compensation and related expenses
50,528

 
54,906

Accrued marketing expenses
16,002

 
12,979

Other accrued expenses
18,256

 
18,142

Total current liabilities
169,409

 
149,590

Long-term debt, less current maturities
617,930

 
689,205

Deferred income taxes
59,636


64,749

Long-term lease liability - operating
72,067



Other long-term liabilities
4,714

 
6,034

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

 

Common stock, no par value; 40,000,000 shares authorized; issued and
 
 
 
outstanding shares: at October 31, 2019: 16,921,547; at April 30, 2019: 16,849,026
357,304

 
352,424

Retained earnings
366,464

 
317,420

Accumulated other comprehensive loss - Defined benefit pension plans
(48,860
)
 
(49,491
)
Total shareholders' equity
674,908

 
620,353

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
1,598,664

 
$
1,529,931

See notes to unaudited condensed consolidated financial statements.
 
 
 

3



AMERICAN WOODMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
October 31,
 
October 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
428,016

 
$
424,878

 
$
855,381

 
$
853,840

Cost of sales and distribution
340,966

 
338,116

 
673,812

 
671,342

Gross Profit
87,050

 
86,762

 
181,569

 
182,498

 
 
 
 
 
 
 
 
Selling and marketing expenses
20,451

 
22,986

 
41,138

 
45,924

General and administrative expenses
29,900

 
28,718

 
59,332

 
58,548

Restructuring charges, net
(188
)
 
(406
)
 
(207
)
 
2,035

Operating Income
36,887

 
35,464

 
81,306

 
75,991

 
 
 
 
 
 
 
 
Interest expense, net
7,436

 
8,943

 
15,524

 
18,368

Other (income) expense, net
(527
)
 
1,112

 
(534
)
 
(325
)
Income Before Income Taxes
29,978

 
25,409

 
66,316

 
57,948

 
 
 
 
 
 
 
 
Income tax expense
7,815

 
6,921

 
17,272

 
14,693

 
 
 
 
 
 
 
 
Net Income
$
22,163

 
$
18,488

 
$
49,044

 
$
43,255

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
 
 
 
Basic
16,919,664

 
17,555,584

 
16,892,267

 
17,544,849

Diluted
16,955,835

 
17,588,449

 
16,932,236

 
17,589,767

 
 
 
 
 
 
 
 
Net earnings per share
 
 
 
 
 
 
 
Basic
$
1.31

 
$
1.05

 
$
2.90

 
$
2.47

Diluted
$
1.31

 
$
1.05

 
$
2.90

 
$
2.46

 
 
 
 
 
 
 
 
See notes to unaudited condensed consolidated financial statements.


4



AMERICAN WOODMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
October 31,
 
October 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
22,163

 
$
18,488

 
$
49,044

 
$
43,255

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Change in pension benefits, net of deferred taxes of $108 and $105, and $215 and $210 for the three and six months ended October 31, 2019 and 2018, respectively
316

 
307

 
631

 
614

 
 
 
 
 
 
 
 
Total Comprehensive Income
$
22,479

 
$
18,795

 
$
49,675

 
$
43,869

 
 
 
 
 
 
 
 
See notes to unaudited condensed consolidated financial statements.


5



AMERICAN WOODMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
(Unaudited)

 
 

 

 

ACCUMULATED  

 
 
 

 

 

OTHER

TOTAL
 
COMMON STOCK

RETAINED

COMPREHENSIVE

SHAREHOLDERS'
(in thousands, except share data)
SHARES

AMOUNT

EARNINGS

LOSS

EQUITY
Balance, May 1, 2018
17,503,922


$
361,158


$
269,576


$
(49,069
)

$
581,665
















Net income




24,767




24,767

Other comprehensive income, 


 

 

 

 
net of tax






307


307

Stock-based compensation


786






786

Exercise of stock-based
 

 

 

 

 
compensation awards, net of amounts






 

 



withheld for taxes
43,048


(1,241
)





(1,241
)
Employee benefit plan
 

 

 

 

 
contributions
41,408


3,623






3,623

Balance, July 31, 2018
17,588,378


$
364,326


$
294,343


$
(48,762
)

$
609,907

 
 
 
 
 
 
 
 
 
 
Net income




18,488




18,488

Other comprehensive income, 


 

 

 

 
net of tax






307


307

Stock-based compensation


836






836

Exercise of stock-based
 

 

 

 

 
compensation awards, net of amounts






 

 



withheld for taxes
5,880









Stock repurchases
(189,633
)

(3,602
)

(9,597
)



(13,199
)
Balance, October 31, 2018
17,404,625


$
361,560


$
303,234


$
(48,455
)

$
616,339
















Balance, May 1, 2019
16,849,026


$
352,424


$
317,420


$
(49,491
)

$
620,353













Net income




26,881




26,881

Other comprehensive income, 








 
net of tax






315


315

Stock-based compensation


897






897

Exercise of stock-based








 
compensation awards, net of amounts












withheld for taxes
20,923


(1,050
)





(1,050
)
Employee benefit plan








 
contributions
45,721


3,772






3,772

Balance, July 31, 2019
16,915,670


$
356,043


$
344,301


$
(49,176
)

$
651,168

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6



Net income




22,163




22,163

Other comprehensive income, 








 
net of tax






316


316

Stock-based compensation


1,178






1,178

Exercise of stock-based








 
compensation awards, net of amounts












withheld for taxes
5,877


83






83

Balance, October 31, 2019
16,921,547


$
357,304


$
366,464


$
(48,860
)

$
674,908

 
 
 
 
 
 
 
 
 
 
See notes to unaudited condensed consolidated financial statements.
 
 





7



AMERICAN WOODMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended
 
October 31,
 
2019

2018
OPERATING ACTIVITIES
 

 
Net income
$
49,044


$
43,255

Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization
48,527


46,726

Net loss on disposal of property, plant and equipment
217


584

Amortization of operating lease right-of-use assets
12,768



Amortization of debt issuance costs
1,316


1,356

Unrealized (gain) loss on foreign exchange forward contracts
(96
)

199

Gain on insurance recoveries


(580
)
Stock-based compensation expense
2,075


1,622

Deferred income taxes
(5,464
)

(4,899
)
Pension contributions in excess of expense
(626
)

(1,989
)
Contributions of employer stock to employee benefit plan
3,772

 
3,623

Other non-cash items
951


(971
)
Changes in operating assets and liabilities:



Customer receivables
5,026


5,434

Income taxes receivable
(1,695
)

22,108

Inventories
(12,123
)

(10,835
)
Prepaid expenses and other assets
(5,634
)

(2,130
)
Accounts payable
673


(2,901
)
Accrued compensation and related expenses
(4,379
)
 
9,101

Operating lease liabilities
(11,783
)


Marketing and other accrued expenses
3,663


(2,036
)
Net cash provided by operating activities
86,232


107,667







INVESTING ACTIVITIES
 

 
Payments to acquire property, plant and equipment
(15,918
)

(14,755
)
Proceeds from sales of property, plant and equipment
313


35

Proceeds from insurance recoveries


580

Acquisition of business, net of cash acquired


(7,182
)
Maturities of certificates of deposit
1,500


5,000

Investment in promotional displays
(4,183
)

(3,395
)
Net cash used by investing activities
(18,288
)

(19,717
)






FINANCING ACTIVITIES
 

 
Payments of long-term debt
(73,198
)

(94,060
)
Proceeds from issuance of common stock
83


500

Repurchase of common stock


(13,199
)
Withholding of employee taxes related to stock-based compensation
(1,050
)

(1,739
)
Net cash used by financing activities
(74,165
)

(108,498
)






Net decrease in cash and cash equivalents
(6,221
)

(20,548
)






Cash and cash equivalents, beginning of period
57,656


78,410








8



Cash and cash equivalents, end of period
$
51,435


$
57,862







Supplemental cash flow information:
 
 
 
     Non-cash investing and financing activities:

 

          Property, plant and equipment included in accounts payable at period end
$
901

 
$
2,619





    Cash paid during the period for:



         Interest
$
15,025


$
19,131

       Income taxes
$
24,573


$
9,976

 
 
 
 
See notes to unaudited condensed consolidated financial statements.




9



AMERICAN WOODMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A--Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended October 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2020.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”).  

Goodwill and Intangible Assets: Goodwill represents the excess of purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. 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 accounting standards, when evaluating goodwill, 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 three- and six-month periods ended October 31, 2019 and 2018.

Intangible assets consist of customer relationship intangibles and trademarks. The Company amortizes the cost of intangible assets over their estimated useful lives, which range from 3 to 6 years, unless such lives are deemed indefinite. There were no impairment charges related to intangible assets for the three- and six-month periods ended October 31, 2019 and 2018.

Foreign Exchange Forward Contracts: In the normal course of business, the Company is subject to risk from adverse fluctuations in foreign exchange rates. The Company manages these risks through the use of foreign exchange forward contracts. The Company recognizes its outstanding forward contracts in the condensed consolidated balance sheets at their fair values. The Company does not designate the forward contracts as accounting hedges. The changes in the fair value of the forward contracts are recorded in other income, net in the condensed consolidated statements of income.

At October 31, 2019, the Company held forward contracts maturing from November 2019 to April 2020 to purchase 228.1 million Mexican pesos at exchange rates ranging from 19.45 to 19.91 Mexican pesos to one U.S. dollar. An asset of $0.1 million is recorded in prepaid expenses and other on the condensed consolidated balance sheets.

Note B--New Accounting Pronouncements
 
In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-02, 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 already commenced. The Company also elected the practical expedients to the new standard without restating comparative prior period financial information and to not recognize ROU assets and liabilities for operating leases with shorter than 12-month terms. On May 1, 2019, the Company recognized operating lease assets and operating lease liabilities of $80.4 million. The new standard did not have a material impact on the Company's results of operations or cash flows, or on its debt covenant calculations. ASU 2016-02 also requires entities to disclose certain qualitative and quantitative information regarding the amount, timing, and uncertainty of cash flows arising from leases. Such disclosures are included in Note P--Leases.

Note C--Net Earnings Per Share
 
The following table sets forth the computation of basic and diluted net earnings per share:

10



 
 
Three Months Ended
 
Six Months Ended
 
 
October 31,
 
October 31,
(in thousands, except per share amounts)
 
2019
 
2018
 
2019
 
2018
Numerator used in basic and diluted net earnings
 
 
 
 
 
 
 
 
per common share:
 
 
 
 
 
 
 
 
Net income
 
$
22,163

 
$
18,488

 
$
49,044

 
$
43,255

Denominator:
 
 
 
 
 
 
 
 
Denominator for basic net earnings per common
 
 
 
 
 
 
 
 
share - weighted-average shares
 
16,920

 
17,556

 
16,892

 
17,545

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options and restricted stock units
 
36

 
32

 
40

 
45

Denominator for diluted net earnings per common
 
 
 
 
 
 
 
 
share - weighted-average shares and assumed
 
 
 
 
 
 
 
 
conversions
 
16,956

 
17,588

 
16,932

 
17,590

Net earnings per share
 
 
 
 
 
 
 
 
Basic
 
$
1.31

 
$
1.05

 
$
2.90

 
$
2.47

Diluted
 
$
1.31

 
$
1.05

 
$
2.90

 
$
2.46



The Company repurchased a total of 189,633 shares of its common stock during the three- and six-month periods ended October 31, 2018, respectively. There were no shares repurchased during the three- and six-month periods ended October 31, 2019. There were no potentially dilutive securities for the three- and six-month periods ended October 31, 2019, which were excluded from the calculation of net earnings per diluted share. An immaterial amount of potentially dilutive securities for the three- and six-month periods ended October 31, 2018 were excluded from the calculation of net earnings per diluted share.

Note D--Stock-Based Compensation
 
The Company has various stock-based compensation plans. During the three months ended October 31, 2019, the Board of Directors of the Company approved grants of 9,600 service-based restricted stock units ("RSUs") to non-employee directors. The service-based RSUs (i) vest daily through the end of the two-year vesting period as long as the recipient continuously remains a member of the Board and (ii) entitle the recipient to receive one share of the Company's common stock per unit vested. During the six-months ended October 31, 2019, the Board of Directors of the Company also approved grants of service-based RSUs and performance-based RSUs to key employees. The employee performance-based RSUs totaled 61,379 units and the employee service-based RSUs totaled 33,091 units. The performance-based RSUs entitle the recipients to receive one share of the Company’s common stock per unit granted if applicable performance conditions are met and the recipient remains continuously employed with the Company until the units vest.  The service-based RSUs entitle the recipients to receive one share of the Company’s common stock per unit granted if they remain continuously employed with the Company until the units vest.  All of the Company’s RSUs granted to employees cliff-vest three years from the grant date.

For the three- and six-month periods ended October 31, 2019 and 2018, stock-based compensation expense was allocated as follows: 
 
 
Three Months Ended 
 October 31,

Six Months Ended 
 October 31,
(in thousands)
 
2019

2018

2019

2018
Cost of sales and distribution
 
$
277

 
$
185

 
$
492

 
$
344

Selling and marketing expenses
 
265

 
217

 
473

 
385

General and administrative expenses
 
636

 
434

 
1,110

 
893

Stock-based compensation expense
 
$
1,178

 
$
836

 
$
2,075

 
$
1,622


 
During the six months ended October 31, 2019, the Company also approved grants of 6,483 cash-settled performance-based restricted stock tracking units ("RSTUs") and 3,482 cash-settled service-based RSTUs for more junior level 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

11



Company's common stock as of the payment date if applicable performance conditions are met and the recipient remains continuously employed with the Company until the units vest.  The service-based RSTUs entitle the recipients to receive a payment in cash equal to the fair market value of a share of the Company's common stock as of the payment date if they remain continuously employed with the Company until the units vest.  All of the RSTUs cliff-vest three years from the grant date.  Since the RSTUs will be settled in cash, the grant date fair value of these awards is recorded as a liability until the date of payment.  The fair value of each cash-settled RSTU award is remeasured at the end of each reporting period and the liability is adjusted, and related expense recorded, based on the new fair value.  The Company recognized expense of $0.2 million and $(0.1) million for the three-month periods ended October 31, 2019 and 2018, respectively, and $0.2 million and $0.2 million for the six-month periods ended October 31, 2019 and 2018, respectively. A liability for payment of the RSTUs is included in the condensed consolidated balance sheets in the amount of $0.6 million and $0.7 million as of October 31, 2019 and April 30, 2019, respectively.

Note E--Customer Receivables
 
The components of customer receivables were: 
 

October 31,

April 30,
(in thousands)

2019

2019
Gross customer receivables

$
127,245


$
132,145

Less:



 
Allowance for doubtful accounts

(471
)

(249
)
Allowance for returns and discounts

(6,656
)

(5,995
)







Net customer receivables

$
120,118


$
125,901

  

Note F--Inventories
 
The components of inventories were: 
 

October 31,

April 30,
(in thousands)

2019

2019
Raw materials

$
50,891


$
46,054

Work-in-process

46,151


43,794

Finished goods

38,909


34,873








Total FIFO inventories

135,951


124,721








Reserve to adjust inventories to LIFO value

(16,193
)

(16,193
)







Total inventories

$
119,758


$
108,528


 
Of the total inventory of $119.8 million at October 31, 2019, $69.5 million is carried under the FIFO method of accounting and $50.3 million is carried under the LIFO method. Of the total inventory of $108.5 million at April 30, 2019, $58.6 million is carried under the FIFO method and $49.9 million is carried under the LIFO method.
 
Note G--Property, Plant and Equipment

The components of property, plant and equipment were:

12



 
 
October 31,

April 30,
(in thousands)
 
2019

2019
Land
 
$
4,431


$
4,751

Buildings and improvements
 
114,794


114,421

Buildings and improvements - finance leases
 
11,202


11,202

Machinery and equipment
 
304,075


294,993

Machinery and equipment - finance leases
 
30,649


30,574

Construction in progress
 
12,641


7,002


 
477,792


462,943

Less accumulated amortization and depreciation
 
(270,893
)

(254,680
)

 





Total
 
$
206,899


$
208,263



Amortization and depreciation expense on property, plant and equipment amounted to $9.2 million and $9.0 million for the three months ended October 31, 2019 and 2018, respectively, and $18.3 million and $17.8 million for the six months ended October 31, 2019 and 2018, respectively. Accumulated amortization on finance leases included in the above table amounted to $31.4 million and $30.8 million as of October 31, 2019 and April 30, 2019, respectively.

Note H--Intangibles

The components of customer relationship intangibles were:
 
 
October 31,

April 30,
(in thousands)
 
2019

2019
Customer relationship intangibles
 
$
274,000


$
274,000

Less accumulated amortization
 
(83,722
)

(60,889
)

 





Total
 
$
190,278


$
213,111


The components of trademarks were:
 
 
October 31,

April 30,
(in thousands)
 
2019

2019
Trademarks
 
$
10,000


$
10,000

Less accumulated amortization
 
(6,111
)

(4,445
)

 





Total
 
$
3,889


$
5,555



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 for the three months ended October 31, 2019 and 2018 was $12.3 million and $12.2 million, respectively, and $24.5 million and $24.5 million for the six months ended October 31, 2019 and 2018, respectively.

Note I--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.
 

13



The following is a reconciliation of the Company’s warranty liability, which is included in other accrued expenses on the balance sheet: 
 

Six Months Ended
 

October 31,
(in thousands)

2019

2018
Beginning balance at May 1

$
4,616


$
4,045

Accrual

12,539


13,205

Settlements

(12,294
)

(12,604
)







Ending balance at October 31

$
4,861


$
4,646



Note J--Pension Benefits
 
Effective April 30, 2012, the Company froze all future benefit accruals under the Company’s hourly and salary defined-benefit pension plans.
 
Net periodic pension benefit cost consisted of the following for the three- and six-month periods ended October 31, 2019 and 2018
 

Three Months Ended

Six Months Ended
 

October 31,

October 31,
(in thousands)

2019

2018

2019

2018
Interest cost

$
1,494


$
1,568


$
2,987


$
3,135

Expected return on plan assets

(2,082
)

(2,128
)

(4,163
)

(4,255
)
Recognized net actuarial loss

423


412


846


824














Net periodic pension benefit

$
(165
)

$
(148
)

$
(330
)

$
(296
)

 
The Company expects to contribute a total of $0.5 million to its pension plans in fiscal 2020, which represents discretionary funding. As of October 31, 2019, $0.3 million of contributions had been made. The Company made contributions of $7.3 million to its pension plans in fiscal 2019. 

Note K--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’s cash equivalents are invested in money market funds, mutual funds and certificates of deposit.  The Company’s mutual fund investment assets represent contributions made and invested on behalf of the Company’s named executive officers in a supplementary employee retirement plan.

Level 2- Investments with observable inputs other than Level 1 prices, such as: quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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 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, certificates of deposit, accounts receivable and payable and short-term debt on the condensed 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

14



information available in publicly quoted markets. The following table summarizes the fair value of assets and liabilities that are recorded in the Company’s consolidated financial statements as of October 31, 2019 and April 30, 2019 at fair value on a recurring basis (in thousands):
 

Fair Value Measurements
 

As of October 31, 2019
 

Level 1

Level 2

Level 3
ASSETS:

 

 

 
Mutual funds

$
790


$


$

Foreign exchange forward contracts



96



Total assets at fair value

$
790


$
96


$











 

As of April 30, 2019
 

Level 1

Level 2

Level 3
ASSETS:

 

 

 
Certificates of deposit

$
1,500


$


$

Mutual funds

1,604





Total assets at fair value

$
3,104


$


$



There were no transfers between Level 1, Level 2 or Level 3 for assets measured at fair value on a recurring basis.

Note L--Loans Payable and Long-Term Debt

On December 29, 2017, the Company entered into a credit agreement (as subsequently amended, the "Credit Agreement") with a syndicate of lenders and Wells Fargo Bank, National Association, 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 million5-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"). The Company borrowed the entire $250 million available under each of the Initial Term Loan and the Delayed Draw Term Loan on December 29, 2017 and February 12, 2018, respectively, in connection with its acquisition of RSI Home Products, Inc. (“RSI”) and subsequent refinancing of RSI’s debt. The Company is required to make specified quarterly installments on both the Initial Term Loan and the Delayed Draw Loan. As of October 31, 2019, $134 million was outstanding on each of the Initial Term Loan and the Delayed Draw Loan for a total of $268 million. As of April 30, 2019, $170 million was outstanding on each of the Initial Term Loan and the Delayed Draw Loan for a total of $340 million. The outstanding balance approximates fair value as the Initial Term Loan and Delayed Draw Term Loan have a floating interest rate. There were no amounts outstanding on the Revolving Facility as of October 31, 2019 or April 30, 2019. The Credit Facilities mature on December 29, 2022.

Amounts outstanding under the Credit Facilities bear interest based on a fluctuating rate measured by reference to either, at the Company’s option, a base rate plus an applicable margin or LIBOR plus an applicable margin, with the applicable margin being determined by reference to the Company’s then-current “Total Funded Debt to EBITDA Ratio.” The Company 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.” In addition, a letter of credit fee will accrue on the face amount of any outstanding letters of credit at a per annum rate equal to the applicable margin on LIBOR loans, payable quarterly in arrears. As of October 31, 2019, the applicable margin with respect to base rate loans and LIBOR loans was 0.50% and 1.50%, respectively, and the commitment fee was 0.18%.

The Credit Agreement includes certain financial covenants, including a maximum “Total Funded Debt to EBITDA Ratio” as of the last day of any fiscal quarter ending through January 31, 2020 of no more than 3.50 to 1.00 and thereafter, of no more than 3.25 to 1.00 (with an increase to 3.75 to 1.00 for a certain period upon the consummation of a “Qualified Acquisition”). The Company is also required to maintain a “Fixed Charge Coverage Ratio” of no less than 1.25 to 1.00. 

The 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, dispose of its assets or engage in a merger or another 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 also restrict the Company’s ability to make certain

15



investments and to make certain restricted payments, including the payment of dividends and repurchase of common stock, in certain limited circumstances. The Company is, however, permitted to make unlimited investments so long as the “Total Funded Debt to EBITDA Ratio” is less than or equal to 3.00 to 1.00 after giving effect to any such investment and no default or event of default has occurred and is continuing or would result from any such investment. The Company is also permitted to make (i) unlimited restricted payments so long as the “Total Funded Debt to EBITDA Ratio” would be less than or equal to 2.75 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) 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.
 
As of October 31, 2019, the Company was in compliance with the covenants included in the Credit Agreement.

The Company’s obligations under the Credit Agreement are guaranteed by the Company’s subsidiaries and the obligations of the Company and its subsidiaries are secured by a pledge of substantially all of their respective personal property.

On February 12, 2018, the Company issued $350 million in aggregate principal amount of 4.875% Senior Notes due 2026 (the “Senior Notes”). The Senior Notes mature on March 15, 2026 and interest on the Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The Senior Notes are fully and unconditionally guaranteed by each of the Company’s current and future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Credit Agreement. The indenture governing the Senior Notes restricts the ability of the Company and the Company’s “restricted subsidiaries” to, as applicable, (i) incur additional indebtedness or issue certain preferred shares, (ii) create liens, (iii) pay dividends, redeem or repurchase stock or make other distributions or restricted payments, (iv) make certain investments, (v) create restrictions on the ability of the “restricted subsidiaries” to pay dividends to the Company or make other intercompany transfers, (vi) transfer or sell assets, (vii) merge or consolidate with a third party and (viii) enter into certain transactions with affiliates of the Company, subject, in each case, to certain qualifications and exceptions as described in the indenture. As of October 31, 2019, the Company and its restricted subsidiaries were in compliance with all covenants under the indenture governing the Senior Notes.

At October 31, 2019, the book value of the Senior Notes was $350 million and the fair value was $357 million, based on Level 1 inputs.

Note M--Income Taxes

The effective income tax rate for the three- and six-month periods ended October 31, 2019 was 26.1% and 26.0%, respectively, compared with 27.2% and 25.4% in the comparable periods in the prior fiscal year. The decrease in the effective tax rate for the second quarter as compared to the comparable period in the prior fiscal year was primarily due to less unfavorable permanent tax items. The overall increase in the effective tax rate for the first half of fiscal 2020 as compared to the comparable period in the prior year was primarily due to a decrease in the benefit from stock-based compensation transactions. During the first half of fiscal 2020 and 2019, the Company recognized an excess tax benefit related to stock-based compensation transactions of $0.1 million and $0.7 million, respectively.

Note N--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 three- and six-months ended October 31, 2019 and 2018:


Three Months Ended

Six months ended


October 31,

October 31,
(in thousands)

2019

2018

2019

2018
Home center retailers

$
189,148


$
196,542


$
387,899


$
401,591

Builders

184,755


169,596