WINCHESTER, Va., Dec. 13, 2011 /PRNewswire/ -- American
Woodmark Corporation (NASDAQ: AMWD), a leading supplier of
cabinetry to the remodeling and new construction industries,
announced today that the continuing housing slump has led to the
decision to reduce production capacity and to implement changes in
certain elements of the Company's long term retirement
plans.
In a realignment of the Company's manufacturing network, the
Company will close a component facility in Hardy County, West Virginia and a lumber
dimension operation in Hazard, Kentucky. The Company has also
made the decision to offer the assembly plant in Tahlequah, Oklahoma, idled in early 2009, for
sale.
Kent Guichard, Chairman and Chief
Executive Officer commented, "The housing sector remains mired in a
slump driven by low consumer confidence. The last four years
have been the worst four years in new home construction levels
since 1959. In the near term, we believe the ongoing
uncertainty surrounding government finances, persistent
unemployment, and restrictive credit will continue to suppress
consumer confidence and demand for discretionary big ticket items,
particularly those related to home purchase and home
improvement."
Guichard continued, "Although we have consistently gained market
share, the overall drop in consumer activity has created excess
capacity that is simply too expensive to maintain. These
targeted reductions will increase our utilization rates and
decrease overhead costs, while retaining sufficient capacity to
service our customers for the foreseeable future. Our
remaining network of nine manufacturing facilities will be more
efficient, while retaining the ability to increase production by
approximately 50% before requiring significant capital
investment."
Regarding the West Virginia
facility, Guichard stated, "The Hardy County Plant is an older
facility that will require an increasing level of investment.
The combination of an aging building, outdated equipment, and
changes to our product line will require significant retooling in
order to meet the quality expectations of our customers. Our
other component facilities are newer and already have the ability
to meet both production demands and evolving product
specifications. The investment required in Hardy County would not provide an
adequate return in this environment."
Addressing the decision on the Kentucky facility, Guichard noted, "As is the
case with our component operations, the Company has excess capacity
in our lumber and dimension operations. The Hazard Plant was
selected for closure due to a variety of factors including access
to lumber supply, flexibility, and logistics costs."
Focusing on these actions, Guichard stated, "Unfortunately, the
depth and duration of the current housing cycle has been
extreme. The need to reduce our excess capacity is in no way
reflective of the performance of the individuals in these
operations. I would like to express my appreciation to the
outstanding employees at both these facilities that have
contributed to the success of the Company over many years.
The fact that we were able to wait as long as we have to make these
decisions given the economic reality is a testament to their hard
work, dedication and resourcefulness."
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."
American Woodmark Corporation manufactures and distributes
kitchen cabinets and vanities for the remodeling and new home
construction markets. Its products are sold on a national
basis directly to home centers, major builders and through a
network of independent distributors. The Company presently
operates eleven manufacturing facilities and nine service centers
across the country.
Safe harbor statement under the Private Securities Litigation
Reform Act of 1995: All forward‑looking statements made by
the Company involve material risks and uncertainties and are
subject to change based on factors that may be beyond the Company's
control. Accordingly, the Company's future performance and
financial results may differ materially from those expressed or
implied in any such forward-looking statements. Such factors
include, but are not limited to, those described in the Company's
filings with the Securities and Exchange Commission and the Annual
Report to Shareholders. The Company does not undertake to
publicly update or revise its forward looking statements even if
experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
AMWD-F
SOURCE American Woodmark Corporation