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 July 31, 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)

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 August 30, 2021, 16,568,254 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)
	Condensed Consolidated Balance Sheets as of July 31, 2021 and April 30, 2021	3
	Condensed Consolidated Statements of Income--Three months ended July 31, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income--Three months ended July 31, 2021 and 2020	5
	Condensed Consolidated Statements of Shareholders' Equity--Three months ended July 31, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows--Three months ended July 31, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements--July 31, 2021	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
SIGNATURES		31

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) 

	July 31, 2021		April 30, 2021 As Adjusted
ASSETS
Current assets
Cash and cash equivalents	$	27,818	$	91,071
Customer receivables, net	130,736		146,866
Inventories	181,794		158,167
Prepaid expenses and other	15,072		13,861
Total current assets	355,420		409,965
Property, plant and equipment, net	206,932		204,002
Operating lease right-of-use assets	120,703		123,118
Customer relationship intangibles, net	110,361		121,778
Goodwill	767,612		767,612
Promotional displays, net	14,790		14,554
Deferred income taxes	1,557		1,118
Other assets	12,210		12,252
TOTAL ASSETS	$	1,589,585	$	1,654,399
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	87,214	$	91,622
Current maturities of long-term debt	2,131		8,322
Short-term lease liability - operating	20,635		19,994
Accrued compensation and related expenses	48,039		58,577
Accrued marketing expenses	18,769		20,019
Other accrued expenses	22,029		21,913
Total current liabilities	198,817		220,447
Long-term debt, less current maturities	491,412		513,450
Deferred income taxes	43,448		42,891
Long-term lease liability - operating	106,917		109,628
Other long-term liabilities	11,890		11,745
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 July 31, 2021: 16,561,054; at April 30, 2021: 16,801,101	359,732		362,524
Retained earnings	432,137		448,282
Accumulated other comprehensive loss	(54,768)		(54,568)
Total shareholders' equity	737,101		756,238
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,589,585	$	1,654,399
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
	July 31,
	2021		2020 As Adjusted
Net sales	$	442,581	$	390,087
Cost of sales and distribution	389,138		310,520
Gross Profit	53,443		79,567
Selling and marketing expenses	22,987		19,898
General and administrative expenses	23,687		29,983
Restructuring charges, net	313		3,460
Operating Income	6,456		26,226
Interest expense, net	2,173		6,030
Other (income) expense, net	73		(1,688)
Income Before Income Taxes	4,210		21,884
Income tax expense	1,229		5,825
Net Income	$	2,981	$	16,059
Weighted Average Shares Outstanding
Basic	16,660,833		16,936,832
Diluted	16,716,167		17,013,444
Net earnings per share
Basic	$	0.18	$	0.95
Diluted	$	0.18	$	0.94
See notes to unaudited condensed consolidated financial statements.

4

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	Three Months Ended
	July 31,
	2021		2020 As Adjusted
Net income	$	2,981	$	16,059
Other comprehensive income, net of tax:
Change in pension benefits, net of deferred taxes of $126 and $113 for the three months ended July 31, 2021 and 2020, respectively	373		327
Change in cash flow hedges (swap)	(573)		—
Total Comprehensive Income	$	2,781	$	16,386
See notes to unaudited condensed consolidated financial statements.

5

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

(Unaudited)

						ACCUMULATED		TOTAL
				RETAINED		OTHER		SHAREHOLDERS'
	COMMON STOCK			EARNINGS		COMPREHENSIVE		EQUITY
(in thousands, except share data)	SHARES	AMOUNT		As Adjusted		LOSS		As Adjusted
Balance, April 30, 2020	16,926,537	$	359,430	$	403,193	$	(51,173)	$	711,450
Net income	—	—		16,059		—		16,059
Other comprehensive income,
net of tax	—	—		—		327		327
Stock-based compensation	—	961		—		—		961
Exercise of stock-based
compensation awards, net of amounts
withheld for taxes	16,212	(534)		—		—		(534)
Employee benefit plan
contributions	45,591	3,743		—		—		3,743
Balance, July 31, 2020	16,988,340	$	363,600	$	419,252	$	(50,846)	$	732,006
Balance, April 30, 2021	16,801,101	$	362,524	$	448,282	$	(54,568)	$	756,238
Net income	—	—		2,981		—		2,981
Other comprehensive income,
net of tax	—	—		—		(200)		(200)
Stock-based compensation	—	1,177		—		—		1,177
Exercise of stock-based
compensation awards, net of amounts
withheld for taxes	20,243	(1,033)		—		—		(1,033)
Stock repurchases	(299,781)	(5,874)		(19,126)		—		(25,000)
Employee benefit plan
contributions	39,491	2,938		—		—		2,938
Balance, July 31, 2021	16,561,054	$	359,732	$	432,137	$	(54,768)	$	737,101
See notes to unaudited condensed consolidated financial statements.

6

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months Ended
	July 31,
	2021		2020 As Adjusted
OPERATING ACTIVITIES
Net income	$	2,981	$	16,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,442		26,352
Net loss on disposal of property, plant and equipment	115		46
Reduction in the carrying amount of operating lease right-of-use assets	6,955		6,706
Amortization of debt issuance costs	217		630
Unrealized (gain) loss on foreign exchange forward contracts	(350)		1,255
Stock-based compensation expense	1,177		961
Deferred income taxes	(24)		(3,000)
Pension contributions and related (income) expense	305		(502)
Contributions of employer stock to employee benefit plan	2,938		3,743
Other non-cash items	(961)		750
Changes in operating assets and liabilities:
Customer receivables	16,644		(17,524)
Inventories	(23,532)		(14,968)
Prepaid expenses and other assets	(1,751)		(465)
Accounts payable	(4,560)		5,979
Accrued compensation and related expenses	(10,538)		(371)
Income taxes payable	326		7,855
Operating lease liabilities	(6,610)		(6,142)
Marketing and other accrued expenses	(1,186)		12,636
Net cash provided by operating activities	6,588		40,000
INVESTING ACTIVITIES
Payments to acquire property, plant and equipment	(11,871)		(5,183)
Proceeds from sales of property, plant and equipment	5		6
Investment in promotional displays	(2,840)		(2,659)
Net cash used by investing activities	(14,706)		(7,836)
FINANCING ACTIVITIES
Payments of long-term debt	(29,105)		(634)
Repurchase of common stock	(25,000)		—
Withholding of employee taxes related to stock-based compensation	(1,033)		(534)
Debt issuance cost	3		—
Net cash used by financing activities	(55,135)		(1,168)
Net increase (decrease) in cash and cash equivalents	(63,253)		30,996

7

	Three Months Ended
	July 31,
	2021		2020 As Adjusted
Cash and cash equivalents, beginning of period	91,071		97,059
Cash and cash equivalents, end of period	$	27,818	$	128,055
Supplemental cash flow information:
Non-cash investing and financing activities:
Property, plant and equipment included in accounts payable at period end	$	152	$	502
Cash paid during the period for:
Interest	$	2,139	$	1,195
Income taxes	$	991	$	974
See notes to unaudited condensed consolidated financial statements.

8

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 three-month period ended July 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2022.  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, 2021 filed with the U.S. Securities and Exchange Commission ("SEC").  

COVID-19: COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of the long-term effects are currently unknown. 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, as well as pricing related to the aforementioned items.

Inventories:  Effective May 1, 2021, the Company changed its accounting method for inventory valuation for inventories which previously utilized a last-in, first-out ("LIFO") basis to a first-in, first-out ("FIFO") basis. As of July 31, 2021 and April 30, 2021, inventories accounted for under the LIFO method would have represented approximately 43% of the Company's total inventories during each of the respective periods. We believe this change in accounting method is preferable as it: (i) results in a uniform method to value our inventory across the entire organization; (ii) improves comparability with our peers; (iii) is expected to better reflect the current value of inventory on the consolidated balance sheets and would result in a better matching of revenue and expense, and (iv) is reflective of the physical flow of inventory.

All prior periods presented in the Condensed Consolidated Financial Statements have been retrospectively adjusted to apply the effects of the change in accounting method from the LIFO method to FIFO method of accounting. As of April 30, 2021, the cumulative effect of the change increased inventories by $17.9 million, partially offset by $4.5 million in deferred income taxes resulting in an impact to retained earnings of approximately $13.3 million. There was no impact on total cash provided by operating activities for the periods presented as a result of this change. The impact of the change in accounting method to net earnings was $1.6 million for the three months ended July 31, 2021.

As a result of the change in accounting method, the Company now uses the FIFO method of inventory costing across the entire organization. Costs include materials, labor, and production overhead at normal production capacity. Costs do not exceed net realizable values. See Note F - Inventories for additional information.

The following tables reflect the effect of the change in accounting method on our current period Condensed Consolidated Financial Statements (in thousands except for per share amounts):

9

Condensed Consolidated Statement of Income for the three months ended July 31, 2021
	As Computed under previous method		Effect of Change		As Reported under FIFO
Cost of sales and distribution	$	391,342	$	(2,204)	$	389,138
Gross Profit	$	51,239	$	2,204	$	53,443
Operating Income	$	4,252	$	2,204	$	6,456
Income Before Income Taxes	$	2,006	$	2,204	$	4,210
Income tax expense	$	654	$	575	$	1,229
Net Income	$	1,352	$	1,629	$	2,981
Net earnings per share, basic	$	0.08	$	0.10	$	0.18
Net earnings per share, diluted	$	0.08	$	0.10	$	0.18

Condensed Consolidated Balance Sheet as of July 31, 2021
	As Computed under previous method		Effect of Change		As Reported under FIFO
Inventories	$	179,590	$	2,204	$	181,794
Total current assets	$	353,216	$	2,204	$	355,420
Total assets	$	1,587,381	$	2,204	$	1,589,585
Other accrued expenses	$	21,454	$	575	$	22,029
Total current liabilities	$	198,242	$	575	$	198,817
Retained earnings	$	430,508	$	1,629	$	432,137
Total shareholders' equity	$	735,472	$	1,629	$	737,101
Total liabilities and shareholders' equity	$	1,587,381	$	2,204	$	1,589,585

Condensed Consolidated Statement of Cash Flows for the three months ended July 31, 2021
	As Computed under previous method		Effect of Change		As Reported under FIFO
Net income	$	1,352	$	1,629	$	2,981
Inventories	$	(21,328)	$	(2,204)	$	(23,532)
Income taxes payable	$	(249)	$	575	$	326

Condensed Consolidated Statement of Stockholders' equity for the three months ended July 31, 2021
	As Computed under previous method		Effect of Change		As Reported under FIFO
Net income	$	1,352	$	1,629	$	2,981
Total shareholders' equity	$	735,472	$	1,629	$	737,101

Condensed Consolidated Statement of Comprehensive income for the three months ended July 31, 2021
	As Computed under previous method		Effect of Change		As Reported under FIFO
Net income	$	1,352	$	1,629	$	2,981
Total Comprehensive Income	$	1,152	$	1,629	$	2,781

As a result of the retrospective application of the change in accounting method, certain line items in our Condensed Consolidated Financial Statements and related notes were adjusted as follows:

10

Condensed Consolidated Statements of Income for the three months ended July 31, 2020
	As Previously Reported		Effect of Change		As Adjusted
Cost of sales and distribution	$	309,949	$	571	$	310,520
Gross Profit	$	80,138	$	(571)	$	79,567
Operating Income	$	26,797	$	(571)	$	26,226
Income Before Income Taxes	$	22,455	$	(571)	$	21,884
Income tax expense	$	5,970	$	(145)	$	5,825
Net Income	$	16,485	$	(426)	$	16,059
Net earnings per share, basic	$	0.97	$	(0.02)	$	0.95
Net earnings per share, diluted	$	0.97	$	(0.03)	$	0.94

Condensed Consolidated Balance Sheet as of April 30, 2021
	As Previously Reported		Effect of Change		As Adjusted
Inventories	$	140,282	$	17,885	$	158,167
Total current assets	$	392,080	$	17,885	$	409,965
Total assets	$	1,636,514	$	17,885	$	1,654,399
Deferred income taxes	$	38,348	$	4,543	$	42,891
Retained earnings	$	434,940	$	13,342	$	448,282
Total shareholders' equity	$	742,896	$	13,342	$	756,238
Total liabilities and shareholders' equity	$	1,636,514	$	17,885	$	1,654,399

Condensed Consolidated Statement of Cash Flows for the three months ended July 31, 2020
	As Previously Reported		Effect of Change		As Adjusted
Net income	$	16,485	$	(426)	$	16,059
Deferred income taxes	$	(2,855)	$	(145)	$	(3,000)
Inventories	$	(15,539)	$	571	$	(14,968)

Condensed Consolidated Statement of Stockholders' equity for the three months ended July 31, 2020
	As Previously Reported		Effect of Change		As Adjusted
Net income	$	16,485	$	(426)	$	16,059
Total shareholders' equity	$	721,520	$	10,486	$	732,006

Condensed Consolidated Statement of Comprehensive income for the three months ended July 31, 2020
	As Previously Reported		Effect of Change		As Adjusted
Net income	$	16,485	$	(426)	$	16,059
Total comprehensive income	$	16,812	$	(426)	$	16,386

Condensed Consolidated Statement of Stockholders' equity for the year ended April 31, 2020
	As Previously Reported		Effect of Change		As Adjusted
Retained earnings as of April 30, 2020	$	392,281	$	10,912	$	403,193
Total shareholders' equity as of April 30,2020	$	700,538	$	10,912	$	711,450

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

11

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-month periods ended July 31, 2021 and 2020.

Intangible assets consist of customer relationship intangibles. The Company amortizes the cost of intangible assets over their estimated useful lives, six years, unless such lives are deemed indefinite. There were no impairment charges related to intangible assets for the three-month periods ended July 31, 2021 and 2020.

Derivative Financial Instruments: The Company uses derivatives as part of the normal business operations to manage its exposure to fluctuations in interest rates associated with variable interest rate debt and foreign exchange rates. The Company has established policies and procedures that govern the risk management of these exposures. The primary objective in managing these exposures is to decrease the volatility of cash flows affected by changes in interest rates.

The Company uses interest rate swap contracts to manage interest rate exposures. Derivatives are recorded in the condensed consolidated balance sheets at fair value. Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income, and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. If a derivative is deemed to be ineffective, the change in fair value of the derivative is recognized directly in earnings.

The Company also manages 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) expense, net in the condensed consolidated statements of income.

Note B--New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("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 accounting for reference rate reform. ASU 2020-04 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 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 ASU 2020-04 to have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB 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 investments, performing intraperiod tax allocations and calculating income taxes in interim periods. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 was effective for the Company beginning May 1, 2021. The Company has reviewed the provisions of the pronouncement and the adoption of this guidance did not have an impact on the Company's financial position or results of operations.

Note C--Net Earnings Per Share

The following table sets forth the computation of basic and diluted net earnings per share:

12

	Three Months Ended
	July 31,
(in thousands, except per share amounts)	2021		2020 As Adjusted
Numerator used in basic and diluted net earnings
per common share:
Net income	$	2,981	$	16,059
Denominator:
Denominator for basic net earnings per common
share - weighted-average shares	16,661		16,937
Effect of dilutive securities:
Stock options and restricted stock units	55		77
Denominator for diluted net earnings per common
share - weighted-average shares and assumed
conversions	16,716		17,013
Net earnings per share
Basic	$	0.18	$	0.95
Diluted	$	0.18	$	0.94

There were no potentially dilutive securities for the three-month periods ended July 31, 2021 and 2020, which 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 July 31, 2021, the Board of Directors of the Company approved grants of service-based restricted stock units ("RSUs") and performance-based RSUs to key employees. The performance-based RSUs totaled 57,476 units and the service-based RSUs totaled 30,984 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-month periods ended July 31, 2021 and 2020, stock-based compensation expense was allocated as follows: 

	Three Months Ended    July 31,
(in thousands)	2021		2020
Cost of sales and distribution	$	349	$	299
Selling and marketing expenses	319		(21)
General and administrative expenses	509		683
Stock-based compensation expense	$	1,177	$	961

During the three months ended July 31, 2021, the Company also approved grants of 5,794 cash-settled performance-based restricted stock tracking units ("RSTUs") and 3,096 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 one share of the Company's common stock as of the payment date if applicable performance conditions are met and the recipient remains continuously employed with the Company until the units vest.  The service-based RSTUs entitle the recipients to receive a payment in cash equal to the fair market value of one 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

13

adjusted, and related expense recorded, based on the new fair value.  The Company recognized expense of $0.1 million and $0.3 million for the three-month periods ended July 31, 2021 and 2020, respectively. A liability for payment of the RSTUs is included in "Other long-term liabilities" on the condensed consolidated balance sheets in the amount of $0.6 million and $1.0 million as of July 31, 2021 and April 30, 2021, respectively.

Note E--Customer Receivables

The components of customer receivables were: 

	July 31,		April 30,
(in thousands)	2021		2021
Gross customer receivables	$	139,498	$	156,187
Less:
Allowance for doubtful accounts	(220)		(331)
Allowance for returns and discounts	(8,542)		(8,990)
Net customer receivables	$	130,736	$	146,866

Note F--Inventories

The components of inventories were: 

	July 31,		April 30,
(in thousands)	2021		2021 As Adjusted
Raw materials	$	80,700	$	63,384
Work-in-process	55,875		51,176
Finished goods	45,219		43,607
Total inventories	$	181,794	$	158,167

Effective May 1, 2021, the Company changed its accounting principle for inventory valuation from a LIFO basis to a FIFO basis. See Note A - Basis of Presentation for additional information on the effect of the change.

Note G--Property, Plant and Equipment

The components of property, plant and equipment were:

	July 31,		April 30,
(in thousands)	2021		2021
Land	$	4,431	$	4,431
Buildings and improvements	116,851		116,103
Buildings and improvements - finance leases	11,636		11,636
Machinery and equipment	318,651		315,371
Machinery and equipment - finance leases	31,912		31,386
Construction in progress	30,150		22,669
	513,631		501,596
Less accumulated amortization and depreciation	(306,699)		(297,594)
Total	$	206,932	$	204,002

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Amortization and depreciation expense on property, plant and equipment amounted to $9.6 million and $11.6 million for the three months ended July 31, 2021 and 2020, respectively. The three months ended July 31, 2020 includes accelerated depreciation expense of $1.1 million related to the closure of the plant located in Humboldt, Tennessee. Accumulated amortization on finance leases included in the above table amounted to $33.5 million and $33.0 million as of July 31, 2021 and April 30, 2021, respectively.

Note H--Intangibles

The customer relationship intangibles were:

	July 31,		April 30,
(in thousands)	2021		2021
Customer relationship intangibles	$	274,000	$	274,000
Less accumulated amortization	(163,639)		(152,222)
Total	$	110,361	$	121,778

Customer relationship intangibles are amortized over the estimated useful lives on a straight-line basis over six years. Amortization expense for the three-month periods ended July 31, 2021 and 2020 was $11.4 million and $12.3 million, 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.

The following is a reconciliation of the Company's warranty liability, which is included in other accrued expenses on the unaudited condensed consolidated balance sheets: 

	Three Months Ended
	July 31,
(in thousands)	2021		2020
Beginning balance at May 1	$	5,249	$	3,753
Accrual	4,814		4,303
Settlements	(4,559)		(4,138)
Ending balance at July 31	$	5,504	$	3,918

Note J--Pension Benefits

Prior to April 30, 2020, the Company had two defined benefit pension plans covering many of the Company's employees hired prior to April 30, 2012. Effective April 30, 2012, the Company froze all future benefit accruals under the Company's defined-benefit pension plan. 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 American Woodmark Corporation Employee Pension Plan (the "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 Plan, of which $0.2 million was incurred in the first three months of fiscal 2022 and $0.4 million was incurred in all of fiscal 2021. In connection with the Plan termination and in addition to the Plan termination costs, the Company may be required to make an additional funding contribution to the Plan in order to ensure the 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.

15

Net periodic pension benefit cost consisted of the following for the three-month periods ended July 31, 2021 and 2020: 

	Three Months Ended
	July 31,
(in thousands)	2021		2020
Interest cost	$	1,349	$	1,165
Expected return on plan assets	(1,543)		(2,107)
Recognized net actuarial loss	499		440
Net periodic pension benefit	$	305	$	(502)

The Company did not contribute to the Plan in the first three months of fiscal 2022 and expects to contribute $2.5 million during the remainder of fiscal 2022. The Company made no contributions to the Plan in fiscal 2021. 

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; interest rate swap and foreign exchange forward contracts; and short- and long-term debt. The carrying values of cash and equivalents, 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 interest rate swap and foreign exchange 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's consolidated financial statements as of July 31, 2021 and April 30, 2021 at fair value on a recurring basis (in thousands):

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	Fair Value Measurements
	As of July 31, 2021
	Level 1		Level 2		Level 3
ASSETS:
Mutual funds	$	503	$	—	$	—
Foreign exchange forward contracts	—		350		—
Total assets at fair value	$	503	$	350	$	—
LIABILITIES:
Interest rate swap contracts	$	—	$	573	$	—
	As of April 30, 2021
	Level 1		Level 2		Level 3
ASSETS:
Mutual funds	$	642	$	—	$	—

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 (the "Prior Credit Agreement") with a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent. The Prior Credit Agreement provided for a $100 million revolving loan facility with a $25 million sub-facility for the 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 entire $250 million available under the 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 its acquisition of RSI Home Products, Inc. ("RSI") and subsequent refinancing of RSI's debt. The facilities under the Prior Credit Agreement were scheduled to mature on December 29, 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 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 redemption of the Senior Notes (as defined below). 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.

As of July 31, 2021 and April 30, 2021, $237.5 million and $250 million, respectively, was outstanding on the Term Loan Facility. As of July 31, 2021 and April 30, 2021, $248 million and $264 million, respectively, was outstanding under the Revolving Facility. Outstanding letters of credit under the Revolving Facility were $9 million as of July 31, 2021, leaving approximately $243 million in available capacity under the Revolving Facility as of July 31, 2021. 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, 2021. The outstanding balances noted above approximate fair value as the facilities have a floating interest rate.

Amounts outstanding under the Term Loan Facility and the Revolving Facility bear interest based on a fluctuating rate measured by reference to either, at the Company's option, a base rate plus an applicable margin or LIBOR plus an applicable margin, with the applicable margin being determined by reference to the Company's then-current "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's then-current "Secured Net Leverage Ratio." In addition, a letter of credit fee accrues 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 July 31, 2021, the applicable margin with respect to base rate loans and LIBOR loans was 0.25% and 1.25%, respectively, and the commitment fee was 0.125%. The A&R Credit Agreement includes provisions providing for the transition from LIBOR to a replacement benchmark upon the

17

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 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 its subsidiaries to incur additional indebtedness, create additional liens on its assets, make certain investments, dispose of its assets, or engage in a merger or other similar transaction, or engage in transactions with affiliates, subject, in each case, to the various exceptions and conditions described in the A&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 repurchase of common stock, in certain limited circumstances.

As of July 31, 2021, the Company was in compliance with all covenants included in the A&R Credit Agreement.

The Company's obligations under the A&R Credit Agreement are guaranteed by the Company'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.

On February 12, 2018, the Company issued $350 million in aggregate principal amount of 4.875% Senior Notes due 2026 (the "Senior Notes") and utilized the proceeds, together with the proceeds from the delayed draw term loan under the Prior Credit Agreement, to refinance certain senior notes assumed from the acquisition of RSI. The Senior Notes were guaranteed by the Company's domestic subsidiaries and were scheduled to mature March 15, 2026. On April 26, 2021, the Company redeemed in full the Senior Notes at a redemption price equal to 102.438% of the principal amount of the Senior Notes, plus accrued and unpaid interest to the redemption date.

Note M--Derivative Financial Instruments

Interest Rate Swap Contracts

The Company enters into interest rate swap contracts to manage variability in the amount of known or expected cash payments related to portions of its variable rate debt. On May 28, 2021, the Company entered into four interest rate swaps with an aggregate notional amount of $200 million to hedge part of the variable rate interest payments under the Term Loan Facility. The interest rate swaps became effective on May 28, 2021 and will terminate on May 30, 2025. The interest rate swaps economically convert a portion of the variable rate debt to fixed rate debt. The Company receives floating interest payments monthly based on one-month LIBOR and pays a fixed rate of 0.5980% to the counterparty.

The interest rate swaps are designated as cash flow hedges. Changes in fair value were recorded to other comprehensive income. The risk management objective in using interest rate swaps is to add stability to interest expense and to manage the Company's exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings, as a component of interest expense, net to offset variability in interest expense associated with the underlying debt's cash flows.

During the quarter ended July 31, 2021, unrealized losses of $0.6 million were recorded in other comprehensive income, and $0.2 million of realized losses were reclassified out of accumulated other comprehensive income to interest expense due to payments made to the swap counterparties. As of July 31, 2021, the Company anticipates reclassifying approximately $1.0 million of net hedging losses from accumulated other comprehensive loss into earnings during the next 12 months to offset the variability of the hedged items during this period. Since the Company did not have outstanding interest rate swaps in the prior year period, there were no gains or losses recorded for the quarter ended July 31, 2020.

Foreign Exchange Forward Contracts

At July 31, 2021, the Company held forward contracts maturing from August 2021 to April 2022 to purchase 516.4 million Mexican pesos at exchange rates ranging from 20.32 to 20.91 Mexican pesos to one U.S. dollar. An asset of $0.3 million is recorded in prepaid expenses and other on the condensed consolidated balance sheet.

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Note N--Income Taxes

The effective income tax rate for the three-month period ended July 31, 2021 was 29.2%, compared with 26.6% in the comparable period in the prior fiscal year. The effective rate for the three-month period ending July 31, 2021 was higher than the comparable period in the prior fiscal year due to state income taxes and the impact of discrete items on lower pretax income.

Note O--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-months ended July 31, 2021 and 2020:

	Three Months Ended
	July 31,
(in thousands)	2021		2020
Home center retailers	$	209,324	$	173,995
Builders	178,238		164,348
Independent dealers and distributors	55,019		51,744
Net Sales	$	442,581	$	390,087

Note P--Concentration of Risks

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 with respect to 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 each customer's current and anticipated financial condition. Estimates and assumptions are periodically reviewed and updated. Any resulting adjustments to the allowance are reflected in current operating results.

As of July 31, 2021, the Company's two largest customers, Customers A and B, represented 31.2% and 19.6% of the Company's gross customer receivables, respectively. As of July 31, 2020, Customers A and B represented 29.0% and 25.1% of the Company's gross customer receivables, respectively.

The following table summarizes the percentage of net sales attributable to the Company's two largest customers for the three-months ended July 31, 2021 and 2020:

	Three Months Ended
	July 31,
	2021	2020
Customer A	31.8%	27.7%
Customer B	15.5%	16.9%

Note Q--Leases

Operating Leases - Right-of-Use ("ROU") assets related to operating leases are presented as "Operating lease right-of-use assets" on the unaudited condensed consolidated balance sheets. 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 unaudited condensed consolidated balance sheets.

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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 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 unaudited condensed 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 unaudited condensed consolidated balance sheets.

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:

	Three Months Ended
	July 31,
(in thousands)	2021		2020
Finance lease cost:
Reduction in the carrying value of right-of-use assets	$	287	$	98
Interest on lease liabilities	$	25	$	14
Operating lease cost	$	6,955	$	6,706

Additional information related to leases was as follows:

	Three Months Ended
	July 31,
(in thousands)	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases	$	25		$	14
Operating cash flows for operating leases	$	6,610		$	6,142
Financing cash flows for financing leases	$	279		$	92
Right-of-use assets obtained in exchange for new finance lease liabilities	$	654		$	109
Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,026		$	155
Weighted average remaining lease term (years)
Weighted average remaining lease term - finance leases	2.79			3.22
Weighted average remaining lease term - operating leases	6.39			7.33
Weighted average discount rate
Weighted average discount rate - finance leases	2.94		%	3.08		%
Weighted average discount rate - operating leases	3.19		%	3.54		%

20

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 unaudited condensed consolidated balance sheet as of July 31, 2021:

(in thousands)	Operating leases		Financing leases
Year ending April 30,
2022	$	17,969	$	1,745
2023	23,805		1,962
2024	21,817		1,579
2025	18,529		377
2026	18,296		102
Thereafter	40,956		—
Total lease payments	141,372		5,765
Less imputed interest	(13,820)		(221)
Total lease liability	127,552		5,544
Current maturities	(20,635)		(2,131)
Lease liability - long-term