Note H – Employee Benefit and Retirement Plans

Employee Stock Ownership Plan

In fiscal 1990, the Company instituted the American Woodmark Investment Savings Stock Ownership Plan. Under this plan, all employees who are at least 18 years old and have been employed by the Company for at least six consecutive months are eligible to receive Company stock through a discretionary profit-sharing contribution and a 401(k) matching contribution based upon the employee's contribution to the plan.

Beginning in fiscal 2013, discretionary profit-sharing contributions ranging from 0-5%, based on predetermined net income levels of the Company, may be made annually in the form of Company stock. Prior to fiscal 2013, profit-sharing contributions in the form of Company stock were 3% of after-tax earnings, calculated on a quarterly basis. The Company recognized expenses for profit-sharing contributions of $818,000 and $293,000 in fiscal years 2014 and 2013, respectively. The Company did not make, or recognize any expenses for, discretionary profit-sharing contributions in fiscal 2012.

Beginning in fiscal 2013, as part of the realignment of its retirement plans, the Company increased the match on 401(k) contributions in the form of Company stock to 100% of an employee’s annual contribution to the plan up to 4% of base earnings. Prior to fiscal 2013, the Company matched 401(k) contributions in the form of Company stock at 50% of an employee's annual contribution to the plan up to 4% of base earnings for an effective maximum Company contribution of 2% of base earnings. The expense for 401(k) matching contributions for this plan was $4,054,000, $2,547,000 and $1,284,000, in fiscal years 2014, 2013 and 2012, respectively.

Pension Benefits

The Company has two defined benefit pension plans covering many of the Company’s employees hired prior to April 30, 2012. These plans provide defined benefits based on years of service and final average earnings (for salaried employees) or benefit rate (for hourly employees).

Effective April 30, 2012, the Company froze all future benefit accruals under the Company’s hourly and salaried defined benefit pension plans.

Included in accumulated other comprehensive loss at April 30, 2014 is $42.6 million ($26.0 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 $0.9 million ($0.5 million net of tax) in net actuarial losses in net periodic pension benefit costs during fiscal 2015. The Company uses an April 30 measurement date for its benefit plans.

The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company’s non-contributory defined benefit pension plans as of April 30:


		APRIL 30
(in thousands)		2014		2013

CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of year	$	149,429	$	136,264
Interest cost		6,203		6,261
Actuarial (gains) and losses		(7,615)		10,801
Benefits paid		(3,875)		(3,897)
Projected benefit obligation at end of year	$	144,142	$	149,429

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	95,733	$	85,717
Actual return on plan assets		8,483		8,993
Company contributions		2,258		4,920
Benefits paid		(3,875)		(3,897)
Fair value of plan assets at end of year	$	102,599	$	95,733

Funded status of the plans	$	(41,543)	$	(53,696)
Unrecognized net actuarial loss		42,589		52,703
Prepaid (accrued) benefit cost	$	1,046	$	(993)

AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
Defined benefit pension liabilities	$	(41,543)	$	(53,696)
Accumulated other comprehensive loss		42,589		52,703
Net amount recognized	$	1,046	$	(993)

The accumulated benefit obligation for both pension plans was $144,142,000 and $149,429,000 at April 30, 2014 and 2013, respectively.


		PENSION BENEFITS
(in thousands)		2014		2013		2012

COMPONENTS OF NET PERIODIC PENSION BENEFIT COST
Service cost	$	0	$	0	$	5,305
Interest cost		6,203		6,261		6,533
Expected return on plan assets		(7,113)		(6,563)		(6,533)
Amortization of prior service cost		0		0		53
Curtailment loss		0		0		331
Recognized net actuarial loss		1,129		923		1,710
Pension benefit cost	$	219	$	621	$	7,399

Actuarial Assumptions: The discount rate at April 30 was used to measure the year-end benefit obligations and the earnings effects for the subsequent year. Actuarial assumptions used to determine benefit obligations and earnings effects for the pension plans follow:


	FISCAL YEARS ENDED APRIL 30
	2014		2013
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE BENEFIT OBLIGATIONS
Discount rate	4.56	%	4.21	%


	FISCAL YEARS ENDED APRIL 30
	2014		2013		2012
WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC PENSION BENEFIT COST
Discount rate	4.21	%	4.66	%	5.66%/4.76% 1
Expected return on plan assets	7.5	%	7.5	%	8.0	%
Rate of compensation increase	*		*		4.0	%

1 The discount rate was 5.66% from May 1, 2011 to December 31, 2011 and 4.76% from January 1, 2012 to April 30, 2012. The rate changed during fiscal 2012 as a result of the required re-measurement of the Company's pension liability upon its decision to freeze its pension plans.

* The rate of compensation increase is not applicable for periods beyond April 30, 2012 because the Company froze its pension plans effective as of that date.

In fiscal years 2014, 2013 and 2012, the Company determined the discount rate by referencing the Aon Hewitt AA Bond Universe Yield Curve. The Company believes that using a yield curve approach accurately reflects changes in the present value of liabilities over time since each cash flow is discounted at the rate at which it could effectively be settled.

In developing the expected long-term rate of return assumption for the assets of the defined benefit pension plans, the Company evaluated input from its third party pension plan asset managers, including their review of asset class return expectations and long-term inflation assumptions. The Company also considered the related historical ten-year average asset returns at April 30, 2014.

The Company amortizes experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over the average remaining lifetime of the active participants.

Contributions: The Company funds the pension plans in amounts sufficient to meet minimum funding requirements under applicable employee benefit and tax laws plus additional amounts the Company deems appropriate.

The Company expects to contribute $4.3 million to its pension plans in fiscal 2015. The Company made contributions of $2.3 million and $4.9 million to its pension plans in fiscal 2014 and 2013, respectively.

Estimated Future Benefit Payments: The following benefit payments, which reflect expected future service, are expected to be paid:


FISCAL YEAR	BENEFIT PAYMENTS (in thousands)

2015	$	4,719
2016		5,135
2017		5,452
2018		5,818
2019		6,283
Years 2020-2024		37,021

Plan Assets: Pension assets by major category and the type of fair value measurement as of April 30, 2014 and 2013 are presented in the following tables:


FAIR VALUE MEASUREMENTS AT APRIL 30, 2014
(in thousands)	TOTAL		QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1)		SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Cash Equivalents	$	338	$	338	$	0	$	0
Equity Collective Funds:1
Equity Index Value Fund		20,753		0		20,753		0
Equity Index Growth Fund		20,485		0		20,485		0
Small Cap Index Fund		5,929		0		5,929		0
International Equity Fund		4,166		0		4,166		0
Fixed Income Collective Funds:1
Core Fixed Income Fund		33,409		0		33,409		0
Capital Preservation Fund		17,519		0		17,519		0
Total	$	102,599	$	338	$	102,261	$	0

FAIR VALUE MEASUREMENTS AT APRIL 30, 2013
(in thousands)	TOTAL		QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1)		SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Cash Equivalents	$	315	$	315	$	0	$	0
Equity Collective Funds:1
Equity Index Value Fund		19,202		0		19,202		0
Equity Index Growth Fund		19,245		0		19,245		0
Small Cap Index Fund		5,632		0		5,632		0
International Equity Fund		3,932		0		3,932		0
Fixed Income Collective Funds:1
Core Fixed Income Fund		30,000		0		30,000		0
Capital Preservation Fund		17,407		0		17,407		0
Total	$	95,733	$	315	$	95,418	$	0

1 The Collective Trust Funds are valued by applying each plan's ownership percentage in the fund to the fund's net assets at fair value at the valuation date.

Investment Strategy: The Company has established formal investment policies for the assets associated with its pension plans. The objectives of the investment strategies include preservation of capital and long-term growth of capital while avoiding excessive risk. Target allocation percentages are established at an asset class level by the Company’s Pension Committee. Target allocation ranges are guidelines, not limitations, and the Pension Committee may approve allocations above or below a target range.

During a period of uncertainty in the equity and fixed income markets, the Pension Committee may suspend the Target Asset Allocation and manage the investment mix as it sees reasonable, prudent and in the best interest of the plans to better protect the value of the plan assets.

The Company’s pension plans’ weighted-average asset allocations at April 30, 2014 and 2013, by asset category, were as follows:


	PLAN ASSET ALLOCATION
	2014		2014		2013
APRIL 30	TARGET		ACTUAL		ACTUAL

Equity Funds	50.0	%	50.0	%	50.2	%
Fixed Income Funds	50.0	%	50.0	%	49.8	%

Total	100.0	%	100.0	%	100.0	%

Within the broad categories outlined in the preceding table, the Company has targeted the following specific allocations as a percentage of total funds invested: 17% Capital Preservation, 33% Bond, 20% Large Capital Growth, 20% Large Capital Value, 6% Small Capital and 4% International.