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American Woodmark Corporation Announces Capacity Reductions & Cost Savings

Regarding the Oklahoma facility, Guichard noted, "Since the Tahlequah Plant was idled in 2009, we have continued to press forward with improvements in our manufacturing value streams.  As a result, the effective capacity potential of our remaining four assembly plants has increased to the point that the Tahlequah plant will not be needed in any projected market or volume scenario.  Accordingly, we will pursue an orderly sale of the property." 

In addition to the realignment of the manufacturing network, the Company will adjust the overall retirement program offered to all employees.  Changes include freezing the defined benefit pension plans, increasing the Company match within the 401(k) plan, and enhancing the profit sharing plan.

Addressing the changes to the retirement program, Guichard commented, "Traditional defined benefit pension plans have become increasingly difficult to economically maintain due to changes in accounting treatment and funding requirements.  There has been a dramatic shift from these plans to defined contribution plans, placing the Company at a cost disadvantage.  These moves will align us with the market and ultimately make us more competitive."

Guichard continued, "We recognize our role in helping employees prepare for retirement.  By enriching our defined contribution plan, we will continue to help our employees plan, prepare, and fund their retirement.  We believe our entire slate of employee benefits will continue to support our efforts to hire and retain outstanding individuals in pursuit of our Vision."

The Company presently estimates total pre-tax costs associated with these actions of approximately $18.0 million to $20.0 million ( $11.0 million to $12.5 million net of tax), including approximately $11.0 million to $13.0 million of non-cash charges.  The Company expects to recognize substantially all these charges during its third fiscal quarter ending January 31, 2012.  Once all actions have been completed, the Company expects to realize ongoing annual cost savings of approximately $16.5 million to $18.5 million.

Summarizing these decisions, Guichard concluded, "While we continue to believe strongly in the long term future of housing, the current market conditions remain challenging.  We continue to make choices, sometimes difficult choices, in the best interests of our long term stakeholders.  In this environment, we place a high priority on maintaining the financial strength of the Company.  Our balance sheet remains outstanding with low debt and significant cash reserves that provide a high degree of liquidity.  We have consistently generated positive cash flow despite the economic cycle and the actions announced today will reduce the Company's breakeven point and enhance our ability to generate favorable results."

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