AMERICAN WOODMARK CORP (Form: 10-Q, Received: 08/29/2012 13:54:45)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2012

o 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		(I.R.S. Employer
incorporation or organization)		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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ___ No X

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

As of August 27, 2012, 14,503,520 shares of the Registrant’s Common Stock were outstanding.

AMERICAN WOODMARK CORPORATION

FORM 10-Q

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION	NUMBER

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets--July 31, 2012 and April 30, 2012	3

	Condensed Consolidated Statements of Operations--Three months ended July 31, 2012 and 2011	4

	Condensed Consolidated Statements of Comprehensive Income – Three months ended July 31, 2012 and 2011	5

	Condensed Consolidated Statements of Cash Flows--Three months ended July 31, 2012 and 2011	6

	Notes to Condensed Consolidated Financial Statements--July 31, 2012	7-12

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12-17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	18

Item 1A.	Risk Factors	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 5.	Other Information	18-19

Item 6.	Exhibits	20


SIGNATURES		21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)


	July 31,			April 30,
	2012			2012

ASSETS
Current Assets
Cash and cash equivalents	$	60,800		$	66,620
Customer receivables, net		33,793			32,533
Inventories		24,478			22,340
Income taxes receivable and other		2,919			2,523
Deferred income taxes		9,792			7,086
Total Current Assets		131,782			131,102

Property, plant and equipment, net		73,501			75,375
Restricted cash		7,064			7,064
Promotional displays, net		5,373			5,073
Deferred income taxes		31,524			34,969
Other assets		11,474			11,538
TOTAL ASSETS	$	260,718		$	265,121

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	21,182		$	19,492
Current maturities of long-term debt		906			875
Accrued compensation and related expenses		17,836			21,963
Accrued marketing expenses		8,252			8,756
Other accrued expenses		7,426			8,135
Total Current Liabilities		55,602			59,221

Long-term debt, less current maturities		23,703			23,790
Defined benefit pension liabilities		48,986			50,547
Other long-term liabilities		1,476			1,543

Shareholders' Equity
Preferred stock, $1.00 par value; 2,000,000 shares authorized, none issued		--			--
Common stock, no par value; 40,000,000 shares authorized; issued and outstanding shares: at July 31, 2012: 14,451,964 at April 30, 2012: 14,395,273		96,434			96,205
Retained earnings		61,983			61,422
Accumulated other comprehensive loss -
Defined benefit pension plans		(27,466	)		(27,607	)
Total Shareholders' Equity		130,951			130,020
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	260,718		$	265,121

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended
	July 31,
	2012			2011

Net sales	$	148,252		$	131,199
Cost of sales and distribution		126,209			112,792
Gross Profit		22,043			18,407

Selling and marketing expenses		14,520			15,976
General and administrative expenses		5,639			6,341
Restructuring charges		777			15
Operating Income (Loss)		1,107			(3,925	)

Interest expense		151			137
Other income		(59	)		(154	)
Income (Loss) Before Income Taxes		1,015			(3,908	)

Income tax expense (benefit)		454			(1,192	)

Net Income (Loss)	$	561		$	(2,716	)

Net Earnings (Loss) Per Share

Weighted Average Shares Outstanding
Basic		14,415,608			14,299,683
Diluted		14,576,158			14,299,683

Net earnings (loss) per share
Basic	$	0.04		$	(0.19	)
Diluted	$	0.04		$	(0.19	)

Cash dividends per share	$	0.00		$	0.09

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


	Three Months Ended
	July 31,
	2012		2011

Net income (loss)	$	561	$	(2,716	)

Other comprehensive income, net of tax:
Change in pension benefits		141		331

Total Comprehensive Income (Loss)	$	702	$	(2,385	)

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three Months Ended
	July 31,
	2012			2011

OPERATING ACTIVITIES
Net income (loss)	$	561		$	(2,716	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization		3,873			5,974
Net (gain) loss on disposal of property, plant and equipment		(5	)		16
Gain on sales of assets held for sale		(57	)		--
Stock-based compensation expense		985			979
Deferred income taxes		416			(1,255	)
Pension contributions (in excess) less than expense		(1,330	)		1,825
Other non-cash items		(732	)		(297	)
Changes in operating assets and liabilities:
Customer receivables		(1,342	)		313
Inventories		(2,159	)		(766	)
Income taxes receivable and other assets		(632	)		(1,177	)
Accounts payable		1,690			(375	)
Accrued compensation and related expenses		(4,127	)		(759	)
Other accrued expenses		(913	)		2,446
Net Cash Provided (Used) by Operating Activities		(3,772	)		4,208

INVESTING ACTIVITIES
Payments to acquire property, plant and equipment		(2,185	)		(1,261	)
Proceeds from sales of property, plant and equipment		1			14
Proceeds from sales of assets held for sale		1,777			--
Investment in promotional displays		(1,456	)		(840	)
Net Cash Used by Investing Activities		(1,863	)		(2,087	)

FINANCING ACTIVITIES
Payments of long-term debt		(185	)		(154	)
Proceeds from issuance of common stock		--			18
Payment of dividends		--			(1,287	)
Net Cash Used by Financing Activities		(185	)		(1,423	)

Net Increase (Decrease) in Cash and Cash Equivalents		(5,820	)		698

Cash and Cash Equivalents, Beginning of Period		66,620			55,420

Cash and Cash Equivalents, End of Period	$	60,800		$	56,118

See notes to condensed consolidated financial statements.

AMERICAN WOODMARK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A--BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended July 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2013. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2012 filed with the U.S. Securities Exchange Commission (SEC).

NOTE B--NEW ACCOUNTING PRONOUNCEMENTS

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. Additionally, ASU 2011-05 eliminates the option to present comprehensive income and its components as part of the statement of shareholders’ equity. The ASU does not change the items that must be reported in other comprehensive income. The Company adopted this guidance effective May 1, 2012 and included a Statement of Comprehensive Income in the interim financial statements. The adoption of this guidance did not have a material effect on the Company’s financial position or results of operations.

NOTE C--EARNINGS (NET LOSS) PER SHARE

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


	Three Months Ended
	July 31,
(in thousands, except per share amounts)	2012		2011
Numerator used in basic and diluted net earnings (loss) per common share:
Net income (loss)	$	561	$	(2,716	)
Denominator:
Denominator for basic net earnings (loss) per common share -
weighted-average shares		14,416		14,300
Effect of dilutive securities:
Stock options and restricted stock units		160		--
Denominator for diluted net earnings (loss) per common share -
weighted-average shares and assumed conversions		14,576		14,300
Net earnings (loss) per share
Basic	$	0.04	$	(0.19	)
Diluted	$	0.04	$	(0.19	)

Potentially dilutive securities of 1.7 million and 2.0 million shares for the three-month periods ended July 31, 2012 and 2011, respectively, were excluded from the calculation of net earnings (loss) per share, as the effect would be anti-dilutive.

NOTE D--STOCK-BASED COMPENSATION

The Company has various stock compensation plans. During the quarter ended July 31, 2012, the Board of Directors of the Company approved grants of non-statutory stock options and service-based and performance-based restricted stock units to key employees. The Company granted non-statutory stock options to key employees for 125,000 shares of the Company’s common stock with an exercise price of $17.62 per share. The options vest evenly over a three-year period and have a ten-year contractual term. The Company granted 129,075 employee performance-based restricted stock units and 43,025 employee service-based restricted stock units. The performance-based restricted stock units 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 units entitle the recipients to receive one share of the Company’s common stock per unit granted if they remain continuously employed with the Company until the units vest. The Company’s restricted stock units granted to employees cliff-vest three years from the grant date.

For the three-month periods ended July 31, 2012 and 2011, stock-based compensation expense was allocated as follows:


	Three Months Ended
	July 31,
(in thousands)		2012		2011
Cost of sales and distribution		$	177	$	160
Selling and marketing expenses			241		202
General and administrative expenses			567		617
Stock-based compensation expense		$	985	$	979

NOTE E--CUSTOMER RECEIVABLES

The components of customer receivables were:


	July 31,			April 30,
(in thousands)	2012			2012
Gross customer receivables	$	35,914		$	34,572
Less:
Allowance for doubtful accounts		(140	)		(93	)
Allowance for returns and discounts		(1,981	)		(1,946	)

Net customer receivables	$	33,793		$	32,533

NOTE F--INVENTORIES

The components of inventories were:


	July 31,			April 30,
(in thousands)	2012			2012
Raw materials	$	10,214		$	9,412
Work-in-process		15,126			14,543
Finished goods		9,484			8,734

Total FIFO inventories		34,824			32,689

Reserve to adjust inventories to LIFO value		(10,346	)		(10,349	)

Total LIFO inventories	$	24,478		$	22,340

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 WARRANTY

The Company estimates outstanding warranty costs based on the historical relationship between warranty claims and revenues. The warranty accrual is reviewed monthly to verify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period. Adjustments are made when actual warranty claim experience differs from estimates. Warranty claims are generally made within three months of the original shipment date.

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


	Three Months Ended
	July 31,
(in thousands)	2012				2011
Beginning balance at May 1		$	1,885			$	1,738
Accrual			2,257				2,294
Settlements			(2,160	)			(2,148	)

Ending balance at July 31		$	1,982			$	1,884

NOTE H--CASH FLOW

Supplemental disclosures of cash flow information:


	Three Months Ended
	July 31,
(in thousands)	2012			2011
Cash paid during the period for:
Interest		$	97		$	92
Income taxes		$	110		$	135

NOTE I--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 cost consisted of the following for the three months ended July 31, 2012 and 2011.


	Three Months Ended
	July 31,
(in thousands)	2012				2011
Service cost		$	--			$	1,283
Interest cost			1,565				1,676
Expected return on plan assets			(1,641	)			(1,656	)
Amortization of net loss			231				522
Amortization of prior service cost			--				20

Net periodic pension cost		$	155			$	1,845

Based on the laws and assumptions as of April 30, 2012, the Company expects to contribute $7.3 million to its pension plans in fiscal 2013, which represents required funding. As of July 31, 2012, $1.5 million of contributions have been made. The Company made contributions of $2.9 million to its pension plans in fiscal 2012.

New legislation was passed in July 2012 that may have the effect of spreading the expected funding requirements for the Company’s pension plans over a longer period of time. The Company has not yet estimated the effect of the new law on its projected contributions to the pension plans as the rules to apply the new law are not yet available.

NOTE J—RESTRUCTURING CHARGES

In the third quarter of fiscal 2012, the continuing impact of the housing economy’s lengthy downturn caused the Company to announce a restructuring plan (“2012 Restructuring Plan”) that committed to the closing of two of the Company’s manufacturing plants located in Hardy County, West Virginia and Hazard, Kentucky, offering its previously idled plant in Tahlequah, Oklahoma for sale, and realigning its retirement program, including freezing the Company’s defined benefit pension plans. Operations ceased at the Hazard plant in April 2012 and at the Hardy County plant in May 2012. The 2012 Restructuring Plan was adopted to reduce costs, increase the Company’s capacity utilization rates and decrease overhead costs.

During fiscal 2012, the Company recognized pre-tax restructuring charges of $15.9 million related to the 2012 Restructuring Plan. During the quarter ended July 31, 2012, the Company recognized pre-tax restructuring charges of $0.8 million related to the 2012 Restructuring Plan. In addition, the Company recognized recurring operating costs for the closed facilities of $0.4 million for the three months ended July 31, 2012 that are expected to continue until the plants are sold.

A reserve for restructuring charges in the amount of $0.7 million is included in the Company’s consolidated balance sheet as of July 31, 2012 which primarily relates to severance costs accrued but not yet paid. Below is the summary of the restructuring reserve balance as of July 31, 2012:


2012 Restructuring Plan
(in thousands)

Restructuring reserve balance as of April 30, 2012	$	2,817
Additions		249
Payments		(2,380	)
Reserve balance as of July 31, 2012	$	686

The Company has a total of three manufacturing plants classified as held for sale; one plant that was idled in 2009, plus the two manufacturing plants closed in the 2012 Restructuring Plan. The Company believes that the $7.3 million net book value of the properties classified as held for sale is fully recoverable. These assets are included in Other Assets on the Company’s balance sheet at July 31, 2012.

NOTE K—FAIR VALUE MEASUREMENTS

The Company utilizes the hierarchy of fair value measurements to classify certain of its assets and liabilities based upon the following definitions:

Level 1- Investments with quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents are invested in money market funds, mutual funds and United States Treasury instruments. The Company’s mutual fund investment assets represent contributions made and invested on behalf of the Company’s named executive officers in a supplementary employee retirement plan.

Level 2- Investments with observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 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 following table summarizes the fair values of assets that are recorded in the Company’s unaudited condensed consolidated financial statements as of July 31, 2012 and April 30, 2012 at fair value on a recurring basis (in thousands):


	Fair Value Measurements
	As of July 31, 2012
		Level 1		Level 2		Level 3
ASSETS:
Money market funds		$	45,938	$	- -	$	- -
Mutual funds			1,301		- -		- -
Total assets at fair value		$	47,239	$	- -	$	- -

	As of April 30, 2012
		Level 1		Level 2		Level 3
ASSETS:
Money market funds		$	38,874	$	- -	$	- -
Mutual funds			1,357		- -		- -
Total assets at fair value		$	40,231	$	- -	$	- -

NOTE L--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. The Company accounts for these loss contingencies in accordance with ASC 450. Where losses are deemed to be probable and estimable, accruals are made. Where losses are deemed to be reasonably possible or remote, a range of loss estimates is determined and considered for disclosure. Where no loss estimate range can be made, the Company and its counsel perform a worst-case estimate. In determining these loss range estimates, the Company considers known values of similar claims and consults with independent counsel.

The Company believes that the aggregate range of loss stemming from the various suits and asserted and unasserted claims which were deemed to be either probable or reasonably possible was not material as of July 31, 2012.

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, 2012.

Forward-Looking Statements

This report contains statements concerning the Company’s expectations, plans, objectives, future financial performance, and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by words such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “would,” “plan,” “may” or other similar words. Forward-looking statements contained in this report, including 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. These include but are not limited to:

general economic or business conditions and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing, and (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;

·	the cyclical nature of the Company’s industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases, and the availability and terms of consumer credit;

·	economic weakness in a specific channel of distribution;

·	the loss of sales from specific customers due to their loss of market share, bankruptcy or switching to a competitor;

·	risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials as well as fuel, transportation, warehousing and labor costs and environmental compliance and remediation costs;

·	the need to respond to price or product initiatives launched by a competitor;

·	the Company’s ability to successfully implement initiatives related to increasing market share, new products, maintaining and increasing its sales force and new product displays; and

·	sales growth at a rate that outpaces the Company’s ability to install new capacity or a sales decline that requires reduction or realignment of the Company’s manufacturing capacity.

Additional information concerning the 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 also in the Company's most recent Annual Report on Form 10-K for the fiscal year ended April 30, 2012, filed with the SEC, including under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 1A, "Risk Factors," 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.

Overview

American Woodmark Corporation manufactures and distributes kitchen cabinets and vanities for the remodeling and new home construction markets. Its products are sold on a national basis directly to home centers, major builders and home manufacturers, and through a network of independent dealers and distributors. At July 31, 2012, the Company operated 9 manufacturing facilities and 9 service centers across the country.

The three-month period ended July 31, 2012 was the Company’s first quarter of its fiscal year that ends on April 30, 2013 (fiscal 2013). During the first quarter of fiscal 2013, housing market conditions remained far below levels experienced when the housing market peaked in 2006. Key measures such as single-family housing starts and the level of Gross Private Residential Fixed Investment reported by the U.S. Department of Commerce were less than half of their previous levels. However, several key indicators have begun or continued to trend positively during calendar 2012. Each of the trends listed below favorably impacted the housing market during the first quarter of the Company’s fiscal 2013:

·	Private sector employment increased during the first quarter of fiscal 2013, as it has in every month since March 2010, according to data provided by the U.S. Department of Labor;

·	Consumer confidence improved by 15% compared with one year ago, as reported by the University of Michigan;

·	Existing home sales levels and the median price per existing home sold improved from one year ago by 8% and by 6%, respectively, according to data provided by the National Association of Realtors; and

·	Single-family housing starts improved by 20% compared with one year ago, according to data provided by the U.S. Department of Commerce.

The Company sells its products to two separate sales channels within the housing market; remodeling and new construction. The Company believes there is no single indicator that directly correlates with cabinet remodeling market activity. For this reason, the Company considers several of the above indicators as well as several others, including mortgage interest rates and sales reported by the Kitchen Cabinet Manufacturers Association (KCMA), a trade organization which reports the aggregate sales that have been reported by its members, which include the largest cabinet manufacturers in the United States. Regarding new construction market activity for cabinets, the Company believes that fluctuations in single-family housing starts are the best indicator. During the first quarter of the Company’s fiscal 2013, single-family construction starts rose by 20% above prior year levels. During this same period, cabinet sales reported by KCMA’s members increased at a mid single-digit rate. Since the sales reported by KCMA’s members include both remodel and new construction sales, and because the increase in new construction starts likely drove a double-digit increase in new construction market cabinet sales, the Company believes that remodeling market cabinet sales declined at a single-digit rate during this period.

Faced with a declining remodeling market, the Company’s largest remodeling customers and competitors continued to utilize an elevated level of sales promotions in the Company’s product category to boost sales. These promotions consisted of free products and cash discounts to consumers based upon the amount and/or type of cabinets they purchased. Although some of the Company’s competitors have participated vigorously in these promotional activities, the Company has begun to ease the amount of its promotional offerings while continuing to remain competitive with its competitors. The Company’s remodeling sales during the first quarter of fiscal 2013 were roughly flat with prior year, in a market that appears to have declined by single-digits.

The Company continued to realize strong market share gains in its new construction channel, where sales increased by more than 40% in the first quarter of fiscal 2013 when compared to the same period of fiscal 2012, significantly outpacing the 20% improvement in single-family housing starts.

The Company’s total net sales rose by 13% during the first quarter of fiscal 2013, indicative of market share gains in both its remodeling and new construction sales channels. The Company’s sales increase helped its gross margin rate improve to 14.9% in the first quarter of fiscal 2013, compared with 14.0% in the prior year’s first quarter. The improvement in the Company’s gross margin during the three-month period was driven by reductions in fixed overhead costs associated with the plant closures and by the beneficial impact of increased sales volume. These beneficial factors were partially offset by operational inefficiencies connected with the transition of production related to the plant closures and by the unfavorable impact of higher material costs.

During the third quarter of its prior fiscal year, the Company announced several initiatives designed to reduce its manufacturing capacity and its cost base, including the permanent closure of two manufacturing plants, the decision to place a previously closed manufacturing facility for sale, and the realignment of its retirement program, including the freezing of its pension plans. The Company recorded restructuring charges of $15.9 million (pre-tax) and $10.0 million (after-tax) during fiscal 2012 and $0.8 million (pre-tax) and $0.5 million (after-tax) during the first quarter of fiscal 2013 in connection with these initiatives. Because the bulk of these restructuring efforts were completed at July 31, 2012, the Company expects that its future out-of-pocket costs will be reduced as the fiscal year progresses. The Company has listed each of the three manufacturing facilities that ceased production for sale. The three plants were classified as assets held for sale and included in “Other Assets” with an aggregate $7.3 million net book value in the Company’s July 31, 2012 balance sheet.

The Company regularly assesses its long-lived assets to determine if any impairment has occurred and regularly evaluates its deferred tax assets to determine whether a valuation allowance is necessary. The Company has concluded that none of the long-lived assets pertaining to its 9 manufacturing plants or any of its other long-lived assets were impaired and that no valuation allowance on its deferred tax assets was necessary as of July 31, 2012.

Exclusive of restructuring charges, the Company earned a net income of $1.0 million for the first quarter of fiscal 2013, compared with a net loss of $2.7 million in the first quarter of its prior fiscal year.

Results of Operations


	Three Months Ended
	July 31,
(in thousands)	2012		2011		Percent Change

Net sales	$	148,252	$	131,199		13	%
Gross profit		22,043		18,407		20
Selling and marketing expenses		14,520		15,976		(9	)
General and administrative expenses		5,639		6,341		(11	)

Net Sales . Net sales were $148.3 million for the first quarter of fiscal 2013, an increase of 13% compared with the comparable period of the prior fiscal year. Overall unit volume for the three-month period ended July 31, 2012 improved by 9%, while average revenue per unit increased 4%, driven by modest improvements in the Company’s sales mix and pricing.

Gross Profit. Gross profit margin for the first quarter of fiscal 2013 was 14.9%, compared with 14.0% for the comparable period of the prior fiscal year. The improvement in gross profit margin was due primarily to the beneficial impact of higher sales volume and the reduction in fixed overhead costs associated with the Company’s two plant closures in April and May of 2012. This favorability was partially offset by an increase in material and freight costs. Specific changes and additional information included:

Overhead and labor costs improved by a combined 3.3% of net sales in the first quarter of fiscal 2013 compared with the comparable prior year period, as increased sales volume caused increased absorption of fixed overhead costs. The recent plant closures caused overhead costs to be reduced; however this favorable impact was partially offset by labor inefficiencies that were driven by the transition of production related to the recent plant closures during a period of rising sales volume;

Materials and freight costs increased as a percentage of net sales by 2.4% during the first quarter of fiscal 2013 compared with the comparable prior year period, driven primarily by inflationary pressures in finishing materials, lumber, cartons, imported components, and diesel fuel, as well as production inefficiencies resulting from the recent plant closures.

Selling and Marketing Expenses . Selling and marketing expenses were 9.8% of sales in the first quarter of fiscal 2013, compared with 12.2% of sales for the comparable period of the prior fiscal year. Sales and marketing costs decreased by 9% in relation to the 13% increase in net sales during the first quarter of fiscal 2013, due to cost reductions related to the Company’s retirement plan changes, as well as reduced spending on product displays and dealer sales promotions.

General and Administrative Expenses. General and administrative expenses were 3.8% of sales in the first quarter of fiscal 2013, compared with 4.8% of sales for the comparable period of the prior fiscal year. General and administrative costs were reduced by 11% during the first quarter of fiscal 2013 compared with the prior year, driven by the aforementioned retirement plan changes, as well as reduced incentive-based compensation expenses. As of July 31, 2012, the Company had approximately $0.1 million of accounts with aggregate receivables from customers with a higher perceived level of risk.

Effective Income Tax Rates. The Company’s effective income tax rate for the first quarter of fiscal 2013 was 44.7%, compared with 30.5% in the comparable period of the prior fiscal year. The higher effective tax rate in fiscal 2013 was the result of relatively consistent amounts of permanent tax differences in relation to the net income generated in the first quarter of fiscal 2013 as compared with the net loss generated in the prior year’s first quarter.

Outlook. The Company expects that housing prices will finally bottom during its fiscal year 2013 and begin to improve over prior year levels for the first time in several years. The Company expects that cabinet sales in the remodeling market will correlate with house pricing activity and be relatively flat during fiscal 2013. The Company expects that its remodeling sales will grow at a rate that slightly exceeds that of the remodeling market.

The Company expects that single-family housing starts and new construction cabinet market sales will grow in the low teens during its fiscal year 2013, and that the Company’s new construction sales growth will slightly exceed this level for the remainder of its fiscal year.

Because both the Company’s first quarter sales increase and its market outlook have exceeded its expectations, the Company now expects that it has the opportunity to operate profitably for the remainder of fiscal 2013, even though the entirety of the benefits derived from its restructuring initiatives may be delayed by several months.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash, cash equivalents and restricted cash totaled $67.9 million at July 31, 2012, representing a $5.8 million decrease from its April 30, 2012 balance, and a $2.6 million decrease from July 31, 2011. At July 31, 2012, total long-term debt (including current maturities) was $24.6 million, down $0.1 million from its balance at April 30, 2012 and down $0.8 million from July 31, 2011. The Company’s ratio of long-term debt to total capital was 15.3% at July 31, 2012 compared with 15.5% at April 30, 2012.

The Company’s main source of liquidity is its existing cash and cash equivalents on hand and cash generated from its operating activities. The Company maintains a $35 million secured revolving credit facility with Wells Fargo Bank, N.A. (Wells Fargo). Pursuant to the terms of the Wells Fargo credit facility, $7.1 million of the Company’s cash served as security for borrowings under this facility and was classified as restricted cash at both July 31, 2012 and April 30, 2012.

Cash used by operating activities in the first three months of fiscal 2013 was $3.8 million, compared with cash provided by operating activities of $4.2 million in the comparable period of fiscal 2012. The decrease in cash generated by operating activities was driven primarily by plant closure and severance payments related to the recently completed restructuring activities, by resumption in funding the Company’s pension plans, and by incentive compensation payments pertaining to the prior year. The aggregate incremental impact of these items exceeded $6 million.

The Company’s investing activities primarily consist of capital expenditures and investments in promotional displays. Net cash used for capital expenditures and promotional displays was $1.9 million in the first three months of fiscal 2013, compared with $2.1 million in the comparable period of fiscal 2012. The decrease of $0.2 million was driven by the receipt of $1.8 million in proceeds received from the sale of equipment from the closed plants, partly offset by increases of $0.9 million in outflows for capital expenditures and $0.6 million for promotional displays. The Company expects its gross investments in capital expenditures and promotional displays for fiscal 2013 will increase to approximately $14 million for fiscal 2013, up from $9.9 million in fiscal 2012, driven by machinery and equipment enhancements to enable production volume to increase, and by increasing the number of sales display units deployed.

The Company generated negative free cash flow (defined as net cash provided by operating activities less net cash used for investing activities) of $5.6 million in the first three months of fiscal 2013, compared with positive free cash flow of $2.1 million in the first three months of fiscal 2012. The Company’s free cash flow declined by $7.7 million during the first three months of fiscal 2013, driven by the reduction in cash flow from operating activities.

During the first three months of fiscal 2013, net cash used for financing activities was $0.2 million, compared with $1.4 million of net cash used in the comparable period of the prior fiscal year. The Company discontinued its dividend after making its payment in the first quarter of the prior fiscal year, which reduced the Company’s outflow during the current fiscal year. The Company made no repurchases of its common stock during either period and had $93.3 million of remaining stock repurchases authorized by its Board of Directors as of July 31, 2012.

The Company can borrow up to $35 million under the Wells Fargo credit facility; however, the Company must maintain cash and specified investments held in accounts pledged to Wells Fargo having a collateral value of at least 50% of the Company’s aggregate indebtedness and other obligations to Wells Fargo. At July 31, 2012, $10 million of loans and $3.7 million of letters of credit were outstanding under the Wells Fargo facility and $7.1 million of the Company’s cash was held as security.

On May 29, 2012, the Company and Wells Fargo amended the credit facility and its related security arrangements. These modifications reduced the amount of the Company’s cash and securities that is required to be held as security from 100% to 50% of the Company’s outstanding indebtedness and other obligations to Wells Fargo. As a result, the Company’s restricted cash was reduced to its present level of $7.1 million, and the Company agreed to pledge substantially all of its assets as security for the Company’s indebtedness and other obligations to Wells Fargo. Other amendments to the credit facility (a) reduced the allowable ratio of the Company’s total liabilities to its tangible net worth to a maximum of 1.4 to 1.0 at the end of each fiscal quarter (on a rolling four quarter basis), (b) added a requirement for the Company to maintain a cash flow to fixed charges ratio of not less than 1.25 to 1.0 at the end of each fiscal quarter, and (c) added a requirement that the Company maintain an asset coverage ratio of not less than 1.47 to 1.0 at the end of each calendar month.

The Company was in compliance with all covenants specified in the amended credit facility as of July 31, 2012, as follows: (a) the Company’s ratio of total liabilities to tangible net worth at July 31, 2012 was 1.0 to 1.0; (b) cash flow to fixed charges was 1.64 to 1.0; and (c) its asset coverage ratio as of July 31, 2012 was 5.06 to 1.0.

The credit facility does not limit the Company’s ability to use unrestricted cash to pay dividends or repurchase its common stock.

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 and promotional displays for fiscal 2013.

The timing of the Company’s contractual obligations as of April 30, 2012 is summarized in the table below.


	FISCAL YEARS ENDED APRIL 30
(in thousands)	Total Amounts		2013			2014-2015		2016-2017	2018 and Thereafter

Revolving credit facility	$	10,000	$	--	$	10,000	$	--	$	--
Economic development loans		3,524		--		--		2,234		1,290
Term loans		3,858		328		718		804		2,008
Capital lease obligations		7,283		547		1,131		1,140		4,465
Interest on long-term debt (a)		2,460		480		902		599		479
Operating lease obligations		13,729		3,665		6,206		3,803		55
Pension contributions (b)		30,410		7,350		11,970		11,090		--

Total	$	71,264	$	12,370	$	30,927	$	19,670	$	8,297

(a)

Interest commitments under interest bearing debt consist of interest under the Company’s primary loan agreement, term loans and capitalized lease agreements. Amounts outstanding under the Company’s revolving credit facility, $10 million at April 30, 2012, bear a variable interest rate determined by the London Interbank Offered Rate (LIBOR) plus 1.25%. Interest under the Company’s term loans and capitalized lease agreements is fixed at rates between 2% and 6.5%. Interest commitments under interest bearing debt for the Company’s revolving credit facility are at LIBOR plus the spread in effect as of April 30, 2012, throughout the remaining term of the facility.

(b)

The estimated cost of the Company’s two defined benefit pension plans is determined annually based upon the discount rate and other assumptions at fiscal year end. Future pension funding contributions beyond 2017 have not been determined at this time. New legislation was passed in July 2012 that may have the effect of spreading the expected funding requirements for the Company’s pension plans over a longer period of time. The Company has not yet estimated the effect of the new law on its projected contributions to the pension plans as the rules to apply the new law are not yet available.

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 Company’s critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Since the fiscal year ended April 30, 2012, the Company had no material exposure to changes in interest rates for its debt agreements.

The Company does not currently use commodity or interest rate derivatives or similar financial instruments to manage its commodity price or interest rate risks. See “Seasonal and Inflationary Factors” in Management’s Discussion and Analysis of Financial Condition and Results of Operations above for additional information regarding the effects inflation and commodity price fluctuations have on the costs of the Company’s products.

Item 4. Controls and Procedures

Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of July 31, 2012. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective. In addition, there has been no change in the Company's internal control over financial reporting that occurred during the quarter ended July 31, 2012 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Risk factors that may affect the Company’s business, results of operations and financial condition are described in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012. Additional risks are discussed elsewhere in this report, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Forward-Looking Statements” and “Outlook.”

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

On August 24, 2007, the Company announced that the Company’s Board of Directors approved the repurchase of up to $100 million of the Company’s common stock. This authorization has no expiration date. In the first quarter of fiscal 2013, the Company did not repurchase any shares under this authorization. At July 31, 2012, $93.3 million remained authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock.

Item 5. Other Information

Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Shareholders of American Woodmark Corporation held on August 23, 2012, the holders of 12,871,247 of the 14,395,273 shares of the Company’s common stock outstanding voted on one or more matters either in person at the meeting or by duly executed and delivered proxies. The shareholders approved the three items outlined in the Company’s Proxy Statement that was sent to shareholders and filed with the SEC in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended.

The following items were approved at the Company’s Annual Meeting:


	Votes		Votes		Votes		Broker
	"FOR"		"AGAINST"		"ABSTAINED"		"NON-VOTES"

1. Election of the Board of Directors:
William F. Brandt, Jr.		12,181,240		166,814		529		522,664
Andrew B. Cogan		12,193,170		154,761		652		522,664
Martha M. Dally		12,023,499		324,366		718		522,664
James G. Davis, Jr.		12,193,144		154,712		727		522,664
Kent B. Guichard		12,113,569		230,762		4,252		522,664
Daniel T. Hendrix		12,096,312		250,619		1,652		522,664
Kent J. Hussey		12,179,071		168,785		727		522,664
Carol B. Moerdyk		12,192,073		154,858		1,652		522,664
Vance W. Tang		12,096,381		250,475		1,727		522,664

2. Ratification of Selection of Independent Registered Public Accounting Firm		12,717,162		150,838		3,247		- -

3. Advisory Vote to Approve Executive Compensation		12,035,655		256,435		54,282		524,875

Item 6. Exhibits


Exhibit Number	Description

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 December 14, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K for the fiscal year ended April 30, 2010; 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	Amended and Restated Stockholder’s Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-1 for the fiscal year ended April 30, 1986; Commission File No. 33-6245). Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders of the Registrant’s long-term debt securities, where the long-term debt securities authorized under each such instrument do not exceed 10 percent of the Registrant’s total assets, have been omitted and will be furnished to the Securities and Exchange Commission on request.

10.1	Security Agreement (Financial Assets), dated as of April 26, 2012, made by the Company in favor of Wells Fargo Bank, N.A. (Filed Herewith).

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 (Filed Herewith).

101	Interactive Data File for the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (Filed Herewith).#

# Under Rule 406T of Regulation S-T, this exhibit is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.

SIGNATURES

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

AMERICAN WOODMARK CORPORATION

(Registrant)





	/s/Jonathan H. Wolk
	Jonathan H. Wolk
	Senior Vice President and Chief Financial Officer

	Date: August 29, 2012
	Signing on behalf of the
	registrant and as principal
	financial and accounting officer

EXHIBIT INDEX

Exhibit Number	Description

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 December 14, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K for the fiscal year ended April 30, 2010; 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	Amended and Restated Stockholder’s Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-1 for the fiscal year ended April 30, 1986; Commission File No. 33-6245). Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments that define the rights of holders of the Registrant’s long-term debt securities, where the long-term debt securities authorized under each such instrument do not exceed 10 percent of the Registrant’s total assets, have been omitted and will be furnished to the Securities and Exchange Commission on request.

10.1	Security Agreement (Financial Assets), dated as of April 26, 2012, made by the Company in favor of Wells Fargo Bank, N.A. (Filed Herewith).

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 (Filed Herewith).

101	Interactive Data File for the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (Filed Herewith).#

SECURITY AGREEMENT

(Financial Assets)

This Security Agreement (“Agreement”) to be effective as of April 26, 2012.

GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned AMERICAN WOODMARK CORPORATION, a Virginia corporation , or any of them ("Debtor"), hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association having offices at 1021 East Cary Street, Richmond, Virginia 23219 ("Bank"), a security interest in: (a) Debtor's money market account no. (s ): 4122307325 maintained at Bank ( whether held in Debtor's name or as a Bank collateral account for the benefit of Debtor), any sub-account thereunder or consolidated therewith, and all replacements or substitutions therefor, including any account resulting from a renumbering or other administrative re-identification thereof (such accounts each and collectively being, the "Securities Account", and the parties at which the Securities Accounts are maintained each and collectively being, the "Intermediary"), (b) all financial assets credited to the Securities Account (c) all security entitlements with respect to the financial assets credited to the Securities Account, and (d) any and all other investment property or assets maintained or recorded in the Securities Account, (with all the foregoing collectively defined as "Collateral"), together with whatever is receivable or received when any of the Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, (i) all rights to payment, including returned premiums, with respect to any insurance relating to any of the foregoing, (ii) all rights to payment with respect to any claim or cause of action affecting or relating to any of the foregoing, and (iii) all stock rights, rights to subscribe, stock splits, liquidating dividends, cash dividends, dividends paid in stock, new securities or other property of any kind which Debtor is or may hereafter be entitled to receive on account of any securities pledged hereunder, including without limitation, stock received by Debtor due to stock splits or dividends paid in stock or sums paid upon or in respect of any securities pledged hereunder upon the liquidation or dissolution of the issuer thereof (hereinafter called "Proceeds"). Except as otherwise expressly permitted herein, in the event Debtor receives any such Proceeds, Debtor will hold the same in trust on behalf of and for the benefit of Bank and will immediately deliver all such Proceeds to Bank in the exact form received, with the endorsement of Debtor if necessary and/or appropriate undated stock powers duly executed in blank, to be held by Bank as part of the Collateral, subject to all terms hereof. As used herein, the terms "security entitlement," "financial asset" and "investment property" shall have the respective meanings set forth in the Virginia Uniform Commercial Code.

OBLIGATIONS SECURED . The obligations secured hereby are the payment and performance of: (a) all present and future Indebtedness of Debtor, or any of them (“Obligor”) to Bank and all extensions, renewals or modifications thereof, and restatements or substitutions therefor; (b) all obligations of Debtor and rights of Bank under this Agreement ; and (c) all present and future obligations of Debtor to Bank of other kinds. The word "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. EXCLUSIONS FROM COLLATERAL. Notwithstanding anything herein to the contrary, the terms "Collateral" and "Proceeds" do not include, and Bank disclaims a security interest in, all Collective Investment Funds now or hereafter maintained in the Securities Account. "Collective Investment Funds" means collective investment funds as described in 12 CFR 9.18 and includes, without limitation, common trust funds maintained by Bank for the exclusive use of its fiduciary clients. In addition, Bank may, at its sole discretion and at any time upon written notice to Debtor, release Bank’s security interest in any WF Securities in the Collateral or Proceeds and exclude WF Securities from the determination of value requirements to which the Collateral is subject to hereunder. Such release, if any, shall not relieve Debtor from the obligation to satisfy any value requirement set forth herein. As used

WM-QuickForms-SA/FA (1/10/12)

Obligor # ____________, AU # ____________

Deal # ____________, Facility # ____________

-1-

herein, "WF Securities" means stock, securities or obligations of Wells Fargo & Company or of any affiliate thereof (as the term affiliate is defined in Section 23A of the Federal Reserve Act (12 USC 371(c), as amended from time to time).

CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS . This is a continuing agreement and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Obligors to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Obligors or Debtor or any other event or proceeding affecting any of the Obligors or Debtor. As to any of Debtor that are not also an Obligor, this Agreement shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Obligors after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Obligors or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office set forth above, or at such other address as Bank shall from time to time designate. The obligations of Debtor hereunder shall be in addition to any obligations of Debtor under any other grants or pledges of security for any liabilities or obligations of any of the Obligors or any other person heretofore or hereafter given to Bank unless said other grants or pledges of security are expressly modified or revoked in writing; and this Agreement shall not, unless expressly herein provided, affect or invalidate any such other grants or pledges of security.

OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Obligors, and a separate action or actions may be brought and prosecuted against Debtor whether action is brought against any of the Obligors or any other person, or whether any of the Obligors or any other person is joined in any such action or actions. Debtor acknowledges that this Agreement is absolute and unconditional, there are no conditions precedent to the effectiveness of this Agreement, and this Agreement is in full force and effect and is binding on Debtor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Debtor . To the extent permitted by applicable law, Debtor waives the benefit of any statute of limitations affecting Debtor's liability hereunder or the enforcement thereof, and Debtor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Debtor's liability hereunder. The liability of Debtor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent that for any reason any amount at any time paid on account of any Indebtedness secured hereby is rescinded or must be otherwise restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Debtor, Debtor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel to the extent permissible), expended or incurred by Bank in connection therewith , including without limitation, in any litigation with respect thereto.

TERMINATION. This Agreement will terminate upon the performance of all obligations of Debtor to Bank secured hereby, including without limitation, the indefeasible payment and satisfaction in full of all Indebtedness of Debtor to Bank, and the termination of all commitments of Bank to extend credit to Debtor.

OBLIGATIONS OF BANK. Any money received by Bank in respect of the Collateral may be deposited, at Bank's option, into a non-interest bearing account over which Debtor shall have no control, and the same shall, for all purposes, be deemed Collateral hereunder. Bank shall have no duty to take any steps necessary to preserve the rights of Debtor against prior parties, or to initiate any action to protect against

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the possibility of a decline in the market value of the Collateral or Proceeds. Bank shall not be obligated to take any actions with respect to the Collateral or Proceeds requested by Debtor unless such request is made in writing and Bank determines, in its sole discretion, that the requested action would not unreasonably jeopardize the value of the Collateral and Proceeds as security for the Indebtedness.

REPRESENTATIONS AND WARRANTIES.

(a) Debtor represents and warrants to Bank that: ( i ) Debtor's legal name is exactly as set forth on the first page and Debtor’s signature line of this Agreement, and all of Debtor 's organizational documents or agreements delivered to Bank are complete and accurate in every respect and Debtor is registered as an organization in good standing under the laws of the jurisdiction set forth therein; (ii) Debtor’s chief executive office is located at 3102 Shawnee Drive, Winchester, VA 22601; ( ii i ) Debtor is the owner of the Collateral and Proceeds; ( i v ) Debtor has the exclusive right to grant a security interest in the Collateral and Proceeds; ( v ) all Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created hereby or as otherwise agreed to by Bank, or heretofore disclosed by Debtor to Bank, in writing; ( v i ) all statements contained herein and, where applicable, in the Collateral, are true and complete in all material respects; ( vi i ) no financing statement or control agreement covering any of the Collateral or Proceeds, and naming any secured party other than Bank, exists or is on file in any public office or remains in effect; ( viii ) no person or entity, other than Debtor, Bank and Intermediary, has any interest in or control over the Collateral; and ( ix ) specifically with respect to Collateral and Proceeds consisting of investment securities, instruments, chattel paper, documents, contracts, insurance policies or any like property, all persons appearing to be obligated thereon have authority and capacity to contract and are bound as they appear to be, and the same comply with applicable laws concerning form, content and manner of preparation and execution.

(b) Each of Debtor who are not also the Obligor, further represent and warrant to Bank that: (i) the Collateral pledged hereunder is so pledged at Obligors’ request; (ii) Bank has made no representation to Debtor as to the creditworthiness of any of the Obligors; and (iii) Debtor has established adequate means of obtaining from each of the Obligors on a continuing basis financial and other information pertaining to Obligors’ financial condition. Debtor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Debtor's risks hereunder, and Debtor further agrees that Bank shall have no obligation to disclose to Debtor any information or material about any of the Obligors which is acquired by Bank in any manner.

COVENANTS OF DEBTOR.

(a) Debtor agrees in general: (i) to indemnify Bank against all losses, claims, demands, liabilities and expenses of every kind caused by property subject hereto; ( ii ) to permit Bank to exercise its powers; ( iii ) to execute and deliver such documents as Bank deems necessary to create, perfect and continue the security interests contemplated hereby; ( iv ) not to change Debtor's name, and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered without giving Bank prior written notice thereof; ( v ) not to change the places where Debtor keeps any of the Collateral or Debtor 's records concerning the Collateral and Proceeds without giving Bank prior written notice of the address to which Debtor is moving same ; and ( vi ) to cooperate with Bank in perfecting all security interests granted herein and in obtaining such agreements from third parties as Bank deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of any of its rights hereunder.

(b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in writing: (i) that Bank is authorized to file financing statements in the name of Debtor to perfect Bank's security interest in Collateral and Proceeds; (ii) not to permit any security interest in or lien on the Collateral or Proceeds, except in favor of Bank and except liens in favor of Intermediary to the extent expressly permitted by Bank in writing; (iii) not to hypothecate or permit the transfer by operation of law of any of the Collateral or Proceeds or any interest therein; (iv) to keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral and Proceeds, and to permit

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Bank to inspect the same and make copies thereof at any reasonable time; (v) if requested by Bank following the occurrence of an Event of Default, to receive and use reasonable diligence to collect Proceeds, in trust and as the property of Bank, and to immediately endorse as appropriate and deliver such Proceeds to Bank daily in the exact form in which they are received together with a collection report in form satisfactory to Bank; (vi) in the event Bank elects to receive payments of Collateral or Proceeds hereunder, to pay all expenses incurred by Bank in connection therewith, including expenses of accounting, correspondence, collection efforts, reporting to account or contract debtors, filing, recording, record keeping and expenses incidental thereto; (vii) to provide any service and do any other acts which may be necessary to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims; and (viii) if the Collateral or Proceeds consists of securities and so long as no Event of Default exists, to vote said securities and to give consents, waivers and ratifications with respect thereto, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would impair Bank's interest in the Collateral and Proceeds or be inconsistent with or violate any provisions of this Agreement. Debtor further agrees that any party now or at any time hereafter authorized by Debtor to advise or otherwise act with respect to the Securities Account shall be subject to all terms and conditions contained herein and in any control, custodial or other similar agreement at any time in effect among Bank, Debtor and Intermediary relating to the Collateral.

POWERS OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Bank's officers and employees, or any of them, if an Event of Default has occurred and is continuing: (a) to perform any obligation of Debtor hereunder in Debtor 's name or otherwise; (b) to notify any person obligated on any security, instrument or other document subject to this Agreement of Bank's rights hereunder; (c) to collect by legal proceedings or otherwise all dividends, interest, principal or other sums now or hereafter payable upon or on account of the Collateral or Proceeds; (d) to enter into any extension, modification, reorganization, deposit, merger or consolidation agreement, or any other agreement relating to or affecting the Collateral or Proceeds, and in connection therewith to deposit or surrender control of the Collateral and Proceeds, to accept other property in exchange for the Collateral and Proceeds, and to do and perform such acts and things as Bank may deem proper, with any money or property received in exchange for the Collateral or Proceeds, at Bank's option, to be applied to the Indebtedness or held by Bank under this Agreement; (e) to make any compromise or settlement Bank deems desirable or proper in respect of the Collateral and Proceeds; (f) to insure, process and preserve the Collateral and Proceeds; (g) to exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto; and (h) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Bank as necessary, proper or convenient in connection with the preservation, perfection or enforcement of its rights hereunder. To effect the purposes of this Agreement or otherwise upon instructions of Debtor, Bank may cause any Collateral and/or Proceeds to be transferred to Bank's name or the name of Bank's nominee. If an Event of Default has occurred and is continuing, any or all Collateral and/or Proceeds consisting of securities may be registered, without notice, in the name of Bank or its nominee, and thereafter Bank or its nominee may exercise, without notice, all voting and corporate rights at any meeting of the shareholders of the issuer thereof, any and all rights of conversion, exchange or subscription, or any other rights, privileges or options pertaining to such Collateral and/or Proceeds, all as if it were the absolute owner thereof. The foregoing shall include, without limitation, the right of Bank or its nominee to exchange, at its discretion, any and all Collateral and/or Proceeds upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, or upon the exercise by the issuer thereof or Bank of any right, privilege or option pertaining to any shares of the Collateral and/or Proceeds, and in connection therewith, the right to deposit and deliver any and all of the Collateral and/or Proceeds with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as Bank may determine. All of the foregoing rights, privileges or options may be exercised without liability on the part of Bank or its nominee except to account for property actually received by Bank. Bank shall have no duty to exercise any of the foregoing, or any other rights, privileges or options with respect to the Collateral or Proceeds and shall not be responsible for any failure to do so or delay in so doing.

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DEBTOR'S WAIVERS.

(a) Debtor waives any right to require Bank to: (i) proceed against any of the Obligors or any other person ; (ii) marshal assets or proceed against or exhaust any security held from any of the Obligors or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Obligors or any other person; (iv) take any other action or pursue any other remedy in Bank's power; (v) make any presentment or demand for performance, or any notices of any kind, including without limitation, any notice of nonpayment or nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed or secured hereunder, or in connection with the creation of new or additional Indebtedness; or (vi) to set off against the Indebtedness the fair value of any real or personal property given as collateral for the Indebtedness .

(b) Debtor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Obligors or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Obligors or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Obligors which is a corporation, partnership or other type of entity, or any defect in the formation of any such Obligor; (iv) the application by any of the Obligors of the proceeds of any Indebtedness for purposes other than the purposes represented by Obligors to, or intended or understood by, Bank or Debtor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Obligors or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Obligors; (vi) any impairment of the value of any interest in the Collateral or Proceeds, or any other security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that a party to this Agreement give any notice of acceptance of this Agreement. Until all Indebtedness shall have been paid in full, Debtor shall have no right of subrogation, and Debtor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Obligors or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Debtor further waives all rights and defenses Debtor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Debtor's rights of subrogation or Debtor's rights to proceed against any of the Obligors for reimbursement, or (B) any loss of rights Debtor may suffer by reason of any rights, powers or remedies of any of the Obligors in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Obligors' Indebtedness, whether by operation of law, or otherwise, including any rights Debtor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness , and Debtor waives any rights Debtor may have under Sections 49-25 and 49-26 of the Code of Virginia (1950), as amended, including any right to require Bank to proceed against Obligor or any collateral that secures the Indebtedness.

AUTHORIZATIONS TO BANK. Debtor authorizes Bank either before or after revocation hereof, without notice to or demand on Debtor, and without affecting Debtor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security, other than the Collateral and Proceeds, for the payment of the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release the Collateral and Proceeds, or any part thereof, or any such other security; (c) apply the Collateral and

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Proceeds or such other security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Obligors to any Indebtedness of any of the Obligors to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Agreement, and Debtor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Agreement in whole or in part.

PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations of Debtor to Bank, due and payable immediately upon demand, together with interest at a rate determined in accordance with the provisions of this Agreement, shall be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement.

EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) any default in the payment or performance of any obligation, or any defined event of default, under (i) any contract or instrument evidencing any Indebtedness, (ii) any other agreement between any of the Obligors and Bank, including without limitation any loan agreement, relating to or executed in connection with any Indebtedness, or (iii) any control, custodial or other similar agreement in effect among Bank, Debtor and Intermediary relating to the Collateral; (b) any representation or warranty made by Debtor herein shall prove to be incorrect in any material respect when made; (c) Debtor shall fail to observe or perform any obligation or agreement contained herein; (d) any impairment of any rights of Bank in any Collateral or Proceeds, or any attachment or like levy on any property of Debtor; and (e) Bank, in good faith, believes any or all of the Collateral and/or Proceeds to be in danger of misuse, dissipation, commingling, loss, theft, damage or destruction, or otherwise in jeopardy or unsatisfactory in character or value.

REMEDIES. Upon the occurrence of any Event of Default, Bank shall have and may exercise without demand any and all rights, powers, privileges and remedies granted to a secured party upon default under the Virginia Uniform Commercial Code or otherwise provided by law, including without limitation, the right (a) to contact Intermediary and to instruct Intermediary to deliver all Collateral and/or Proceeds directly to Bank, and (b) to sell, lease, license or otherwise dispose of any or all Collateral and to give such withdrawal and/or redemption notices as may be required with respect to any of the Collateral. All rights, powers, privileges and remedies of Bank shall be cumulative. No delay, failure or discontinuance of Bank in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. It is agreed that public or private sales or other disposition, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auctions, are all commercially reasonable since differences in the prices generally realized in the different kinds of dispositions are ordinarily offset by the differences in the costs and credit risks of such dispositions. While an Event of Default exists: (a) Debtor will not dispose of any Collateral or Proceeds except on terms approved by Bank; (b) Bank may appropriate the Collateral and apply all Proceeds toward repayment of the Indebtedness in such order as Bank may from time to time elect; (c) Bank may take any action with respect to the Collateral contemplated by any control, custodial or other similar agreement then in effect among Bank, Debtor and Intermediary; and (d) at Bank's request, Debtor will assemble and deliver all Collateral, and books and records pertaining to the Collateral or Proceeds to Bank at a reasonably convenient place designated by Bank. For any Collateral or Proceeds consisting of securities, Bank shall b e under no obligation to delay a sale or other disposition of any portion thereof for the period of time necessary to permit the issuer thereof to register such securities for public sale under any applicable state or federal law, even if the issuer thereof would agree to do so. Debtor further agrees that Bank shall have no obligation to process or prepare any Collateral for sale or other disposition.

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DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of Collateral hereunder, Bank may disclaim all warranties of title, possession, quiet enjoyment and the like. Any proceeds of any disposition of any Collateral or Proceeds, or any part thereof, may be applied by Bank to the payment of expenses incurred by Bank in connection with the foregoing, including reasonable attorneys' fees, and the balance of such proceeds may be applied by Bank toward the payment of the Indebtedness in such order of application as Bank may from time to time elect. Upon the transfer of all or any part of the Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds and shall be fully discharged thereafter from all liability and responsibility with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred, Bank shall retain all rights, powers, privileges and remedies herein given.

NOTICES. All notices, requests and demands required under this Agreement must be in writing, addressed to Bank at the address specified above and to Debtor at the address of its chief executive office specified above or to such other address as any party may designate by written notice to each other party, and shall be deemed to have been given or made as follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including, to the extent permitted by applicable law, reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel to the extent permissible), incurred by Bank in connection with (a) the perfection and preservation of the Collateral or Bank's interest therein, and (b) the realization, enforcement and exercise of any right, power, privilege or remedy conferred by this Agreement, whether or not suit is brought or foreclosure is commenced, and if suit is brought whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Debtor or in any way affecting any of the Collateral or Bank's ability to exercise any of its rights or remedies with respect thereto . All of the foregoing shall be paid by Debtor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or the Prime rate in effect from time to time.

SUCCESSORS; ASSIGNMENT . This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties ; provided however, that Debtor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent. Debtor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Obligors to Bank and any obligations with respect thereto, including this Agreement. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Debtor and/or this Agreement, whether furnished by Obligors, Debtor or otherwise. Debtor further agrees that Bank may disclose such documents and information to Obligors.

AMENDMENT. This Agreement may be amended or modified only in writing signed by Bank and Debtor.

APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Obligor, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Obligor named herein or when this Agreement is executed by more than one Debtor, the word "Obligors" and the word "Debtor" respectively shall mean all or any one or more of them as the context requires . If Obligor is a signator of this Agreement, the word “Obligor” includes “Debtor”, and the word “Debtor” includes “Obligor”, as the context may require.

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SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.

GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Virginia.

ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination .

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Virginia selected by the American Arbitration Association (“AAA” ); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii), and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Virginia or a neutral retired judge of the state or federal judiciary of Virginia and in either case, with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Virginia and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Virginia Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

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(e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Agreement or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.

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SECURITY AGREEMENT

(Financial Assets)

[SIGNATURE PAGE]

IN WITNESS WHEREOF , this Agreement has been duly executed as of the day and year first above written.

DEBTOR:

AMERICAN WOODMARK CORPORATION,

a Virginia corporation

By:	/s/ Jonathan Wolk (SEAL)
Name:	Jonathan Wolk
Title:	Senior Vice President & CFO

18060835_3.DOCX


	/s/Kent B. Guichard
	Kent B. Guichard
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
	Date: August 29, 2012


Date: August 29, 2012		/s/ Kent B. Guichard
		Kent B. Guichard
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


	/s/Jonathan H. Wolk
	Jonathan H. Wolk
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)
	Date: August 29, 2012