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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended   January 31, 2005

OR

For the transition period from                  to                 

Commission file number 0-14798

American Woodmark Corporation

(Exact name of registrant as specified in its charter)

(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)

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, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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AMERICAN WOODMARK CORPORATION

FORM 10-Q

INDEX

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PART I. FINANCIAL INFORMATION

AMERICAN WOODMARK CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

See accompanying condensed notes to consolidated financial statements

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AMERICAN WOODMARK CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data)

(Unaudited)

See accompanying condensed notes to consolidated financial statements

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AMERICAN WOODMARK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

See accompanying condensed notes to consolidated financial statements

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AMERICAN WOODMARK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles 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. generally accepted accounting principles 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 nine-month period ended January 31, 2005 are not necessarily indicative of the results that may be expected for the year ended April 30, 2005. The unaudited financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2004.

NOTE B—NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued Statement No. 123 (revised 2004), "Share-Based Payment," which is a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation." Statement 123 (R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."   Under FASB Statement No. 123 (R), all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values as of the awards’ grant date and the estimated number of awards that are expected to vest. The Company is allowed to select from three alternative transition methods, each having different reporting implications. The Company will be required to adopt this statement as of August 1, 2005.  The Company is currently evaluating the three transition methods and has not yet determined the impact of adopting Statement No. 123 (R) on its results of operations or its financial position.

NOTE C—COMPREHENSIVE INCOME

The Company’s comprehensive income was $7.2 million and $28.3 million for the three months and nine months ended January 31, 2005, respectively, and $7.7 million and $23.5 million for the three months and nine months ended January 31, 2004, respectively. Comprehensive income differs from net income for the quarter and nine months ending January 2005 and 2004 due to the change in the accumulated unrealized loss on the Company’s interest rate swap agreement.

NOTE D—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

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NOTE E—STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25 in accounting for stock options and discloses the pro forma effects on net income based on the fair value of options granted as permitted by Statement of Financial Accounting Standards No. 123.  No stock-based employee compensation cost is reflected in net income, as all options granted had an exercise price equal to the market value of the common stock at the date of grant.

The following table summarizes the pro forma effects on net income assuming compensation cost for such awards had been recorded based upon the estimated fair value on the date of the grant (in thousands, except per share data):

To determine these amounts, the fair value of each stock option has been estimated on the date of the grant using a Black-Scholes option-pricing model. Significant assumptions used in this model include a dividend yield of 0.8% and the following:

NOTE F—CUSTOMER RECEIVABLES

The components of customer receivables were:

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NOTE G—INVENTORIES

The components of inventories were:

An actual valuation of inventory under the LIFO method is made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Since these items are estimated, interim results are subject to the final year-end LIFO inventory valuation.

NOTE H—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 three months of the original shipment date.

The following is a reconciliation of the Company’s warranty liability:

NOTE I—CASH FLOW

Supplemental disclosures of cash flow information:

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NOTE J—PENSION BENEFITS

Net periodic pension cost consisted of the following for the three months and nine months ended January 31, 2005 and 2004.

Employer Contributions

The Company previously disclosed in its consolidated financial statements for the year ended April 30, 2004, that it expected to contribute $8.1 million to its pension plan in fiscal 2005. As of January 31, 2005, $7.1 million of contributions have been made. The Company presently anticipates contributing an additional $1.5 million to fund its pension plan in fiscal 2005 for a total of $8.6 million.

NOTE K—OTHER INFORMATION

The Company is involved in various suits and claims in the normal course of business. Included therein are claims against the Company pending before the Equal Employment Opportunity Commission. Although management believes that such claims are without merit and intends to vigorously contest them, the ultimate outcome of these matters cannot be determined at this time. In the opinion of management, after consultation with counsel, the ultimate liabilities and losses, if any, that may result from suits and claims involving the Company will not have a material adverse effect on the Company’s results of operations, financial position, and liquidity.

NOTE L—STOCK SPLIT

On August 26, 2004, the Board of Directors of American Woodmark Corporation declared a two-for-one stock split of the Company’s common stock that was distributed in the form of a stock dividend on September 24, 2004.

All share and per share information has been restated to reflect the two-for-one stock split.

In addition, the Board of Directors authorized an additional $10 million to repurchase common stock. This Board authorization is for the repurchase of company stock from time-to-time when in the opinion of management, the market price presents an attractive return on investment for the shareholders.

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Management’s Discussion and Analysis of Financial Condition

and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the related notes to the consolidated financial statements, both of which are included in Item 1 of this report. The Company’s critical accounting policies are included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2004.

Forward-Looking Statements

This report contains statements concerning the Company’s expectations, plans, objectives, future financial performance, and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by words such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may” or other similar words. Forward-looking statements contained in this Management’s Discussion and Analysis are based on current expectations. However, we participate in an industry that is subject to rapidly changing conditions and there are numerous factors that could cause the Company to experience a decline in sales and/or earnings. These include (1) overall industry demand at reduced levels, (2) economic weakness in a specific channel of distribution, (3) the loss of sales from specific customers due to their loss of market share, bankruptcy or switching to a competitor, (4) a sudden and significant rise in basic raw material costs, (5) a dramatic increase to the cost of diesel fuel and/or transportation-related services, (6) the need to respond to price or product initiatives launched by a competitor, and (7) sales growth at a rate that outpaces the Company’s ability to install new capacity. While the Company believes that these risks are manageable and will not adversely impact the long-term performance of the Company, these risks could, under certain circumstances, have a materially adverse impact on operating results.

Overview

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 home manufacturers, and through a network of independent distributors. At January 31, 2005, the Company operated fifteen manufacturing facilities and ten service centers across the country.

During the third quarter of fiscal 2005, the Company experienced growth in net sales compared to the third quarter of fiscal 2004, driven by continued strength in both the new construction and remodeling markets. New construction markets serviced by the Company continued to exhibit high levels of activity due to the favorable mortgage rate environment. Demand for the Company’s products in the remodeling market was strong, as existing home sales and home improvement activity remained high. Gross profit for the quarter of 18.8% was down from 21.4% in the most recent quarter and 20.8% in the third quarter of fiscal 2004. The decline in gross profit was driven by a combination of increased manufacturing overhead costs associated with underutilized capacity and escalating freight costs.

Net income for the quarter was $7.1 million compared to $7.7 million during the third quarter of fiscal 2004.

On August 26, 2004, the Board of Directors of American Woodmark Corporation declared a two-for-one stock split of the Company’s common stock that was distributed to shareholders in the form of a stock dividend on September 24, 2004. All share and per share information has been restated to reflect the two-for-one stock split.

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Results of Operations

Sales.  Net sales were $183.2 million for the third quarter of fiscal 2005, an increase of 12.5% over the third quarter of fiscal 2004. For the first nine months of fiscal 2005, net sales were $569.9 million, an increase of 17.0% over the same period in fiscal 2004. Higher sales for both the quarter and nine-month periods were the result of continued growth in both the remodeling and new home construction markets. Overall unit volume for the quarter and the nine-month period ending January 31, 2005, increased 5.6% and 10.4%, respectively, due to the combination of general market growth and an increase in market share driven by new products. The average revenue per unit increased 6.6% for the third quarter and 6.0% for the nine-month period ending January 31, 2005, as a result of shifts in product mix and improved pricing.

Gross Profit.  Gross profit margin for the third quarter of fiscal 2005 was 18.8% compared to 20.8% for the same period of fiscal 2004. For the first nine months of fiscal 2005, gross margin was 20.3% compared to 21.0% for the same period of fiscal 2004. The decrease between periods was the result of a combination of higher overhead and freight costs which were only partially offset by lower labor costs. The Company experienced unfavorable leverage on overhead costs as capacity expansion exceeded short-term demand. Freight costs increased as a percentage of sales as a result of general industry factors including higher fuel costs and increased operating expenses associated with new Department of Transportation requirements. Labor costs declined as a percentage of sales due to improved productivity and lower benefit costs. Material costs remained flat as a percentage of sales, as price increases in certain raw materials were offset by material substitution and material efficiencies.

Selling and Marketing Expenses.  Selling and marketing expenses for the third quarter of fiscal 2005 were $16.6 million or 9.1% of sales compared to $14.4 million or 8.9% of sales for the same period in fiscal 2004. The quarterly increase is due to timing of promotional activity, increased amortization expense for promotional store displays in support of new stores and store resets, and advertising costs associated with new products. For the first nine months of fiscal 2005, selling and marketing expenses were $49.2 million or 8.6% of sales compared to $44.9 million or 9.2% of sales for the first nine months of fiscal 2004. The decrease as a percentage of sales was attributable to cost containment efforts and leverage gained on higher sales volume partially offset by increases in promotional advertising costs and higher overhead expenses.

General and Administrative Expenses.  General and administrative expenses for the third quarter of fiscal 2005 were $6.2 million or 3.4% of sales compared to $6.8 million or 4.2% of sales for the same period in fiscal 2004. The quarterly decrease is primarily attributable to lower costs associated with the Company’s pay-for-performance employee incentive plans. For the first nine months of fiscal 2005, general and administrative expenses were $20.7 million or 3.6% of sales compared to $18.6 million or 3.8% of sales for the same period of fiscal 2004. The increase between periods was primarily the result of increased professional fees, including costs associated with Section 404 compliance of the Sarbanes-Oxley Act of 2002.

Interest Expense.  Interest expense for the third quarter and first nine months of fiscal 2005 was $75 thousand and $209 thousand respectively, compared to $196 thousand and $681 thousand for the third quarter and first nine months of fiscal 2004. The decrease between periods is attributable to increased capitalized interest as a result of an increase in the Company’s long-term capital projects.

Effective Income Tax Rates.  The Company’s combined federal and state effective income tax rate for the third quarter and first nine months of fiscal 2005 was 39.0% compared to 38.5% and 39.0% in the same periods of fiscal 2004.

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CASH FLOWS

The statements of cash flows reflect the changes in cash and cash equivalents for the nine months ended January 31, 2005 and 2004, by classifying transactions into three major categories: operating, investing, and financing activities.

Operating Activities

The Company’s main source of liquidity is cash generated from operating activities consisting of net earnings adjusted for non-cash operating items, primarily depreciation and amortization, and changes in operating assets and liabilities such as receivables, inventories, and payables.

Cash provided by operating activities in the first nine months of fiscal 2005 was $45.5 million compared to $26.8 million in fiscal 2004. The improvement versus last year was attributable to an increase in net income, depreciation and amortization, and deferred income tax liabilities combined with a decrease in customer receivables which were partially offset by decreases in accrued compensation and related expenses and increases in prepaid income taxes and other prepaid expenses. Changes in cash flow from customer receivables were due to timing of cash payments and receipts. Deferred income taxes decreased due to the tax treatment associated with stock option exercises.

Investing Activities

The Company’s primary investing activities are property additions. Property, plant, and equipment additions for the first nine months of fiscal 2005 were $54.4 million compared to $11.9 million in the same period of fiscal 2004. These expenditures were primarily for the completion of construction of a new component facility in Hardy County, West Virginia, a new assembly facility in Allegany County, Maryland, equipment deposits for expanded capacity, and other equipment and tooling related to cost savings projects. In December 2004, the Company received $4.25 million in grant proceeds from the Hardy County Rural Development Authority in conjunction with the completion of the new component facility in Hardy County, West Virginia. In January 2005, the Company acquired land to build a new lumber processing facility in Garrett County, Maryland. The Company expects to invest approximately $5 to $7 million in capital spending during the remainder of fiscal 2005.

Financing Activities

Long-term borrowings increased $9.4 million from year-end as the Company closed on a $10 million, low interest loan from the West Virginia Economic Development Authority. The loan bears a fixed 2% interest rate, requires monthly interest payments for 24 months and monthly principal and interest payments for the remainder of the term, with loan maturity on July 30, 2024. Due to timing, the Company was required to make a one day borrowing of funds from its term credit facility of $2.3 million during the first nine months of fiscal 2005.

Cash dividends paid to shareholders were $1.4 million and $1.2 million for the first nine months of fiscal 2005 and fiscal 2004, respectively.

Under the Company’s stock repurchase plan approved by the Board of Directors in August 2002 and August 2004, the Company repurchased $7.5 million of stock during the first nine months of fiscal 2005. Each Board of Directors authorization was for the repurchase of up to $10 million of company stock from time to time, when in the opinion of management, the market price presents an attractive return on investment for the shareholders. At January 31, 2005, approximately $6.7 million remains authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. See Part II, Item 2 for a table summarizing stock repurchases in the quarter, and the approximate dollar value of shares that may be repurchased under the program.

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FINANCIAL CONDITION AND LIQUIDITY

Cash flow from operations combined with accumulated cash on hand and available borrowing capacity is expected to be sufficient to meet forecasted working capital requirements, service existing debt obligations, and fund capital expenditures for the remainder of fiscal 2005 and fiscal 2006. As of January 31, 2005, the Company had $35 million available under existing credit facilities.

The timing of the Company’s contractual obligations as summarized in the Annual Report on Form 10-K for fiscal year 2004 remains consistent with the exception of the $10 million, low interest loan as outlined in “Financing Activities” above.

Dividends Declared

On February 17, 2005, the Board of Directors approved a $.03 per share cash dividend on its Common Stock. The cash dividend will be paid on March 24, 2005, to shareholders of record on March 10, 2005.

Seasonal and Inflationary Factors

The Company’s business has historically been subjected to seasonal influences, with higher sales typically realized in the second and fourth fiscal quarters.

The costs of the Company’s products are subject to inflationary pressures and commodity price fluctuations. The Company has generally been able over time to recover the effects of inflation and commodity price fluctuations through sales price increases.

As of January 31, 2005, the Company had no instruments which were sensitive to changes in market interest rates. All borrowings of the Company, after consideration of the interest rate swap, carry a fixed interest rate between 2% and 6%. See additional disclosures in the Company’s Annual Report on Form 10-K.

Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of January 31, 2005. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective and that there have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Since that evaluation process was completed, there have been no significant changes in internal controls or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION

The Company is involved in various suits and claims in the normal course of business all of which constitute ordinary, routine litigation incidental to the business. The Company does not have any litigation that does not constitute ordinary, routine litigation to its business.

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The following table summarizes repurchases of common stock in the quarter ended January 31, 2005:

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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