

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended	~~October~~January 31, ~~2017~~2018

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.)

3102 Shawnee Drive, Winchester, Virginia			22601
(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)

AMERICAN WOODMARK CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



									ACCUMULATED
									OTHER			TOTAL
	COMMON STOCK					RETAINED			COMPREHENSIVE			SHAREHOLDERS'
(in thousands, except share data)	SHARES		AMOUNT			EARNINGS			LOSS			EQUITY
Balance, May 1, 2016	16,244,041		$	163,290		$	164,756		$	(47,285	)	$	280,761

Net income	—		—			53,851			—			53,851
Other comprehensive loss,
net of tax	—		—			—			810			810
Stock-based compensation	—		2,477			—			—			2,477
Exercise of stock-based
compensation awards, net of amounts
withheld for taxes	122,522		626			—			—			626
Stock repurchases	(178,118	)	(1,483		)	(11,924		)	—			(13,407		)
Employee benefit plan
contributions	44,080		2,926			—			—			2,926
Balance, January 31, 2017	16,232,525		$	167,836		$	206,683		$	(46,475	)	$	328,044

Balance, May 1, 2017	16,232,775		$	168,835		$	224,031		$	(40,417	)	$	352,449

Net income	—		—			44,032			—			44,032
Other comprehensive loss,
net of tax	—		—			—			750			750
Stock-based compensation	—		2,506			—			—			2,506
Exercise of stock-based
compensation awards, net of amounts
withheld for taxes	86,335		(1,494		)	—			—			(1,494		)
Stock issuance related to acquisition	1,457,568		189,849			—			—			189,849
Stock repurchases	(309,612	)	(2,664		)	(26,336		)	—			(29,000		)
Employee benefit plan
contributions	36,264		3,554			—			—			3,554
Balance, January 31, 2018	17,503,330		$	360,586		$	241,727		$	(39,667	)	$	562,646

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Supplemental cash flow information:
Non-cash investing and financing activities:
Long-term debt related to funding acquisition	$	300,000	$	—
Stock issuance in connection with acquisition	$	189,849	$	—
Property, plant and equipment	$	4,687	$	—
Net other assets and liabilities related to acquisition	$	6,154	$	—

Cash paid during the period for:
Interest	$	272	$	435
Income taxes	$	17,920	$	19,966

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 ~~six-month~~nine-month period ended ~~October~~January 31, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2018. 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, 2017 filed with the U.S. Securities and Exchange Commission (“SEC”). On December 29, 2017, the Company successfully completed the acquisition of RSI Home Products, Inc. and subsidiaries (“RSI”). As a result of the RSI acquisition, the financial results of the Company for the three- and nine-month periods ended January 31, 2018 include the results of operation of RSI and its subsidiaries since the date of acquisition.

Inventory: Inventories are stated at lower of cost or market. Inventory costs are determined by the last-in, first-out (LIFO) method and for certain subsidiaries by the first-in, first-out (FIFO) method.

The LIFO cost reserve is determined in the aggregate for inventory and is applied as a reduction to inventories determined on the FIFO method. FIFO inventory cost approximates replacement cost.

Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during each reporting period. Examples of estimates include the allocation of fair value to assets acquired and liabilities assumed in acquisitions, pension obligations, useful lives of property and equipment and recoverability of goodwill and other intangible assets. Actual results could differ from those estimates.

Goodwill and Other 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 but evaluates for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

When testing goodwill for impairment, 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- and nine-month periods ended January 31, 2018 and 2017.

The Company amortizes the cost of other intangible assets over their estimated useful lives, which range up to six years, unless such lives are deemed indefinite. There were no impairment charges related to other intangible assets for the three- and nine-month periods ended January 31, 2018 and 2017.

Note B--New Accounting Pronouncements -

In May 2014, the Financial Accounting Standards Board ~~(FASB)~~(the FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” ASU 2014-09 supersedes the revenue recognition requirements in “Accounting Standard Codification 605 - Revenue Recognition” and most industry-specific guidance. The standard requires that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date." ASU 2015-14 defers the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that period. The Company does not expect the adoption of ASU 2014-09 and ASU 2015-14 to have a material

impact on results of operations, cash flows and financial position. The Company is continuing to evaluate the impact of ASU 2014-09 primarily to determine the transition method to utilize at adoption and the additional disclosures required.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU 2016-02 requires lessees to recognize most leases on-balance sheet, which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP. ASU 2016-02 supersedes "Topic 840 - Leases." ASU 2016-02 is effective for public companies for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method for all entities. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements, however, if at adoption the Company has similar obligations for leases as it had at October 31, 2017, the Company believes this guidance will not have a material impact on its results of operations, cash flows and financial position.statements.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." ASU 2017-07 requires an employer to disaggregate the service cost component from the other components of net benefit (income) cost. The other components of net benefit (income) cost are required to be presented in the income statement separately from the service cost component and outside of operating income. The amendments also allow only the service cost component of net benefit (income) cost to be eligible for capitalization. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied (1) retrospectively for the presentation of the service cost component and the other components of net periodic pension (income) cost and net periodic postretirement benefit (income) cost on the income statement, and (2) prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension (income) cost and net periodic postretirement benefit (income) cost in assets. The Company believes this guidance will not have a material impact on its results of operations, cash flows and financial position.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from

the Tax Cuts and Jobs Act. The amendments in this ASU are effective for annual and interim periods in fiscal years beginning after December 15, 2018. The Company is currently assessing the impact that ASU 2018-02 will have on its consolidated financial statements.

Note C-- Acquisition of RSI Home Products, Inc. (the "RSI Acquisition")

On November 30, 2017, American Woodmark, Alliance Merger Sub, Inc. ("Merger Sub"), RSI Home Products, Inc. ("RSI") and Ronald M. Simon, as the RSI stockholder representative, entered into a merger agreement (the merger agreement"), pursuant to which the parties agreed to merge Merger Sub with and into RSI pursuant to the terms and subject to the conditions set forth in the Merger Agreement, with RSI continuing as the surviving corporation and as a wholly owned subsidiary of American Woodmark. On December 29, 2017 (the "Acquisition Date"), the Company consummated the RSI Acquisition pursuant to the terms of the Merger Agreement. As a result of the merger of Merger Sub with and into RSI, Merger Sub’s separate corporate existence ceased, and RSI continued as the surviving corporation and a wholly owned subsidiary of American Woodmark. RSI is a leading manufacturer of kitchen and bath cabinetry and home organization products. The acquisition is expected to enable the Company to make further progress in implementing its business strategy of increasing operational efficiency to drive enhanced profitability, leveraging differentiated service platforms to grow revenue, and continuing to deepen relationships within its existing customer base.

In connection with the RSI Acquisition, on December 29, 2017, the Company entered into a credit agreement (the "Credit Agreement") with a syndicate of lenders and Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, providing for a $100 million, 5-year revolving loan facility with a $25 million sub-facility for the issuance of letters of credit (the “Revolving Facility”), a $250 million, 5-year initial term loan facility (the "Initial Term Loan") and a $250 million delayed draw term loan facility (the "Delayed Draw Term Loan" and, together with the Revolving Facility and the Initial Term Loan, the "Credit Facilities") (See Note M--Loans Payable and Long-Term Debt for further details). American Woodmark used the full proceeds of the Initial Term Loan and approximately $50 million in loans under the Revolving Facility, together with cash on its balance sheet, to fund the cash portion of the RSI Acquisition consideration and its transaction fees and expenses.

At the closing of the RSI Acquisition, American Woodmark assumed approximately $589 million (including accrued interest) of RSI’s indebtedness consisting largely of RSI’s 6½% Senior Secured Second Lien Notes due 2023 (the "RSI Notes"). (See Note M--Loans Payable and Long-Term Debt).

Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

As consideration for the RSI Acquisition, American Woodmark paid total accounting consideration of $553.2 million including (i) cash consideration of $363.3 million, net of cash acquired, and (ii) 1,457,568 newly issued shares of American Woodmark common stock valued at $189.8 million based on $130.25 per share, which was the closing stock price on the Acquisition Date. The consideration paid is subject to a working capital adjustment by which the consideration will be adjusted upward or downward depending on whether the amount of working capital delivered at the Acquisition Date exceeds or is less than a target amount. The working capital adjustment has not yet been finalized and the accounting consideration does not reflect any adjustment to the estimated working capital reflected in the consideration paid at the Acquisition Date.

The Company accounted for the acquisition of RSI as a business combination, which requires the Company to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of net assets acquired is recorded as goodwill. The Company has commenced the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the Acquisition Date. The amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the Acquisition Date. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the Acquisition Date permitted under GAAP. The final values may also result in changes to depreciation and amortization expense related to certain assets such as buildings, equipment and intangible assets. Any potential adjustments made could be material in relation to the preliminary values presented in the table below.

The following table summarizes the allocation of the preliminary purchase price as of the Acquisition Date, which is based on the accounting consideration of $553.2 million, to the estimated fair value of assets acquired and liabilities assumed (in thousands):



Goodwill	$	765,743
Customer relationship intangibles		274,000
Property, plant and equipment		87,064
Inventories		66,293
Customer receivables		54,649
Income taxes receivable		18,450
Trademarks		10,000
Prepaid expenses and other		4,571
Leasehold interests		151
Total identifiable assets and goodwill acquired		1,280,921

Debt		602,313
Deferred income taxes		67,478
Accrued expenses		29,777
Accounts payable		25,113
Notes payable		2,988
Income taxes payable		49
Total liabilities assumed		727,718

Total accounting consideration	$	553,203

The fair value of the assets acquired and liabilities assumed were preliminarily determined using income, market and cost valuation methodologies. The fair value of debt acquired was determined using Level 1 inputs as quoted prices in active markets for identical liabilities were available. The fair value measurements were estimated using significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Accounting Standards Codification (ASC) 820. The income approach was primarily used to value the customer relationship intangibles and trademarks. The income approach determines value for an asset or liability based on the present value of cash flows projected to be generated over the remaining economic life of the asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected product pricing, operational performance including company specific synergies, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. The net cash flows are discounted to present value

using a discount rate that reflects the relative risk of achieving the cash flow and the time value of money. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with another of equivalent economic utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The cost and market approaches were used to value inventory, while the cost approach was the primary approach used to value property, plant and equipment.

The preliminary purchase price allocation resulted in the recognition of $765.7 million of goodwill, which is not expected to be amortizable for tax purposes. The goodwill recognized is attributable to expected revenue synergies generated by the integration of the Company’s products with RSI's, cost synergies resulting from purchasing and manufacturing activities, and intangible assets that do not qualify for separate recognition, such as the assembled workforce of RSI.

Customer receivables were recorded at the contractual amounts due of $54.7 million, less an allowance for doubtful accounts of $0.1 million, which approximates their fair value.

Determining the fair value of assets acquired and liabilities assumed requires the exercise of significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The cash flows employed in the valuation are based on the Company’s best estimates of future sales, earnings and cash flows after considering factors such as general market conditions, expected future customer orders, contracts with suppliers, labor costs, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield different results.

Impact to Financial Results for the Nine Months Ended January 31, 2018

RSI’s financial results have been included in our consolidated financial results for the period from the Acquisition Date to January 31, 2018. As a result, our consolidated financial results for the nine months ended January 31, 2018 do not reflect a full nine months of RSI results. From December 29, 2017 to January 31, 2018, RSI generated net sales of approximately $38.6 million and an operating loss of approximately $4.9 million, inclusive of intangible amortization and adjustments to account for the acquisition, including a $6.3 million charge to cost of sales as a result of the step up of inventory as of the Acquisition Date to fair value.

The Company incurred approximately $10.2 million of transaction costs associated with the RSI Acquisition during the nine months ended January 31, 2018 that the Company expensed as incurred. These costs are included in general and administrative expenseson the Consolidated Statements of Income.

Supplemental Pro Forma Financial Information (unaudited)

The following table presents summarized unaudited pro forma financial information as if RSI had been included in the Company’s financial results for the entire nine months ended January 31, 2018 and 2017:



	Nine months ended
	January 31,
(in thousands)	2018		2017
Net Sales	$	1,207,775	$	1,213,604
Net Income (1)	$	45,812	$	71,945
Net earnings per share - basic	$	2.60	$	4.06
Net earnings per share - diluted	$	2.58	$	4.03

(1) Includes stock compensation expense of $17.5 million and $2.6 million for the nine months ended January 31, 2018 and 2017, respectively, calculated under the intrinsic value method in measuring stock-based liability awards related to stock-based grants made by RSI prior to the RSI Acquisition.

The unaudited supplemental pro forma financial data above assumes the RSI Acquisition occurred on May 1, 2016 and has been calculated after applying the Company’s accounting policies and adjusting the historical results of RSI with pro forma adjustments, net of a statutory tax rate of 34.4% and 40.4% for the nine months ended January 31, 2018 and 2017, respectively. Significant pro forma adjustments include the recognition of additional amortization expense related to acquired intangible

assets (net of historical amortization expense of RSI), additional interest expense related to the Initial Term Loan used to finance the acquisition, and elimination of the inventory fair value step-up expense and transaction related expenses which are non-recurring in nature. These adjustments assume the application of fair value adjustments to intangibles and that the $300.0 million borrowed under the Credit Agreement occurred on May 1, 2016 and are as follows: amortization expense, net of tax, of $20.0 million and $20.5 million for the nine months ended January 31, 2018 and 2017, respectively; interest expense, net of tax, (including amortization expense related to $6.7 million of debt issuance costs, which are being amortized over a period of 5 years) of $3.0 million and $3.3 million for the nine months ended January 31, 2018 and 2017, respectively. The following amounts have been excluded: inventory fair value step-up expense, net of tax, of $4.1 million for the nine months ended January 31, 2018; and transaction expenses add-back, net of tax, of $6.9 million and $0.5 million for the nine months ended January 31, 2018 and 2017.

The unaudited supplemental pro forma financial information does not reflect the realization of any expected ongoing cost or revenue synergies relating to the integration of the two companies. Further, the pro forma data should not be considered indicative of the results that would have occurred if the RSI Acquisition, related financing, and associated issuance of Senior Notes (defined herein) and repurchase or redemption of the RSI Notes had been actually consummated on May 1, 2016, nor are they indicative of future results (See Note ~~C--Net~~R--Subsequent Events).

Note D--Net Earnings Per Share

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

The Company repurchased a total of ~~194,541~~58,371 and ~~67,400~~38,318 shares of its common stock during the three-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~251,241~~309,612 and ~~139,800~~178,118 shares of its common stock during the ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, respectively. There were no potentially dilutive securities for the three- and ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, which were excluded from the calculation of net earnings per diluted share.

Note ~~D--Stock-Based~~E--Stock-Based Compensation

The Company has various stock-based compensation plans. During the quarter ended ~~October~~January 31, ~~2017,~~2018, the Company ~~approved grants of a total of 4,410 service-based restricted stock units (“RSUs”)~~did not grant any stock-based compensation awards to employees or non-employee directors. The service-based RSUs vest daily through the end of the two-year vesting period as long as the recipient continuously remains a member of the Board, and entitle the recipient to receive one share of the Company's common stock per unit granted. During the ~~six-months~~nine-months ended ~~October~~January 31, ~~2017,~~2018, the Board of Directors of the Company ~~also~~ approved grants of service-based RSUs and performance-based RSUs to key ~~employees.~~employees and non-employee directors. The employee performance-based RSUs totaled 33,080 units and the employee and non-employee director service-based RSUs totaled ~~17,840~~22,250 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 (or, for

non-employee directors, serving on the Board of Directors) until the units vest. All of the Company’s RSUs granted to employees cliff-vest three years from the grant date.

For the three- and ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, stock-based compensation expense was allocated as follows:

During the ~~six~~nine months ended ~~October~~January 31, ~~2017,~~2018, the Company also approved grants of 4,496 cash-settled performance-based restricted stock tracking units ("RSTUs") and 2,519 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 a 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 a 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 adjusted, and related expense recorded, based on the new fair value. The Company recognized expense of ~~$141 thousand~~approximately $0.6 million and ~~$152 thousand~~$0.1 million for the three-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$366 thousand~~approximately $1.0 million and ~~$203 thousand~~$0.3 million for the ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, respectively. A liability for payment of the RSTUs is included in the Company's balance sheets in the amount of ~~$1.0~~$1.6 million and $1.5 million as of ~~October~~January 31, ~~2017~~2018 and April 30, 2017, respectively.

Note ~~E--Customer~~F--Customer Receivables

The components of customer receivables were:


	October 31,			April 30,			January 31,			April 30,
(in thousands)	2017			2017			2018			2017
Gross customer receivables	$	69,327		$	66,373		$	127,339		$	66,373
Less:
Allowance for doubtful accounts	(156		)	(148		)	(280		)	(148		)
Allowance for returns and discounts	(2,960		)	(3,110		)	(5,282		)	(3,110		)

Net customer receivables	$	66,211		$	63,115		$	121,777		$	63,115

Note ~~F--Inventories~~G--Inventories

The components of inventories were:

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 ~~G--Product~~H--Property, Plant and Equipment

The components of property, plant and equipment were:



	January 31			April 30
(in thousands)	2018			2017
Land	$	4,751		$	3,581
Buildings and improvements	93,902			81,172
Buildings and improvements - capital leases	11,203			11,202
Machinery and equipment	268,063			187,836
Machinery and equipment - capital leases	29,918			29,378
Construction in progress	28,600			10,838
	436,437			324,007
Less accumulated amortization and depreciation	(225,809		)	(216,074		)

Total	$	210,628		$	107,933

Amortization and depreciation expense on property, plant and equipment amounted to $12.9 million and $10.5 million for the nine months ended January 31, 2018 and 2017, respectively. Accumulated amortization on capital leases included in the above table amounted to $30.0 million and $29.7 million as of January 31, 2018 and April 30, 2017, respectively.

The components of intangible assets were:



(in thousands)	Weighted Average Amortization Period	Amortization Method	Cost		Accumulated Amortization		Net Carrying Amount
Customer relationships	6 years	Straight-line	$	274,000	$	3,806	$	270,194
Trademarks	3 years	Straight-line	10,000		278		9,722
Intangible assets, net					$	4,084	$	279,916

Amortization expense for the nine months ended January 31, 2018 was $4.1 million. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five 12-month periods beginning in January 31, 2018 is $49.0 million, $49.0 million, $48.7 million, $45.7 million and $45.7 million, respectively.

Note J--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 balance sheet:

Note ~~H--Cash Flow~~

~~Supplemental disclosures of cash flow information:~~

Six Months Ended

October 31,
(in thousands)
2017
2016
Cash paid during the period for:

Interest
$ 217

$ 288
Income taxes
$ 17,461

$ 11,800

~~Note I--Pension~~K--Pension Benefits

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

Net periodic pension (benefit) cost consisted of the following for the three- and ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 and ~~2016:~~2017:

The Company ~~expects to contribute~~contributed a total of $19.3 million to its pension plans in the first nine months of fiscal 2018, which represents both required and discretionary ~~funding. Of that amount, as~~funding, and does not expect to contribute any additional funds during the remainder of ~~October 31, 2017, $8.3 million of contributions had been made.~~fiscal 2018. On August 24, 2017, the Board of Directors of the Company approved up to $13.6 million of discretionary funding which is included in the total ~~expected~~ contributions for the year. The Company made contributions of $27.3 million to its pension plans in fiscal 2017.

Note ~~J--Fair~~L--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 Level 1 investments include 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 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. ~~The Company has no Level 2 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.~~

The Company's financial instruments include cash and cash equivalents ~~marketable securities~~valued at cost, which approximates fair value, due to the short-term maturities of these instruments. Money market funds, mutual funds and ~~other investments; accounts receivable~~certificates of deposits are carried at fair value in the financial statements. For these investments, the fair value was estimated based on quoted prices categorized as a Level 1 valuation. The Company's mutual fund investment assets represent contributions made and ~~accounts payable;~~invested on behalf of the Company's executive officers in a supplementary employee retirement plan.

The fair values of the Company's RSI Notes were determined using Level 2 inputs based the conditional call and ~~short- and long-term debt.~~tender offer described further in Note R, which approximates the carrying value recorded in connection with the RSI Acquisition. The carrying values of ~~cash and equivalents, accounts receivable and payable and short- and long-term debt on~~ the ~~Consolidated Balance Sheets approximate their~~Credit Facilities approximated fair ~~value.~~ value because the interest rates vary with market interest rates.

The following table summarizes the fair values of assets that are recorded in the Company’s unaudited condensed consolidated financial statements as of ~~October~~January 31, ~~2017~~2018 and April 30, 2017 at fair value on a recurring basis (in thousands):

There were no transfers between Level 1, Level 2 or Level 3.3 for assets measured at fair value on a recurring basis.

Note ~~K--Loans~~M--Loans Payable and Long-Term Debt

The ~~Company's outstanding indebtedness~~Credit Facilities

On December 29, 2017, the Company entered into the Credit Agreement, which provides for the Revolving Facility, the Initial Term Loan and ~~other obligations~~the Delayed Draw Term Loan. Also on December 29, 2017, the Company borrowed the entire $250 million available under the Initial Term Loan and approximately $50 million under the Revolving Facility to ~~Wells Fargo Bank, N.A. ("Wells Fargo") are unsecured. Under~~fund, in part, the ~~terms~~cash portion of the RSI Acquisition consideration and the Company’s transaction fees and expenses related to the RSI Acquisition. In connection with its entry into the Credit Agreement, the Company terminated its prior $35 million revolving credit facility with Wells Fargo. As of January 31, 2018, $250 million and $30 million remained outstanding on the Initial Term Loan and the Revolving Facility, respectively, and no amounts were outstanding under the Delayed Draw Term Loan. The Initial Term Loan is scheduled to mature as follows: $12.5 million by January 31, 2019; $18.8 million by January 31, 2020; $25.0 million by January 31, 2021; $25.0 million by January 31, 2022; and $168.7 million by December 29, 2022. The Credit Facilities mature on December 29, 2022. The Company is required to repay any aggregate outstanding amounts under the Initial Term Loan and the Delayed Draw Term Loan in certain specified quarterly installments beginning on April 30, 2018.

Amounts outstanding under the Credit Facilities 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 “Total Funded Debt to EBITDA Ratio.” The Company will also incur 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 “Total Funded Debt to EBITDA Ratio.” In addition, a letter of credit fee will accrue 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.

The Credit Agreement includes negative covenants restricting the ability of the Company ~~must (1) maintain~~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 Credit Agreement. The negative covenants further restrict the Company’s ability to make certain restricted payments, including the payment of dividends, in certain limited circumstances.

As of January 31, 2018, the Company’s obligations under the Credit Agreement were guaranteed by the Company’s subsidiaries (other than RSI and its subsidiaries) and the obligations of the Company and its subsidiaries (other than RSI and its subsidiaries) were secured by a pledge of substantially all of their respective personal property.

On December 29, 2017, as a result of the closing of the RSI Acquisition, the Company assumed, through its acquisition of all of the equity interests of RSI, the RSI Notes. As of December 29, 2017, the RSI Notes had a fair value of $602.3 million. As of January 31, 2018, the entire $575 million aggregate principal amount of the RSI Notes remained outstanding.

As of January 31, 2018, the RSI Notes (i) accrued interest at ~~the end~~a rate equal to 6.5% per annum, payable in cash in arrears on March 15 and September 15 of each ~~fiscal quarter~~year, (ii) were scheduled to mature on March 15, 2023, (iii) were guaranteed by each of RSI’s domestic subsidiaries, and (iv) were secured by a ~~ratio~~second lien on substantially all of ~~total liabilities~~the assets of RSI and its domestic subsidiaries. As of January 31, 2018, the indenture governing the RSI Notes contained certain customary covenants, including covenants that limited or restricted RSI’s ability to ~~tangible net worth~~incur debt, pay dividends, repurchase or make other distributions in respect of ~~not greater than 1.4~~its capital stock, make other restricted payments, create liens, dispose of assets or engage in transactions with affiliates, subject, in each case to ~~1.0; (2) maintain at~~ the ~~end~~exceptions and conditions described in the indenture. As of each fiscal quarter a ratio of cash flow to fixed charges of not less than 1.5 to 1.0 measured on a rolling four-quarter basis; and (3) comply with other customary affirmative and negative covenants. The CompanyJanuary 31, 2018, RSI was in compliance with the covenants under the indenture governing the RSI Notes. See Note R--Subsequent Events for information concerning the refinancing of the RSI Notes.

On December 29, 2017, the Company also assumed, through its acquisition of all ~~covenants specified~~of the equity interests of RSI, $2.8 million of subordinated promissory notes payable to certain current and former RSI employees. The promissory notes each have a term of 5 years, bear interest at rates ranging from 1.01% to 2.12% per annum, may be prepaid by RSI at any time without penalty and are due in annual installments of principal and interest on their respective anniversary dates. The notes were issued in exchange for the ~~credit facility as~~cancellation of ~~October~~vested stock options of RSI either upon the termination of the applicable employee or immediately prior to the expiration of such options. As of January 31, ~~2017, including as follows: (1)~~2018, the ~~Company’s ratio of total liabilities to tangible net worth at October 31, 2017~~aggregate outstanding balance on the notes was ~~0.37 to 1.0; and (2) the Company's ratio of cash flow to fixed charges for its most recent four quarters was 3.6 to 1.0.~~$2.8 million, with payments due through June 30, 2022.

Note ~~L--Income~~O--Income Taxes

The ~~Company’s~~ effective income tax rate for the three- and ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 was ~~37.2%~~47.0% and ~~33.1%~~33.9%, respectively, compared with ~~38.0%~~33.2% and ~~34.9%~~34.5%, respectively, in the comparable periods in the prior fiscal year. The ~~decrease~~increase in the effective tax rate for the ~~second~~third quarter of fiscal 2018 as compared to the ~~second~~third quarter of fiscal 2017 was primarily due to ~~more favorable permanent~~transaction costs incurred due to the RSI Acquisition and an expected reduction in the amount of domestic production deduction expected for the year due to such acquisition in the quarter, partially offset by the overall benefit from the reduction in the tax ~~differences.~~rate enacted in connection with the Tax Cuts and Jobs Act of 2017 (H.R. 1) (the “Tax Act”). The Company recorded a net tax benefit of $1.2 million in the third quarter of fiscal 2018 in connection with the Tax Act enacted in December 2017. The decrease in the effective tax rate for the first ~~half~~nine months of fiscal 2018 as compared to the first ~~half~~nine months of fiscal 2017 was primarily due to the net benefit of $1.2 million from tax rate reduction enacted in connection with the Tax Act and an increase of $0.5 million in ~~the benefit~~tax benefits from stock-based compensation ~~transactions~~transactions. As is discussed in Note C--Acquisition of RSI Home Products, Inc., a deferred tax liability of approximately $67.8 million was recorded as ~~well as more favorable permanent tax differences.~~ a result of the RSI Acquisition.

Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Act was signed into law. The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering the U.S. corporate federal income tax rate from 35% to 21% effective January 1, 2018. As a result, a proportional federal rate of 30.4% is applicable in the current fiscal year.

The key impacts of the Tax Act for the three months ended January 31, 2018 were the re-measurement of deferred tax balances to the new corporate tax rate and the reduction of corporate federal tax rate applicable in the calculation of current tax expense from 35% to 30.4% in the current fiscal year. The Company is required to re-measure, through income tax expense, its deferred tax assets and liabilities using the enacted rate at which the items are expected to be recovered or settled.

Due to the complexities associated with understanding and applying various aspects of the new law and quantifying or estimating amounts upon which calculations required to account for new law are based, the U.S. Securities and Exchange Commission (“SEC”) recognized that it may be difficult for many companies to complete the determination of all accounting effects of the new law within the available timeframe for issuing their financial statements for the period of enactment. As a result, the SEC provided guidance under SAB 118, permitting corporations to record and report specific items impacted by the new law on the basis of reasonable estimates if final amounts have not been determined and designate them as provisional amounts, or to continue to account for specific items under the previous law if it is not possible to develop reasonable estimates within the timeframe for issuance of the financial statements. In subsequent reporting periods, as the accounting for those items is finalized, companies are expected to record the appropriate adjustments to the initial accounting, removing the provisional designation on an item in the period that the accounting for that item is completed. A measurement period of no more than one year from the date of enactment of the new law is provided under the SEC guidance to complete all such adjustments.

While the Company has not yet completed the assessment of the effects of the Tax Act, we are able to determine reasonable estimates for the impacts of the key items specified above, thus we reported provisional amounts for these items. The Company is still analyzing the impact of the provisions of the law on our deferred tax balances and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount determined and recorded for the re-measurement of our deferred tax balances resulted in a net reduction in deferred assets of $1.6 million. While we have made a reasonable estimate of the impact of the federal corporate tax rate reduction, that estimate could change as we complete our analysis of all impacts of the Tax Act.

We were unable to determine a reasonable estimate of the impact, if any, of the effect on our existing deferred tax assets related to executive compensation. We have continued to apply our existing accounting under ASC 740 for this matter.

Note ~~M--Other~~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 on 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 of 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.

At January 31, 2018, the Company's two largest customers, Customers A and B, represented 31.3% and 22.0% of the Company's gross customer receivables, respectively. At April 30, 2017, Customers A and B represented 8.2% and 20.7% of the Company’s gross customer receivables, respectively.

The following table summarizes the percentage of sales to the Company's two largest customers for the nine months ended January 31, 2018 and 2017:



	PERCENT OF GROSS SALES
	Nine Months Ended
	January 31,
	2018	2017
Customer A	21.8	20.2
Customer B	14.4	15.9

Note Q--Other Information

The Company is involved in suits and claims in the normal course of business, including without limitation product liability and general liability claims, and claims pending before the Equal Employment Opportunity Commission. On at least a quarterly basis, the Company consults with its legal counsel to ascertain the reasonable likelihood that such claims may result in a loss. As required by FASB Accounting Standards Codification Topic 450, “Contingencies” (ASC 450), the Company categorizes the various suits and claims into three categories according to their likelihood for resulting in potential loss: those that are probable, those that are reasonably possible, and those that are deemed to be remote. Where losses are deemed to be probable and estimable, accruals are made. Where losses are deemed to be reasonably possible, a range of loss estimates is determined and considered for disclosure. In determining these loss range estimates, the Company considers known values of similar claims and consults with outside counsel.

The Company believes that the aggregate range of loss stemming from the various suits and asserted and unasserted claims that were deemed to be either probable or reasonably possible was not material as of ~~October~~January 31, ~~2017.~~2018.

Note R--Subsequent Events

On ~~November 30, 2017,~~February 12, 2018, the Company ~~RSI Home Products, Inc., a Delaware corporation (“RSI”~~issued $350 million in aggregate principal amount of 4.875% Senior Notes due 2026 (the “Senior Notes”)~~, Alliance Merger Sub, Inc., a Delaware corporation~~. The Senior Notes will mature on March 15, 2026. Interest on the Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2018. The Senior Notes are, and will be, fully and unconditionally guaranteed by each of the Company’s current and future wholly-owned ~~subsidiary~~domestic subsidiaries that guarantee the Company’s obligations under the Credit Agreement. The indenture governing the Senior Notes restricts the ability of the Company ~~(“Merger Sub”),~~ and ~~Ronald M. Simon, solely in his capacity~~the Company’s “restricted subsidiaries” to, as applicable, (i) incur additional indebtedness or issue certain preferred shares, (ii) create liens, (iii) pay dividends, redeem or repurchase stock or make other distributions or restricted payments, (iv) make certain investments, (v) create restrictions on the ~~Stockholder Representative, entered~~ability of the “restricted subsidiaries” to pay dividends to the Company or make other intercompany transfers, (vi) transfer or sell assets, (vii) merge or consolidate with a third party and (viii) enter into ~~an Agreement and Plan of Merger (the “Merger Agreement”) providing for, at closing, the merger of Merger Sub~~certain transactions with ~~and into RSI, with RSI surviving as a wholly-owned subsidiary~~affiliates of the Company, ~~(the “Merger”).~~subject, in each case, to certain qualifications and exceptions as described in the indenture.

~~Pursuant to the terms and subject to the conditions of the Merger Agreement, as of the effective time of the Merger, the stockholders of RSI will be entitled to receive from~~Also on February 12, 2018, the Company inborrowed the ~~aggregate, an amount in net cash equal to approximately $346~~entire $250 million ~~subject to adjustments~~available under the Delayed Draw Term Loan. In connection with these borrowings, RSI and less the aggregate amount paid to the holders of certain RSI options, and approximately 1,457,574 shares of newly issued Company common stock with a market value of approximately $140 million based on the average closing priceits domestic subsidiaries became guarantors of the Company’s ~~common stock~~obligations under the Credit Agreement and pledged substantially all of their respective personal property as security for their obligations under such guarantee.

The Company utilized the ~~five consecutive trading days immediately preceding~~proceeds from the ~~date~~issuance of the ~~Merger Agreement. The Company will also assume~~Senior Notes and borrowings under the Delayed Draw Term Loan, together with cash on hand, to (A) fund (i) the redemption of $115 million in aggregate principal amount of the RSI Notes on February 26, 2018 pursuant to a conditional call announced on January 25, 2018, (ii) the purchase of approximately ~~$589~~$449.1 million in aggregate principal amount of the RSI Notes on February 12, 2018 pursuant to a tender offer that commenced on January 29, 2018 and (iii) the redemption of approximately $10.9 million in aggregate principal amount of the RSI Notes on February 28, 2018 pursuant to a make-whole call, and (B) repay $30 million of ~~RSI indebtedness at closing, consisting largely of RSI’s privately placed 6½% Senior Secured Second Lien Notes due 2023 issued~~the amount borrowed under the Revolving Facility in March 2015. For further information regarding the Merger Agreement and the Merger, please see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Merger Agreement with RSI” below.

In connection with the ~~signing~~closing of the ~~Merger Agreement,~~RSI Acquisition. As a result of these redemptions and the ~~Company entered into a commitment letter with Wells Fargo and Wells Fargo Securities, LLC providing for a new senior secured credit facility. For further information regarding~~tender offer, none of the ~~commitment letter, please see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources - Commitment Letter” below.~~

RSI Notes remain outstanding.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes, both of which are included in Part I, 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 fiscal year ended April 30, 2017.

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 may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify forward-looking statements by words such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “would,” “plan,” “may,” “intend,” “estimate,” “prospect,” “goal,” “will,” “predict,” “potential” or other similar words. Forward-looking statements contained in this report, including elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are based on current expectations and our actual results may differ materially from those projected in any forward-looking statements. In addition, the Company participates 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 or deterioration in financial condition. Factors that could cause actual results to differ materially from those in forward-looking statements made in this report include but are not limited to:

Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained in this report, including elsewhere in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in Item 1A, "Risk Factors,", and also in the Company's most recent Annual Report on Form 10-K for the fiscal year ended April 30, 2017, filed with the SEC, including under ~~Item 1A, "Risk Factors,"~~ Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 7A, "Quantitative and Qualitative Disclosures about Market Risk." 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 material adverse impact on its operating results and financial condition.

Any forward-looking statement that the Company makes speaks only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors as a result of new information, future events or otherwise, except as required by law.

American Woodmark Corporation manufactures and distributes kitchen, ~~cabinets~~bath and ~~vanities~~home organization products 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,~~distributors and through a network of independent ~~dealers~~dealers. At January 31, 2018, the Company operated eighteen manufacturing facilities in the United States and ~~distributors. At October 31,~~Mexico and seven primary service centers located throughout the United States.

On December 29, 2017, the Company ~~operated nine manufacturing facilities~~completed the acquisition of RSI, a leading manufacturer of kitchen and ~~seven service centers across~~bath cabinetry and home organization products, for consideration consisting of 1,457,568 newly issued shares of American Woodmark common stock, $363.3 million in net cash (subject to certain customary postclosing working capital, indebtedness and seller expense true ups), and the ~~country.~~assumption of approximately $589 million of RSI debt, including accrued interest. We refer to this acquisition as the “RSI Acquisition.”

The three-month period ended ~~October~~January 31, ~~2017~~2018 was the Company’s ~~second~~third quarter of its fiscal year that ends on April 30, 2018 (“fiscal 2018”). During the ~~second~~third quarter of fiscal 2018, the Company continued to experience improving market conditions from the housing market downturn that began in 2007.

The Company’s remodeling-based business was impacted by the following trends during the ~~second~~third quarter of the Company’s fiscal 2018:

The Company believes there is no single indicator that directly correlates with cabinet remodeling market activity. For this reason, the Company considers other factors in addition to those discussed above as indicators of overall market activity including credit availability, housing affordability and sales reported by the Kitchen Cabinet Manufacturers Association (“KCMA”), a trade organization that issues the aggregate sales that have been reported by its members including the largest cabinet manufacturers in the United States. Based on the totality of factors listed above, the Company believes that the cabinet remodeling market increased in the low single digits during the ~~second~~third quarter of fiscal 2018.

The Company’s ~~largest~~ remodeling ~~customers and competitors continued to utilize~~ sales, ~~promotions in the Company’s product category to boost~~which consist of our dealer channel sales and some competitors accelerated their promotional activity. These promotions consisted of free products and/or cash discounts to consumers based upon the amount or type of cabinets they purchased. The Company strives to maintain its promotional levels in line with market activity, with a goal of remaining competitive. The Company experienced promotional levelshome center retail sales, increased 33% during the ~~second quarter of fiscal 2018 that were higher than those experienced in the same period of the prior year.~~

~~The Company’s remodeling sales decreased 1% during the second~~third quarter and ~~increased 2%~~10% during the first ~~half~~nine months of fiscal 2018 compared ~~with~~to the same prior-year periods. Our ~~Waypoint brand, which serves the~~ dealer channel ~~represented approximately 11% of our overall sales and~~ grew by 3% during the third quarter and 11% during the ~~second~~first nine months of fiscal 2018, respectively, when compared to the comparable prior-year periods as management believes that the Company has improved market share in this channel. Our home center retailer channel grew by 42% during the third quarter and ~~16%~~9% during the first ~~half~~nine months of fiscal 2018, respectively, when compared to the comparable prior-year periods. ~~Management~~Much of this growth is attributed to the one month of results from the Company’s acquisition of RSI which accounted for 31% of our remodeling sales during the third quarter of fiscal 2018. Otherwise, excluding the impact of RSI sales, management believes ~~that~~ the Company has ~~improved market~~maintained share within the ~~dealer channel while it has lost share within big box retailers.~~ home center retail channel.

Regarding new construction markets, the Company believes that fluctuations in single-family housing starts are the best indicator of cabinet activity. Assuming a sixty to ninety day lag between housing starts and the installation of cabinetry, single-family housing starts rose approximately ~~13%~~8% during the ~~second~~third quarter of the Company’s fiscal 2018 over the comparable prior year period. Completions over ~~that same time period~~the third fiscal quarter only ~~average 7% as closings were delayed in the TX and FL markets as a result~~averaged an increase of ~~the two hurricanes. We also believe the construction cycle has been extended and utilizing a 90 to 120 day lag between start and cabinet installation, growth was approximately 10%~~3%.

Sales in the new construction channel increased 9%7% in the ~~second~~third quarter, 4% of which was attributable to one month of results from the Company's acquisition of RSI, and more than ~~10%~~9% during the first ~~half~~nine months of fiscal 2018 when compared with the same periods of fiscal 2017. The Company believes it ~~continued to over index~~under indexed the market ~~both~~ due to ~~share penetration with our builder partners as well as the health of the markets where we concentrate our business.~~an increase in first time home buyers.

The Company’s total net sales rose 4%17% during the ~~second~~third quarter and 6%9% during the first ~~half~~nine months of fiscal 2018 compared to the same prior-year periods, which management believes was driven primarily by a rise in overall market ~~activity.~~activity plus one month of sales from the Company’s acquisition of RSI.

The Company earned net income of $2.0 million for the third quarter of fiscal 2018, compared with $14.6 million in the third quarter of its prior fiscal year, and earned net income of $44.0 million for the first nine months of fiscal 2018, compared with $53.9 million in the same period of the prior year.

As of ~~October~~January 31, ~~2017,~~2018, the Company had total net deferred tax liabilities of $63.6 million, compared to net deferred tax assets of ~~$10.1 million, down from~~ $18.0 million at April 30, 2017. The reduction in total net deferred tax assets from April 30, 2017 to ~~October~~January 31, ~~2017~~2018 is mainly due to the preliminary deferred tax liability of $67.8 million from RSI Acquisition, pension contributions, and stock based compensation transactions over ~~that time~~the period. The Company regularly considers the need for a valuation allowance against its deferred tax assets. Deferred tax assets are reduced by a valuation allowance when, after considering all positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The Company has recorded a valuation allowance related to deferred tax assets for certain state investment tax credit (“ITC”) carryforwards. These credits expire in various years beginning in fiscal 2020. The Company believes based on positive evidence of the housing industry improvement along with ~~four~~five consecutive years of profitability that the Company will more likely than not realize all other remaining deferred tax assets.

The Company earned net income of $19.8 million for the second quarter of fiscal 2018, compared with $17.6 million in the second quarter of its prior fiscal year, and earned net income of $42.0 million for the first half of fiscal 2018, compared with $39.3 million in the same period of the prior year.

Results of Operations

Net Sales. Net sales were ~~$274.8~~$292.8 million for the ~~second~~third quarter of fiscal 2018, an increase of 4%17% compared with the ~~second~~third quarter of fiscal 2017. For the first ~~six~~nine months of fiscal 2018, net sales were ~~$551.6~~$844.4 million, reflecting a 6%9% increase compared with the same period of fiscal 2017. ~~Overall unit volume for the three- and six-month periods ended October 31, 2017 improved by 3% and 5%, respectively. Average revenue per unit increased 1%~~The increase in net sales during the ~~three-~~third quarter and ~~six-month period~~first nine months of fiscal 2018 was driven by ~~improvements~~one month of sales from the Company’s acquisition of RSI of $38.6 million and organic growth of 2% in the ~~Company’s sales mix.~~third quarter and 4% in the first nine months of fiscal 2018.

Gross Profit. Gross profit margin for the ~~second~~third quarter of fiscal 2018 was ~~20.9%~~17.2%, compared with ~~21.3%~~20.7% for the same period of fiscal 2017. Gross profit margin was ~~21.0%~~19.7% for the first ~~half~~nine months of fiscal 2018, compared with ~~22.1%~~21.7% in the first ~~half~~nine months of fiscal 2017. Gross profit in the ~~second~~third quarter was unfavorably impacted by higher transportation costs, raw material inflation, and ~~material inflation.~~operating inefficiency and $6.3 million, or 216 bps, of inventory step-up amortization. Gross profit for the first ~~six~~nine months of the current fiscal year was unfavorably impacted by higher transportation costs, raw material inflation, and ~~higher~~ healthcare ~~costs.~~costs and $6.3 million, or 75 bps, of inventory step-up amortization.

Selling and Marketing Expenses. Selling and marketing expenses were ~~6.6%~~6.5% of net sales in the ~~second~~third quarter of fiscal 2018, compared with ~~6.5%~~7.4% of net sales for the same period in fiscal 2017. For the first ~~six~~nine months of fiscal 2018, selling and marketing expenses were 6.6% of net sales, compared with ~~6.4%~~6.8% of net sales for the same period of fiscal 2017. Selling and marketing expenses as a percentage of net sales ~~slightly increased~~decreased during the ~~second~~third quarter and first ~~half~~nine months of fiscal 2018 as a result of ~~higher~~lower personnel costs and product launch costs.

General and Administrative Expenses. General and administrative expenses were ~~3.1%~~8.0% of net sales in the ~~second~~third quarter of fiscal 2018, compared with ~~4.0%~~4.6% of net sales in the ~~second~~third quarter of fiscal 2017, and ~~3.3%~~4.9% of net sales in the first ~~half~~nine months of fiscal 2018 compared with ~~4.1%~~4.3% of net sales in the same period in fiscal 2017. The ~~decrease~~increase in general and administrative expenses as a percentage of net sales during the ~~second~~third quarter and first ~~half~~nine months of fiscal 2018 was driven by ~~favorable leverage from increased sales,~~RSI Acquisition related costs of $10.2 million and amortization of intangibles of $4.1 million, partially offset by lower incentive ~~compensation costs and ongoing expense controls.~~costs.

Use of Non-GAAP Financial Measures. Management considers a measurement that is not in accordance with U.S. generally accepted accounting principles a useful measurement of the operational profitability of the Company. Management deems adjusted EBITDA as a useful measure of performance of its core operations and helpful in evaluating comparative results period over period. Some investment professionals also utilize such a measurement as an indicator of the value of profits and cash that are generated strictly from operating activities, putting aside working capital and certain other balance sheet changes. For this measurement, management increases net income for significant non-operating and non-cash expense items to arrive at an amount known as “Earnings Before Interest, Taxes, Depreciation and Amortization” (EBITDA). Further, management defines adjusted EBITDA as EBITDA adjusted to exclude such items as: restructuring charges, stock based compensation, corporate business development expense and loss on disposal of property, plant and equipment. The reader is cautioned that the values for EBITDA and adjusted EBITDA should not be compared to other entities unknowingly. EBITDA and adjusted EBITDA should not be considered alternatives to net income or cash flows from operating activities as an indicator of operating performance or as a measure of liquidity. The reader should refer to the determination of net income and cash flows from operating activities in accordance with U.S. generally accepted accounting principles disclosed in the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows.

EBITDA and adjusted EBITDA as used by management are calculated as follows:



Reconciliation of Adjusted Non-GAAP Financial Measures to the GAAP Equivalents

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
(in thousands)	2018			2017			2018			2017

Net income (GAAP)	$	1,996		$	14,553		$	44,032		$	53,851
Add back:
Income tax expense	1,768			7,220			22,567			28,312
Interest (income) expense, net	4,035			(167		)	2,887			(225		)
Depreciation and amortization expense	6,602			4,846			17,579			13,719
Amortization of customer lists and trademarks	4,083			—			4,083			—
EBITDA (Non-GAAP)	$	18,484		$	26,452		$	91,148		$	95,657
Add back:
Acquisition related expenses	10,163			728			10,163			728
Inventory step-up amortization (1)	6,334			—			6,334			—
Stock compensation expense	897			828			2,506			2,477
Loss on asset disposal	147			111			280			286
Adjusted EBITDA (Non-GAAP)	$	36,025		$	28,119		$	110,431		$	99,148

Net Sales	$	292,791		$	249,285		$	844,387		$	771,511
Adjusted EBITDA margin (Non-GAAP)	12.3		%	11.3		%	13.1		%	12.9		%

(1) The inventory step-amortization is the increase in the fair value of inventory acquired through the RSI Acquisition that was fully expensed in the quarter ended January 31, 2018.

Adjusted EBITDA. Adjusted EBITDA was $36.0 million, with an Adjusted EBITDA margin of 12.3%, compared to $28.1 million and 11.3% for the same quarter of the prior fiscal year. Adjusted EBITDA was $110.4 million, with an Adjusted EBITDA margin of 13.1%, for the first nine months of fiscal 2018 compared to $99.1 million and 12.9% in the same period of the prior fiscal year. The increase during the third quarter and first nine months of fiscal 2018 is primarily due to additional sales growth and the inclusion of one month of results for RSI.

Effective Income Tax Rates. The Company’s effective income tax rate for the three- and ~~six-month~~nine-month periods ended ~~October~~January 31, ~~2017~~2018 was ~~37.2%~~47.0% and ~~33.1%~~33.9%, respectively, compared with ~~38.0%~~33.2% and ~~34.9%~~34.5%, respectively, in the comparable

periods ofin the prior fiscal year. The ~~decrease~~increase in the effective tax rate for the ~~second~~third quarter of fiscal 2018 as compared to the ~~second~~third quarter of fiscal 2017 was primarily due to ~~more favorable permanent~~transaction costs incurred and an increase in limitation of domestic production deduction due to the acquisition in the quarter, partially offset by the benefit from the reduction in the tax ~~differences.~~rate enacted in connection with the Tax Act. The Company recorded a net tax benefit of $1.2 million in the third quarter of fiscal 2018 in connection with the Tax Act enacted in December, 2017. The decrease in the effective tax rate for the first ~~half~~nine months of fiscal 2018 as compared to the first ~~half~~nine months of fiscal 2017 was primarily due to the net benefit of $1.2 million from tax rate reduction enacted in connection with the Tax Act and an increase ~~in the~~of $0.5 million tax benefit from stock-based compensation ~~transactions as well as~~transactions. See Note O--Income Taxes for more ~~favorable permanent tax differences.~~ information on the Tax Act.

Outlook. ~~The Outlook below for American Woodmark Corporation does not contemplate the merger agreement with RSI:~~

The Company believes that the average price of existing home sales will continue to increase driven by growth in both employment and new household formations. In this environment, the Company expects the cabinet remodeling market will show modest improvement during the remainder of fiscal 2018 but overall activity will continue to be below historical averages. Within the cabinet remodeling market, the Company expects independent dealers to outperform other channels of distribution primarily due to their more affluent customer base. The Company remains focused on improving market share in the home center channel for the remainder of fiscal 2018, however this is heavily dependent upon competitive promotional activity. The Company also expects to continue to increase market share in the dealer channel. This combination is expected to result in remodeling sales growth that is ~~below~~above the market ~~rate.~~rate primarily due to incremental growth from the RSI Acquisition.

The Company expects that single-family housing starts and in turn, new construction cabinet sales, will grow approximately 8-10% during the remainder of its fiscal year 2018, and that the Company’s new construction sales growth will ~~continue to~~

~~exceed~~be below, or at this level, for the remainder of its current fiscal year, ~~but at a lower rate than fiscal 2017, as comparable prior year sales levels become more challenging to exceed.~~

~~Merger Agreement with RSI~~

On November 30, 2017, the Company, RSI Home Products, Inc., a Delaware corporation (“RSI”), Alliance Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Ronald M. Simon, solely in his capacity as the Stockholder Representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”) providing for, at closing, the merger of Merger Sub with and into RSI, with RSI surviving as a wholly-owned subsidiary of the Company (the “Merger”). Merger Sub was formed solely for purposes of engaging in the Merger and has not conducted any prior activities.

~~Pursuant~~market continues to ~~the terms and subject~~shift to ~~the conditions of the Merger Agreement, as of the effective~~first time of the Merger, the stockholders of RSI will be entitled to receive from the Company, in the aggregate, an amount in net cash equal to approximately $346 million, subject to adjustment as described below and less the aggregate amount paid to optionholders as described below, and approximately 1,457,574 shares of newly issued Company common stock (the “Stock Consideration”) with a market value of approximately $140 million based on the average closing price of the Company’s common stock for the five consecutive trading days immediately preceding the date of the Merger Agreement. The Company will also assume approximately $589 million of RSI indebtedness at closing, consisting largely of RSI’s privately placed 6½% Senior Secured Second Lien Notes due 2023 issued in March 2015 (the “Senior Notes”).

The cash consideration to be paid by the Company is subject to adjustments, in certain circumstances, for net working capital, certain costs and expenses of RSI related to the Merger and the amount of cash and indebtedness held by RSI at closing, all as set forth in the Merger Agreement. Each outstanding RSI option that has vested as of the date hereof or is scheduled to vest by February 28, 2018 will be cancelled in exchange for a cash payment in an amount equal to a pro rata share of the aggregate value of the merger consideration described above, less the applicable exercise price of the option (unless such amount would be equal to or less than zero, in which case such option will be cancelled without consideration). Each outstanding RSI option scheduled to vest after February 28, 2018 will be cancelled without consideration in accordance with its terms. The issuance of the Stock Consideration has not been and will not be registered under the Securities Act, and will be conducted in reliance on the exemption for nonpublic offerings provided by Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended, and analogous state securities law provisions, based, in part, upon certain representations made by RSI’s stockholders.

Each of the Company’s and RSI’s obligation to consummate the Merger is subject to certain customary closing conditions, including (i) the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of any other required governmental or third-party consents or approvals, (ii) the absence of any injunction or other legal prohibition preventing consummation of the Merger, the issuance of the Stock Consideration or the other transactions contemplated by the Merger Agreement, (iii) the accuracy of the other party’s representations and warranties, subject to certain materiality thresholds, (iv) the absence of a material adverse effect with respect to the other party, (v) the receipt of certain certificates and other deliverables, (vi) the performance by the other party of its obligations and covenants under the Merger Agreement, and (vii) in the case of the Company, the continued effectiveness of the written consent of the RSI stockholders approving the Merger and the holders of no more than 3% of RSI’s stock having exercised statutory appraisal rights.

The Merger Agreement may be terminated by the parties in certain limited circumstances, including through mutual written consent or by either the Company or RSI unilaterally if the Merger has not occurred on or before April 9, 2018 (subject to certain limited extensions) or the other party breaches its representations, warranties or covenants in a manner that cannot be cured within the time specified in the Merger Agreement. The Merger Agreement may also be terminated by RSI if, after March 30, 2018, all the conditions to closing have been satisfied, RSI has notified the Company that it is ready and willing to close and the Company has nevertheless failed to close within three business days of such notice (in which event the Company would be required to pay a termination fee to RSI in the amount of $22.5 million).

~~For further information regarding the financing of the Merger, please see “Commitment Letter” under “Liquidity and Capital Resources” below.~~home buyers.

LIQUIDITY AND CAPITAL RESOURCES

The Acquisition significantly affected the Company’s financial condition, liquidity and cash flow. See Note C--Acquisition of RSI Home Products, Inc. for a table detailing the preliminary purchase price. The Company’s cash and cash equivalents totaled ~~$162.5~~$139.6 million at ~~October~~January 31, ~~2017,~~2018, representing a ~~$14.4~~$37.4 million decrease from its April 30, 2017 levels. At ~~October~~January 31, ~~2017,~~2018, total long-term debt (including current maturities) was ~~$17.8~~$896.4 million, an

increase of ~~$0.9~~$879.6 million from its balance at April 30, 2017. The Company’s ratio of long-term debt to total capital was ~~4.1%~~61.0% at ~~October~~January 31, ~~2017,~~2018, compared with 4.2% April 30, 2017.

The Company’s main source of liquidity is its cash and cash equivalents on hand and cash generated from its operating activities. The Company can also borrow up to ~~$35~~$100 million under ~~its revolving credit~~the Revolving Facility. Approximately $65.1 million was available under this facility ~~with Wells Fargo Bank, N.A. (“Wells Fargo”), which expires on December~~as of January 31, ~~2018. This facility had an~~2018, and approximately $95.1 million was available ~~borrowing base~~as of ~~$30.1 million at October 31, 2017.~~ February 12, 2018 after giving effect to the use of proceeds from the issuance of the Senior Notes and borrowings under the Delayed Draw Term Loan (See Note R--Subsequent Events).

The ~~Company's~~Company borrowed $250 million under the Initial Term Loan on December 29, 2017 in connection with the closing of the RSI Acquisition and borrowed an additional $250 million under the Delayed Draw Term Loan on February 12, 2018 in connection with the refinancing of the RSI Notes. Amounts outstanding ~~indebtedness and other obligations~~under the Credit Facilities bear interest based on a fluctuating rate measured by reference to ~~Wells Fargo are unsecured. Under the terms of its revolving credit facility, the Company must: (1) maintain~~either, at the ~~end of each fiscal quarter~~Company’s option, a ~~ratio of total liabilities~~base rate plus an applicable margin ranging between 0.25% and 1.25% or LIBOR plus an applicable margin ranging between 1.25% and 2.25%, with the applicable margin being determined by reference to ~~tangible net worth of not greater than 1.4~~the Company’s then-current “Total Funded Debt to 1.0; (2) maintain at the end of each fiscal quarter a ratio of cash flow to fixed charges of not less than 1.5 to 1.0 measured on a rolling four-quarter basis; and (3) comply with other customary affirmative and negative covenants.EBITDA Ratio.” The Company ~~was in compliance with all covenants specified in~~will also incur a quarterly commitment fee on the ~~credit facility as~~average daily unused portion of ~~October 31, 2017, including as follows: (1)~~the Revolving Facility during the applicable quarter at a rate per annum also determined by reference to the Company’s ~~ratio~~then-current “Total Funded Debt to EBITDA Ratio.” The initial applicable margin with respect to base rate loans was 1.00% and the initial applicable margin with respect to LIBOR loans was 2.00%. The initial commitment fee was 0.25%. As of ~~total liabilities~~February 20, 2018, the applicable margin with respect to ~~tangible net worth at October 31, 2017~~base rate loans and LIBOR loans was ~~0.37 to 1.0;~~1.25% and ~~(2) cash flow to fixed charges for its most recent four quarters~~2.25%, respectively, and the commitment fee was ~~3.6 to 1.0.~~0.30%.

The ~~revolving credit facility does not limit~~Company is required to repay the aggregate outstanding amounts under the Initial Term Loan and the Delayed Draw Term Loan in certain specified quarterly installments beginning on April 30, 2018. The Credit Facilities mature on December 29, 2022.

On February 12, 2018, the Company issued $350 million in aggregate principal amount of the Senior Notes and utilized the proceeds of such issuance, together with the borrowings under the Delayed Draw Term Loan as discussed above and cash on hand, to fund the refinancing of the RSI Notes.

The Credit Agreement and the indenture governing the Senior Notes restrict the ability of the Company and certain of the Company’s ~~ability~~subsidiaries to, ~~pay~~among other things, incur additional indebtedness, create additional liens, make certain vestments,

dispose of assets or engage in a merger or consolidation, engage in certain transactions with affiliates, and make certain restricted payments, including the payment of dividends or the repurchase ~~its common shares as long as~~or redemption of stock, subject, in each case, to the ~~Company is~~various exceptions and conditions described in ~~compliance with these covenants.~~ the Credit Agreement and the indenture governing the Senior Notes.

See Note M--Loans Payable and Long-Term Debt and Note R--Subsequent Events for additional information concerning the Credit Facilities, the Senior Notes and the refinancing of the RSI Notes.

Cash provided by operating activities in the first ~~six~~nine months of fiscal 2018 was ~~$41.8~~$48.9 million, compared with ~~$40.1~~$51.7 million in the comparable period of fiscal 2017. The ~~increase~~decrease in the Company’s cash from operating activities was driven primarily by ~~lower increases~~a decrease in ~~customer receivables~~net income and ~~higher operating profitability~~increased income taxes receivable and accrued compensation and other expenses, which was partially offset by higher ~~inventories to support increased sales~~depreciation and ~~lower increases in accounts payable.~~amortization.

The Company’s investing activities primarily consist of purchases and maturities of certificates of deposit, investment in property, plant and equipment and promotional displays. Net cash used for investing activities was ~~$31.1~~$28.4 million in the first ~~six~~nine months of fiscal 2018, compared with ~~$50.4~~$51.7 million in the comparable period of fiscal 2017. The decrease in cash used was due to ~~a $28.5 million decrease in investments in certificates~~the acquisition of ~~deposit which was partially offset by~~RSI and increased investment in property, plant and ~~equipment.~~equipment, which was partially offset by a net $96.0 million increase in cash flow from certificates of deposit.

During the first ~~six~~nine months of fiscal 2018, net cash used by financing activities was ~~$25.1~~$57.9 million, compared with ~~$8.5~~$11.2 million in the comparable period of the prior fiscal year. The increase in cash used was driven by the Company’s payments of long-term debt of $21.4 million, the repurchase of ~~251,241~~309,612 shares of common stock at a cost of ~~$23.5~~$29.0 million, a ~~$13.1~~$15.6 million increase from the prior year, debt issuance costs of $6.7 million and a decrease in proceeds from the exercise of stock options of ~~$1.0~~$1.1 million.

Under a stock repurchase authorization approved by its Board of Directors on November 30, 2015, the Company was authorized to purchase up to $20 million of the Company's common shares. On November 30, 2016, the Board of Directors authorized an additional stock repurchase program of up to $50 million of the Company's common shares. This authorization is in addition to the stock repurchase program authorized on November 19, 2015. Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems appropriate and subject to the Company's cash requirements for other purposes, compliance with the covenants under the ~~Company’s revolving credit facility,~~Credit Agreement and the indenture governing the Senior Notes, and other factors management deems relevant. At ~~October~~January 31, ~~2017, $41.5~~2018, $36.0 million remained authorized by the Company’s Board of Directors to repurchase the Company’s common shares. The Company purchased a total of ~~251,241~~309,612 common shares, for an aggregate purchase price of ~~$23.5~~$29.0 million, during the first ~~six~~nine months of fiscal 2018, under the authorizations. See Part II. Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds" for further information on share repurchases. The Company announced on December 1, 2017 that it ~~is suspending~~suspended its stock repurchase program in conjunction with the ~~proposed Merger.~~

~~On August 24, 2017, the Board of Directors of the Company approved up to $13.6 million of discretionary funding to reduce its defined benefit pension liabilities.~~RSI Acquisition.

On November 30, 2016 the Board of Directors of the Company approved the construction of a new corporate headquarters in Winchester, Virginia. The new space will consolidate employees that currently occupy four buildings in Winchester, Virginia and Frederick County, Virginia, ~~in early calendar~~during the 4th quarter of fiscal 2018. It is expected that the new building will be self-funded for approximately $30 million, of which ~~$10.9~~$18.3 million has been spent through ~~October~~January 31, ~~2017.~~2018. During the first ~~six~~nine months of fiscal 2018, approximately ~~$7.9~~$15.3 million in costs were incurred related to the new company headquarters.

Cash flow from operations combined with accumulated cash and cash equivalents on hand are expected to be more than sufficient to support forecasted working capital requirements, service existing debt obligations and fund capital expenditures for the remainder of fiscal 2018.

~~Commitment Letter~~

In connection with the signing of the Merger Agreement, the Company entered into a commitment letter with Wells Fargo and Wells Fargo Securities, LLC providing for a senior secured credit facility consisting of a $250 million term loan facility and a new $100 million revolving credit facility to replace the Company’s current revolving credit facility discussed above (the “Commitment Letter”). The Company intends to use the proceeds of the term loan, together with cash currently on its balance sheet, to fund the cash portion of the merger consideration and its transaction fees and expenses and intends to use the proceeds of the revolving credit facility to provide ongoing working capital and for other general corporate purposes of the Company and its subsidiaries. The obligations of the parties under the Commitment Letter are subject to a number of customary conditions, including the preparation, execution and delivery of certain definitive documentation, as well as the success of (i) a consent solicitation with respect to a change of control tender offer requirement in the indenture governing the Senior Notes or (ii) a refinancing of the Senior Notes.

Seasonal and Inflationary Factors

The Company’s business has historically been subject 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.

Critical Accounting Policies

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. ~~There have been no significant changes to the~~The Company’s critical accounting policies asare disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2017. Beginning third quarter fiscal 2018 goodwill and other intangible assets has been designated as one of the Company's critical accounting policies as a result of the acquisition of RSI.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does not amortize goodwill but evaluates for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In accordance with the accounting standards, 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- and nine-month periods ended January 31, 2018 and 2017.



Large accelerated filer	[X]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	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. [ ]



PART I.	FINANCIAL INFORMATION	PAGE NUMBER

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance ~~Sheets--October~~Sheets--January 31, ~~2017~~2018 and April 30, 2017	4

	Condensed Consolidated Statements of Income--Three months ended ~~October~~January 31, ~~2017~~2018 and ~~2016; Six~~2017; Nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016~~2017	5

	Condensed Consolidated Statements of Comprehensive Income--Three months ended ~~October~~January 31, ~~2017~~2018 and ~~2016; Six~~2017; Nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016~~2017	6

	Condensed Consolidated Statements of ~~Cash Flows--Six~~Shareholders' Equity-- Nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016~~2017	7

	Condensed Consolidated Statements of Cash Flows--Nine months ended January 31, 2018 and 2017	8

	Notes to Condensed Consolidated Financial ~~Statements--October~~Statements--January 31, ~~2017~~2018	~~8-13~~10-21

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~13-19~~21-28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1928

Item 4.	Controls and Procedures	1928

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2028

Item 1A.	Risk Factors	2028

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2136

Item 6.	Exhibits	2238

SIGNATURES		2340


	October 31, 2017			April 30, 2017			January 31, 2018			April 30, 2017
ASSETS
Current Assets
Current assets
Cash and cash equivalents	$	162,545		$	176,978		$	139,624		$	176,978
Investments - certificates of deposit	57,500			51,750			8,000			51,750
Customer receivables, net	66,211			63,115			121,777			63,115
Inventories	46,723			42,859			108,003			42,859
Income tax receivable							27,353			—
Prepaid expenses and other	9,189			4,526			10,311			4,526
Total Current Assets	342,168			339,228
��
Total current assets							415,068			339,228
Property, plant and equipment, net	121,732			107,933			210,628			107,933
Investments - certificates of deposit	24,250			20,500			2,500			20,500
Customer relationship intangibles, net							270,194			—
Trademarks, net							9,722			—
Goodwill, net							765,743			—
Promotional displays, net	4,729			5,745			12,925			5,745
Deferred income taxes	10,140			18,047			—			18,047
Other assets	10,286			9,820			15,209			9,820
TOTAL ASSETS	$	513,305		$	501,273		$	1,701,989		$	501,273

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Current liabilities
Accounts payable	$	38,739		$	41,312		$	65,052		$	41,312
Current maturities of long-term debt	1,710			1,598			14,864			1,598
Accrued compensation and related expenses	35,119			36,162			46,712			36,162
Accrued marketing expenses	12,512			8,655			18,767			8,655
Other accrued expenses	12,130			13,770			37,301			13,770
Total Current Liabilities	100,210			101,497

Total current liabilities							182,696			101,497
Long-term debt, less current maturities	16,087			15,279			881,585			15,279
Deferred income taxes							63,569			—
Defined benefit pension liabilities	18,151			28,032			6,306			28,032
Other long-term liabilities	3,714			4,016			5,187			4,016

Shareholders' Equity
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 October 31, 2017: 16,104,083;
outstanding shares: at January 31, 2018: 17,503,330;
at April 30, 2017: 16,232,775	170,389			168,835			360,586			168,835
Retained earnings	244,683			224,031			241,727			224,031
Accumulated other comprehensive loss -
Defined benefit pension plans	(39,929		)	(40,417		)	(39,667		)	(40,417		)
Total Shareholders' Equity	375,143			352,449
Total shareholders' equity							562,646			352,449
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	513,305		$	501,273		$	1,701,989		$	501,273

See notes to condensed consolidated financial statements.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	October 31,						October 31,						January 31,						January 31,
	2017			2016			2017			2016			2018			2017			2018			2017

Net sales	$	274,769		$	264,076		$	551,596		$	522,226		$	292,791		$	249,285		$	844,387		$	771,511
Cost of sales and distribution	217,434			207,924			435,767			406,757			242,412			197,689			678,179			604,446
Gross Profit	57,335			56,152			115,829			115,469			50,379			51,596			166,208			167,065

Selling and marketing expenses	18,077			17,146			36,230			33,609			19,167			18,519			55,397			52,128
General and administrative expenses	8,443			10,675			17,950			21,607			23,492			11,476			41,442			33,083
Operating Income	30,815			28,331			61,649			60,253			7,720			21,601			69,369			81,854

Interest expense	24			170			105			329			4,498			447			4,603			776
Other income	(672		)	(269		)	(1,291		)	(466		)	(542		)	(619		)	(1,833		)	(1,085		)
Income Before Income Taxes	31,463			28,430			62,835			60,390			3,764			21,773			66,599			82,163

Income tax expense	11,708			10,793			20,799			21,092			1,768			7,220			22,567			28,312

Net Income	$	19,755		$	17,637		$	42,036		$	39,298		$	1,996		$	14,553		$	44,032		$	53,851

Net Earnings Per Share

Weighted Average Shares Outstanding
Basic	16,197,088			16,295,948			16,234,746			16,280,164			16,578,235			16,241,670			16,349,716			16,267,333
Diluted	16,268,078			16,440,321			16,319,224			16,410,652			16,690,760			16,381,223			16,461,509			16,400,842

Net earnings per share
Basic	$	1.22		$	1.08		$	2.59		$	2.41		$	0.12		$	0.90		$	2.69		$	3.31
Diluted	$	1.21		$	1.07		$	2.58		$	2.39		$	0.12		$	0.89		$	2.67		$	3.28

See notes to condensed consolidated financial statements.


	Six Months Ended						Nine Months Ended
	October 31,						January 31,
	2017			2016			2018			2017
OPERATING ACTIVITIES
Net income	$	42,036		$	39,298		$	44,032		$	53,851
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,977			8,873			21,662			13,719
Net loss on disposal of property, plant and equipment	84			174			266			286
Stock-based compensation expense	1,609			1,649			2,506			2,477
Deferred income taxes	7,750			11,250			13,839			10,173
Pension contributions in excess of expense	(9,081		)	(10,732		)	(20,526		)	(27,706		)
Contributions of employer stock to employee benefit plan	3,554			2,926			3,554			2,926
Other non-cash items	(290		)	88			(546		)	(429		)
Changes in operating assets and liabilities:
Customer receivables	(2,954		)	(12,847		)	(3,577		)	(3,767		)
Income taxes receivables							(8,652		)	—
Inventories	(4,523		)	(1,942		)	235			(2,571		)
Prepaid expenses and other assets	(6,245		)	(2,917		)	(6,639		)	(1,983		)
Accounts payable	(2,573		)	2,878			(1,373		)	(2,110		)
Accrued compensation and related expenses	(1,044		)	(1,754		)	(4,495		)	2,598
Other accrued expenses	2,538			3,202			8,595			4,200
Net cash provided by operating activities	41,838			40,146			48,881			51,664

INVESTING ACTIVITIES
Payments to acquire property, plant and equipment	(20,660		)	(10,354		)	(31,198		)	(13,654		)
Proceeds from sales of property, plant and equipment	2			26			14			37
Acquisition of business, net of cash acquired							(57,200		)	—
Purchases of certificates of deposit	(25,000		)	(50,500		)	(25,000		)	(57,250		)
Maturities of certificates of deposit	15,500			12,500			86,750			23,000
Investment in promotional displays	(978		)	(2,089		)	(1,721		)	(3,867		)
Net cash used by investing activities	(31,136		)	(50,417		)	(28,355		)	(51,734		)

FINANCING ACTIVITIES
Payments of long-term debt	(876		)	(854		)	(21,397		)	(1,290		)
Proceeds from long-term debt	734			2,003			734			2,687
Proceeds from issuance of common stock	1,286			2,241			1,286			2,359
Repurchase of common stock	(23,500		)	(10,443		)	(29,000		)	(13,407		)
Notes receivable, net	—			208			—			208
Withholding of employee taxes related to stock-based compensation	(2,779		)	(1,703		)	(2,779		)	(1,734		)
Debt issuance cost							(6,724		)	—
Net cash used by financing activities	(25,135		)	(8,548		)	(57,880		)	(11,177		)

Net decrease in cash and cash equivalents	(14,433		)	(18,819		)	(37,354		)	(11,247		)

Cash and cash equivalents, beginning of period	176,978			174,463			176,978			174,463

Cash and cash equivalents, end of period	$	162,545		$	155,644		$	139,624		$	163,216

See notes to condensed consolidated financial statements.


	Three Months Ended October 31,					Six Months Ended October 31,				Three Months Ended January 31,				Nine Months Ended January 31,
(in thousands)	2017			2016		2017		2016		2018		2017		2018		2017
Cost of sales and distribution	$	277		$	158	$	521	$	308	$	256	$	160	$	777	$	468
Selling and marketing (income) expenses	(44		)	250		202		501		183		253		385		755
General and administrative expenses	431			395		886		840		458		414		1,344		1,254
Stock-based compensation expense	$	664		$	803	$	1,609	$	1,649	$	897	$	827	$	2,506	$	2,477


	Fair Value Measurements						Fair Value Measurements
	As of October 31, 2017						As of January 31, 2018
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
ASSETS:
Money market funds	$	50,359	$	—	$	—
Certificates of deposit							$	10,500	$	—	$	—
Mutual funds	1,067		—		—		1,092		—		—
Certificates of deposit	81,750		—		—
Total assets at fair value	$	133,176	$	—	$	—	$	11,592	$	—	$	—

	As of April 30, 2017						As of April 30, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
ASSETS:
Money market funds	$	50,146	$	—	$	—	$	50,146	$	—	$	—
Mutual funds	1,038		—		—		1,038		—		—
Certificates of deposit	72,250		—		—		72,250		—		—
Total assets at fair value	$	123,434	$	—	$	—	$	123,434	$	—	$	—



	Share Repurchases
	Total Number of Shares Purchased	Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (000)
	(1)	Per Share		Programs	(1)
August 1 - 31, 2017	66,112	$	89.81	66,112	$	53,464
September 1 - 30, 2017	66,845	$	89.76	66,845	$	47,466
October 1 - 31, 2017	61,584	$	97.43	61,584	$	41,468
Quarter ended October 31, 2017	194,541	$	92.21	194,541	$	41,468



Exhibit Number	Description

2.1	Agreement and Plan of Merger, dated as of November 30, 2017, among RSI Home Products, Inc., American Woodmark Corporation, Alliance Merger Sub, Inc. and Ronald M. Simon, solely in his capacity as the Stockholder Representative (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K as filed on December 1, 2017; Commission File No. 000-14798).

3.1 (a)	Articles of Incorporation as amended effective August 12, 1987 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended January 31, 2003; Commission File No. 000-14798).

3.1 (b)	Articles of Amendment to the Articles of Incorporation effective September 10, 2004 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K as filed on August 31, 2004; Commission File No. 000-14798).

3.2	Bylaws – as amended and restated August 24, 2017 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended July 31, 2017; Commission File No. 000-14798).

4.1	The Articles of Incorporation and Bylaws of the Registrant as currently in effect (incorporated by reference to Exhibits 3.1 and 3.2).

4.2	Indenture, dated as of March 16, 2015, by and among RSI Home Products, Inc., the guarantors from time to time party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (Filed Herewith).

4.3	Supplemental Indenture, dated as of December 15, 2017, among RSI Home Products, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (Filed Herewith).

4.4	Second Supplemental Indenture, dated as of February 9, 2018, among RSI Home Products, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (Filed Herewith).

4.5	Indenture, dated as of February 12, 2018, among American Woodmark Corporation, the guarantors from time to time party thereto and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K as filed on February 14, 2018; Commission File No. 000-14798).

10.1	Credit Agreement, dated as of December 29, 2017, by and among American Woodmark Corporation, as Borrower, the Lenders referred to therein as Lenders and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuer Lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K as filed on January 5, 2018; Commission File No. 000-14798).

10.2	Collateral Agreement, dated as of December 29, 2017, by American Woodmark Corporation and certain of its subsidiaries, as Grantors, in favor of Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K as filed on January 5, 2018; Commission File No. 000-14798).

10.3	Joinder Agreement, dated as of February 12, 2018, by American Woodmark Corporation and each of its subsidiary named therein in favor of Wells Fargo Bank, National Association, as Administrative Agent, for the benefit of the Secured Parties (Filed Herewith).

10.4	Shareholders Agreement, dated as of November 30, 2017, by and among American Woodmark Corporation and the shareholders party thereto (Filed Herewith).

10.5	Commitment Letter, dated as of November 30, 2017, among American Woodmark Corporation, Wells Fargo Bank, National Association, and Wells Fargo Securities, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K as filed on December 1, 2017; Commission File No. 000-14798).

31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).

31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act (Filed Herewith).

32.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished Herewith).



101	Interactive Data File for the Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~January 31, ~~2017~~2018 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (Filed Herewith).



	/s/ M. Scott Culbreth
	M. Scott Culbreth
	Senior Vice President and Chief Financial Officer

	Date: ~~December 5, 2017~~March 12, 2018
	Signing on behalf of the registrant and
	as principal financial and accounting officer